Axiata Group Berhad has sold its shares to Spectrlite UK Limited in a $50 million deal. The Malaysian telco giant confirmed on December 01, that it reached a purchase agreement with Spectrlite UK for the sale of Reynolds Holding Limited which owns 80% equity in Ncell Axiata Limited. Axiata bought Ncell in 2016 for $1.365 billion after taking over Reynolds Holdings.
On November 29, Axiata announced to sell its 80% shares in Ncell and “reclassified the telco as asset held for sale.”
Axiata leaves Ncell, exits Nepal
Axiata exits Nepal, sells stakes in Ncell to Spectrlite UK Ltd.
As per Axiata, the Share Purchase Agreement (SPA) agreement comprises a fixed and a conditional consideration. The company has sold its stakes in Ncell to Spectrlite for a fixed consideration of $50 million of which, $5 million is to be paid within 6 months while the remaining is payable after 48 months.
Axiata sells its Ncell stakes to SpectrLite UK for a fixed consideration of $50 million
Likewise, the conditional consideration holds a share of distributions on the basis of the telco’s future business performance and net distributions declared by Ncell till 2023 plus any windfall gains clinched by the Purchaser (Spectrlite UK).
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Axiata reflects on policy challenges for its operations
Axiata candidly pointed out the reasons it was pushed to its exit from its Nepal unit. The group reasoned potential challenges from double taxation, the additional risk associated with the expiration of its mobile license in 2029, and the expropriation of its stake by the government of Nepal. The group also reflected the “unfavorable” protection environment for foreign investment in Nepal. In its words, the company “had accelerated its exploration of an exit” from Nepal and states that the deal with Spectrlite would enable the company to exit cleanly.
The group also stressed unfair taxation and regulatory uncertainties that it deemed unsustainable to continue doing its business in Nepal. It should be mentioned that the guiding telecommunication provision, Telecommunications Act, 2053 holds that a private telco’s ownership is handed to the government after 25 years and Ncell’s was due in 2029.
The rule holds that a telco with over 50% stakes of foreign investors shall come under the government’s ownership after 25 years. To avoid this situation, the company will have to float the shares to the general public with an IPO and maintain foreign share investment at below 50%. Ncell obtained its operating license on September 01, 2004, and is due to expire in 2029. Staying in Nepal would mean the loss of the transfer of its assets to the government without a dime. It wasn’t taking that risk.
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Axiata leaving Nepal business in a responsible manner
Highlighting Axiata’s tax and other contributions in Nepal, Axiata Chairman Tan Sri Shahril Ridza Ridzuan said that the conglomerate is leaving Nepal in a responsible manner. “This transaction has allowed us to exit the country in a responsible manner,” he added, “The closing of the sale and the completion of our exit from Nepal enables us to focus on our strategic priorities and continue our value creation journey.”
He reflected the company’s narrative that leaving Ncell was strategically important to implement its priorities. He further added, “We are now in a much stronger position to deliver on our strategy, refine our capital allocation priorities, and explore the right strategic partnerships.”
Axiata stressed the expiration of mobile license in 2029 among other regualtory unceratnies behind its exit from Ncel
Likewise, Axiata Group Chief Executive Officer and Managing Director Vivek Sood reflected upon the adverse business climate in the country compelling it to an exit. “Axiata has been in Nepal for seven years, working alongside hard-working colleagues in Ncell. However, the increasing challenges in the operating environment represent a fundamental shift.” He continued that Axiata “cannot continue due to the unfavorable conditions for Axiata, the uncertain regulatory and tax environment, and the looming risks associated with the expiry of the mobile license in 2029.”
Ncell confirms Axiata stake sale
After the Axiata-Spectrlite deal was announced, Ncell released its statement. The private telco confirmed the deal stating that the agreement had been reached between Spectrlite UK Ltd and Axiata UK Ltd for the former to acquire 100% stake of Axiata in Reynolds Holdings which means 80% of shares in Ncell. The operator said that the purchaser is committed to driving the company forward and expanding its range of services while enhancing service quality and introducing newer innovations.
The owner of Spectrlite UK, Mr Satish Lal Acharya said, “Spectrlite is pleased to announce an agreement for the acquisition of a controlling shareholding in Ncell.” He expressed hope that his own experience in the industry will help drive Ncell forward in the future and said that he would be working the the management of Ncell to continue servicing the customers. He continued, “I will be drawing upon my extensive experience in the telecommunications industry and shall be working with the management of Ncell to drive innovations, investments, and a wide range of life-enhancing services to the Nepalese people.”
Satish Lal Acharya along with his brother Sachin Lal Acharya, co-owns Sunivera Capital Venture Pvt. Ltd., a company that currently boasts 20% stakes in Ncell. That means the brothers have ensured they will continue retaining their partial (at least) ownership in the telco.
Jabbor Kayumov, the Chief Executive Officer & Managing Director of Ncell expressed his hope with the current developments. The recently appointed head of the company said, “Ncell is pleased with the upcoming change in ownership and eagerly anticipates collaborating with new shareholders to elevate Ncell into a world-class Nepali-driven data and communications hub.” He shared that in the near future, Ncell will launch its “refined plans” that reflect the huge prospects for expanding Ncell’s services and added that the current scenario “aims to maintain Ncell’s position as the leading national digital services and internet access platform.”
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Axiata highlights contribution to Nepal
In its statement, the Malaysian telco group highlighted its socioeconomic contribution together with Ncell for Nepal. Being one of the largest taxpayers in the country, the group and Ncell contributed Rs 283 billion (RM9.9 billion) in taxes and fees till the Fiscal Year FY 2021/2022 since inception.
Ncell, likewise, supported over 25,000 jobs directly and indirectly and connected over 17 million customers all over Nepal. As part of its Corporate Social Responsibility (CSR) initiatives, Ncell invested over Rs 1.75 billion (RM61.2 million) in a deluge of social projects focusing on education, health, disaster management, environment, etc.
Ncell boasts 17 million users across Nepal and operates 2G, 3G, and 4G, among other digital services. The company launched 4G in 2017 and is the 2nd largest telecommunication service provider and the only operational private telco in Nepal.