Malaysian company Axiata’s decision to exit Nepal by selling its stake in Ncell to a newly established UK-based firm has stirred controversy and triggered debate in the government, Parliament, streets and the court, reigniting challenges for the embattled telecom giant.

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 a 20 percent stake in Ncell.

But, the regulatory agency—Nepal Telecommunications Authority (NTA)—said it is in the dark over the deal even though the Telecommunications Regulation 1997 makes it mandatory for the licensed entity to get prior approval of the NTA to sell or purchase more than five percent of the paid-up capital. In fact, the NTA said it has already sought details about the reported deal from Axiata through Ncell.

Even though Axiata has pointed out an unfavourable investment climate in Nepal as the reason for its exit, officials said that a lot of things, including the terms of the deal, are unclear and suspicious.

On Tuesday, Prime Minister Pushpa Kamal Dahal called a meeting of ruling parties to discuss the matter. The Prime Minister’s Secretariat said besides Prime Minister Dahal, Nepali Congress President Sher Bahadur Deuba, CPN (Unified Socialist) chair Madhav Kumar Nepal, Janata Samajbadi Party leader Rajendra Shrestha, Loktantrik Samajbadi Party chair Mahantha Thakur and several other leaders and government ministers attended the meeting.

Ruling party leaders reached consensus that the SPA deal on Ncell was suspicious and the government needed to investigate it.

Ruling CPN (Maoist Centre) leader Agni Sapkota told ekantipur.com that the ruling parties reached a consensus on conducting a probe so that the country would benefit. “The SPA signed abroad does not look natural. It looks fishy. So, we agreed on the need for an in-depth investigation,” he said.

Likewise, Nepali Congress Leader Ramesh Lekhak told ekantipur.com that the ruling party leaders unanimously agreed that the deal violated Nepal’s regulations, which require investors to seek approval from the relevant regulatory authority, and called for a thorough investigation.

Even during a meeting with editors of various media organisations on Monday, Prime Minister Dahal had said that he had ordered the chief secretary to study the matter, arguing that foreign companies should not have free rein to do as they please.

The Ministry of Communication and Information Technology on Tuesday confirmed that the order was issued as the deal was done without notifying the regulatory agency or taking its approval while the terms and prices of the deal appear unnatural.

“The government will investigate whether existing laws and international norms have been followed,” the ministry said in a statement. “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 any irregularities are found during the probe.

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 and the remainder is payable after 48 months.

There is also a conditional clause, which is unclear, according to

Ananda Raj Khanal, former senior director at NTA. “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,” the Axiata said in a statement.

Experts said that Axiata’ decision to exit Nepal citing an unfavourable investment climate was a major setback for the government which has been seeking to attract domestic and foreign investments by organising an international investment summit in April next year.

Besides concerns raised during the meeting of the ruling parties, the Public Accounts Committee (PAC) of the House of Representatives has also called a meeting for Wednesday to discuss the matter.

Earlier, the parliamentary body had sent a nine-point questionnaire to a number of government agencies including the Inland Revenue Department, the Office of the Company Registrar and the NTA seeking details of the reported deal and whether the deal followed the legal provisions of Nepal.

The PAC has raised additional questions about the potential repercussions of the deal for Nepal. These include Axiata’s claim of an unfavourable investment climate, concerns about taxation and uncertainties regarding the government’s stance on permitting divestment in the context that the company comes under the Nepal government’s ownership within the next six years.

“We have summoned a meeting of the PAC for Wednesday to discuss questions raised by the public and the concerns we raised in the letter,” said Rishikesh Pokharel, the PAC chairperson.

“We had thought that the government would speak on the matter. But this reported deal raised the question whether there is a government in this country.”

According to the PAC secretariat, it has written to the NTA and the Office of the Company Registrar to send their representatives to Wednesday’s meeting. “The parliamentary committee is holding this meeting as a part of carrying out its oversight function,” said Ekram Giri, secretary at the PAC.

Besides concerns being raised by the state agencies, a section of the public has also hit the street against Ncell alleging the deal as non-transparent and suspicious. The CPN-UML’s student wing, the All Nepal National Free Students Union, organised a protest in Kathmandu claiming conspiracy in the deal and demanding that the details be made public.

A few years ago, the private sector telecommunication giant had faced protest after its previous owner Teliasonera exited Nepal without paying capital gains tax.

Axiata’s efforts to avoid paying the tax levied by Nepal's tax authority on the deal made in 2016 following the exit of the Swedish company failed after Nepal’s Supreme Court in November 2019 ruled in favour of the government.

On June 9 this year, the International Centre for Settlement of Investment Disputes (ICSID), an international investment dispute resolution body established by the World Bank, issued a verdict in favour of the Nepal government regarding the capital gains tax dispute.

But Ncell endured reputational damage amid consistent protests against it over alleged non-compliance of tax laws of Nepal. Even Axiata has admitted that the reputational damages hurt Ncell’s profitability.

Fanning the fire, a number of influential politicians are also questioning the reported SPA between Axiata and Spectrlite UK.

Nepali Congress General Secretary Gagan Thapa said in Okhaldhunga on Tuesday that he believed the reported deal on Ncell could have occurred due to corruption at the highest level.

“We can sense corruption worth billions of rupees at the first sight of the deal,” he said, speaking at the district convention of the party.

Meanwhile, the high court, Patan, on December 1, acting on a petition against the SPA, issued a show-cause order in the name of Axiata. The court had invited both sides for a hearing on December 11.

The ongoing controversy could put Ncell in another cycle of uncertainty, according to observers.

“I think Ncell ends up shutting down its shop if no settlement is found in the near term,” said Khanal, former NTA official. “It is not sure what Satish Lal Acharya has in mind with the acquisition of Axiata shares.”