In the report of the third quarter of the current financial year published by the government-owned Nepal Telecom, it is mentioned that the net profit has decreased by 48.67 percent.
Telecom earned a net profit of 5 billion 53 crore 75 lakh 62 thousand rupees in the third quarter of last year. In the same period of the current year, the net profit of Telecom has decreased by 2 billion 69 crore 52 lakh 73 thousand rupees to 2 billion 84 crore 22 lakh 89 thousand rupees.
Telecom's current investment and cash and cash-like amounts have fallen to around 34 billion rupees by the third quarter of the current financial year. It seems that the financial health and current assets of Telecom are declining.
Telecom has mentioned one of the reasons for the decrease in net profit is over the top (OTT) platform ie messenger, viber, whatsapp, email etc. According to Telecom, there has been a significant decline in the income from voice and SMS of Telecom due to the increasing use of OTT.
In addition to having to pay a lump sum of 20 billion rupees for the renewal of the license of the Global System for Mobile Communication (GSM) and competing Internet Service Providers (ISPs) providing mobile WiFi services, the impact of a significant reduction in mobile data consumption has affected the profit, according to Telecom. Due to these problems, the company has added a long-term challenge in terms of cost management to expand services, invest in new technology and operate overall services.
'Due to the increased use of OTT services, the volume of incoming calls from abroad has been affected, the interconnection income has decreased by about Rs 53 crore 55 lakh 66 thousand i.e. 22.37 percent compared to the third quarter of the last financial year. OTT service is having a negative impact on the company's overall voice and SMS service income', Nepal Telecom mentioned.
According to the data of the Telecommunication Authority, not only Nepal Telecom but also the income of the telecom service provider Ncell has decreased significantly in the last few years. The income of the two telecom companies in operation reached 98.71 billion rupees in the financial year 2074/75. According to the Telecommunication Authority, the income of telecom service providers has decreased by 26 percent and has been limited to 73 billion 14 million rupees in the year 2079/80.
The co-spokesperson of Nepal Telecom, Navin Kumar Mishra, said that another reason for the decline in the income of telecom companies is excessive taxes. Old policies, OTT platforms, Wi-Fi hotspots and high renewal fees have been affected. Also, the income of telecom companies has been affected due to the revenue collected under different headings', he said.
Telecom companies have to pay 10 percent service charge and 2 percent property tax in addition to 13 percent value added tax, co-spokesperson Mishra said that by doing this, the total tax will be 21.2 percent. Apart from that, reducing the spectrum fee, royalty fee and four percent of the amount to be paid to the rural telecommunication fund will save 38 percent of the amount. After deducting the cost, financial expenses, license renewal fee and paying the installment loan, only eight percent amount is left on an average. Even after paying the corporate tax, five percent of the amount can be considered profit', he said.
As the income of telecom companies continues to decrease, the companies Experts say that expanding the service, investing in new technology and operating the overall service will be a challenge in the long term in terms of cost management.
Bhesraj Kandel, the former chairman of Nepal Telecommunication Authority, said that even though telecommunication services should be treated as essential services, in Nepal they are taxed like luxury items. According to him, currently telecommunication companies have to pay 30 percent corporate tax, while other sectors have only 25 percent of such tax.
Information technology expert Manohar Bhattarai said that in view of the contraction in the income of telecom service providers, policy reforms should be made and tax rates charged under various headings can be restructured. He believes that both the customer and the telecom service provider will benefit from this.
According to Nepal Telecommunication Authority, the consumption of data instead of voice has increased now. However, the share of Internet service providers is also large. OTT is also a big problem faced by telecom companies for the last six/seven years. Bhattarai believes that there has been a significant decline in telecom revenue due to the OTT platform. "I am not of the opinion that the OTT platform should be closed, but the time has come for the government to think about how to operate it," he said.
Now there are preparations to bring 5G service by expanding 4G in Nepal. Experts say that the effect of the declining income of telecom companies will also be seen in the operation of 5G services. Even though Nepal Telecom has now tested 5G in some places, it is seen that there will be a lack of necessary budget to bring 5G.
The chief executive officer of Ncell, Jabbor Kayumov, argued in a recent program that the telecommunications sector is being pushed towards a crisis as income shrinks. "At present, telecom companies are going through a complex crisis, a large part of our income goes to taxes, 20 percent of the money goes to the purchase of new equipment, and the remaining amount goes to operating expenses," he said.
According to Kayumov, due to the continuously decreasing income in recent years, there will be a lack of necessary funds to bring 5G service. According to him, both the telecom companies will have to spend more than 60 billion rupees to fully operationalize the 5G service.
