Monday, July 22, 2024

Axiata’s Exit and Impression Left

You may have heard that on December 01, 2023, Axiata Group, the major shareholder of Nepal’s telecommunications giant Ncell, decided to exit the Nepali business market. They say the decision comes from what the company describes as a challenging business environment in Nepal. This decision has left a negative impression on the view of international investors. Let’s look at the impression left by Axiata’s exit from the numerical point of view.

Business Prospect

Malaysian conglomerate Axiata states that they lost while doing business in Nepal. The company records a turnover of 37.44 arba rupees in 2023, down from 39.72 arba rupees in 2022. This turnover has decreased considerably from the company’s peak turnover of 57.10 arba rupees in 2017.

According to Axiata, the voting done by the board of directors was unanimous, and they chose to divest the investment from Ncell. The board decided to cite the challenging economic environment in Nepal as the key reason. According to the corporation, this strategic choice aligns with its long-term goals and will benefit investors in the future.

The company announced that it entered a Share Purchase Agreement (SPA) with UK-based Spectrolite. UK Limited will sell Reynolds Holdings Limited, which is registered in St Kitts & Nevis and controls about 80% of Ncell. According to Axita’s most recent quarterly report, the board of directors settled to sell its shares in Ncell on September 29th. In 2016, Axiata paid $1.365 billion to purchase Reynolds from the Swedish business TeliaSonera. On the other hand, the group’s terms of the SPA with Spectrolite UK include a set consideration of $50 million — the amount that Axiata will get from the sale.

Brand logo of Ncell – an Axiata company.

Business and Suspicion

This act of selling appeared suspicious to Nepali regulators and government officials. They assumed that Axiata’s departure from Nepal was an attempt by the company to avoid paying taxes. The Nepal Telecommunications Authority (NTA) has stated that Axiata’s sale of Ncell had to obtain consent first and send a letter to NTA stating the situation and plans of the business. The Nepal Telecommunications Authority (NTA) must authorize the sale and purchase of more than 5% of a company’s paid-up capital.

An Opinion

Axiata’s statement will likely send the wrong message to foreign investors when the Nepalese government prepares to host an investment conference to attract foreign capital. The decision by Axiata to sell its shares raises questions about the merits of Nepal’s investment climate.

What do you think about this decision made by international investors on Nepal’s business environment? Let us know in the comments. Your opinion on how Axiata’s exit and impression left on the Nepali market would help us understand public opinion.

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