The Public Accounts Committee of the House of Representatives on Wednesday directed the government to put a stop to Malaysian company Axiata’s efforts to sell its shares in the Nepal-based telecom company Ncell until a detailed investigation into the matter is completed.

Terming the process adopted to sell its 80 percent stake in Ncell suspicious, non-transparent and unrealistic, the parliamentary body instructed government agencies to conduct and conclude an independent investigation within 30 days.

On December 1, Axiata announced that it had entered into an unconditional sale and purchase agreement (SPA) with Spectrlite UK Limited for the sale of Reynolds Holding Limited, which owns approximately 80 percent equity stake in the Nepal-based Ncell Axiata Limited.

Spectrlite UK, registered in the United Kingdom in September this year, is owned by Satish Lal Acharya, a person of Nepali origin currently based in Singapore. Sunivera Capital Venture, owned by his wife Bhavana Singh Shrestha, has another 20 percent stake in Ncell.

The regulatory agency—Nepal Telecommunications Authority (NTA)—was kept in the dark about the deal even though the Telecommunications Regulation 1997 makes it mandatory for the licensed entity to get prior NTA approval for the sale or purchase of more than five percent of the paid-up capital.

After the NTA sought details of the deal, Ncell on Tuesday wrote to the NTA that it was in the process of collecting documents related to the SPA. It has also informed that the SPA would be submitted to the NTA for regulatory approval in line with clause 15 (K) of the Telecommunications Regulation 1997 and clause 4 of the NTA Bylaws (Share Sales of Licensed Persons)-2019.

However, the PAC said that Axiata should have informed the regulator in advance about the deal, and the malicious intent becomes apparent as Ncell has only now notified the NTA that it would submit the deal for approval.

“Non-compliance of legal provisions, unrealistically maintained very low value of the shares, efforts made to avoid paying capital gains tax, bringing uncertainty to government ownership of the company after six years, and spreading misinformation about Nepal’s investment climate suggest the transactions are suspicious, non-transparent and unreal,” the PAC decision states.

Pointing out the risks arising from legal loopholes in existing laws, the PAC also ordered the government to present a bill on telecommunications in the next session of Parliament.

Earlier this year, the government had drafted an amendment to the Telecommunication Act 1997, removing the provision requiring handover of property to the government after 25 years. But it invited controversy within the bureaucracy, with some suggesting that the provision was intended to benefit Ncell.

With Axiata claiming an unfavourable business environment in Nepal behind its decision to leave the country, the PAC also asked the government to give its opinion on the matter within 48 hours.

“Considering the imminent and existential exposure arising from the scenario of double taxation, additional risk associated with the expiry of the company's mobile license in 2029, with the potential of expropriation of Axiata's stake by the Government of Nepal and the unfavourable foreign investment protection environment in Nepal, Axiata had accelerated its exploration of an exit,” the Axiata group said. “The terms of the SPA with the purchaser would enable Axiata to exit on a clean basis.”

The PAC has also decided to summon Prime Minister Pushpa Kamal Dahal in its next meeting to seek explanation about the Ncell deal.

In addition to the PAC, the Finance Committee under the House of Representatives also decided to summon the chief executive officer of Ncell to discuss the matter.

“The meeting of the Finance Committee decided to summon Ncell CEO and top officials of the authorities concerned including the NTA,” said Rekha Upadhyay Khanal, secretary at the committee.

At the meeting, Rastriya Swatantra Party lawmaker Swarnim Wagle had even called for the presence of Vikas Sood, group chief executive officer of Axiata, to face the parliamentary committee.

Wagle pointed out political links of Satish Lal Acharya, the owner of Spectrlite UK Limited, and his suspicious activities including funding of monthly trips for politicians and their family members to Singapore.

“Based on this SPA, 100 percent ownership of a reputed company like Ncell, which has a reported annual turnover of Rs40 billion to Rs60 billion, will be with the family of a person accused of engaging in suspicious activities,” Wagle said at the House committee meeting on Wednesday. “If you look at the terms of the SPA including fixed consideration and conditional consideration, they look unreal, raising questions about the deal’s intent.”

Other lawmakers in the two committees also called for an investigation, saying that the deal was suspicious. Many have questioned how the company, which Axiata bought in 2016 for $1.365 billion, was valued at just $50 million in 2023.

According to Axiata, key terms of the SPA include a fixed consideration and a conditional consideration. The fixed consideration is $50 million, of which $5 million is payable within six months of the completion of the transaction while the remainder is payable after 48 months.

“There is also a conditional clause, which is unclear,” Ananda Raj Khanal, former senior director at the NTA, told the Post on Tuesday. “The conditional consideration is… contingent upon the future business performance and net distributions declared by Ncell until 2029, and any windfall gains secured by the Purchaser [Spectrlite UK] during this period,” Axiata said in a statement.

After a meeting of the ruling parties on Tuesday, the government said it was going to investigate the issue. “The government will look into whether existing laws and international norms have been followed,” the Ministry of Communications and Information Technology said in a statement on Tuesday. “Likewise, its impact on Nepal’s telecommunications sector, foreign investment and the government revenue.”

The ministry has also warned that the government would initiate strong legal action if the probe finds irregularities in the reported deal.