Ncell decreases its profit by 3 billion NRs in the year 2018

Ncell, the leading private telecom operator of Nepal sees a decline of it’s profit by 3 Billion NRs in the year 2018. According to the Annual report of Axiata, Ncell’s parent company, their Proft after tax fall to Rs 15.3 billion from Rs 18.9 billion.

Although they found growth in the core revenues and data revenues, their overall revenues decline from Rs 58.1 billion (in 2017) to 57.5 billion (in 2018). With the decrease in revenue, Ncell’s EBITDA (Earning before interest, tax, depreciation, and amortization) also decreases by almost 5 percent.

• EBITDA of Ncell= Rs 37.3 billion in 2017 to Rs 35.5 billion in 2018, difference= -4.9%
• EBITDA of Ncell in 2018 ~ 62 % ( also mentioned in OAG report claiming highest margin in the world)

Reasons for the profit decline

Ncell says the decline in their profit is due to the regulatory challenges in the competitive market.  The challenges include

• 2 percent increase in TSC for voice and other services,
• addition of 13% TSC for data services (which was not there before) and
• 5 percent increase in the corporate tax rate.

Ncell claims the addition of TSC in data service have resulted in shrinking revenue share for operators and will further bring a trade-off in spending from voice to data for the consumers.

They also cite the decrease in the international long distance call (ISD calls) revenues, of which the traffic goes down by 33% in 2018. This is due to the increasing use of OTT apps. Read More on How OTT apps impact Telecom operators?

They also say one of the reasons for the low profit is the change in labor laws to provide more benefits and more salaries to their employees.

Positive part

On the positive note of the company’s growth, it’s core revenue and EBITDA grew by 5.4% and 4.2% year on year (YoY) respectively while data revenue alone grew by 18% YoY. The smartphone penetration in Ncell comes at 59% while data subscribers in Ncell are 47% of the total subscriber. Such data indicate significant space for the future growth of the company.

Other expansions and further business in the company are

• Expanded data population coverage to over 55%
• expansion of IoT for vehicle tracking system
• Broadband expansion in rural and remote areas
• contributing to government goals for broadband and digital literacy.
• Reduction in expenses

Although they have a profit decline of 3 billion rupees, they project data revenues and subscriber to increase by 29% and 16% respectively. They believe such increment will offset the decline in voice revenues.

They also express their commitment to Digital Nepal initiatives by building partnerships and alliances with global and in-country partners towards nation building. Just like their competitor Nepal Telecom announcement of a partnership with RBB for mobile money service, Ncell might also be looking for the option to put their foot on Digital Financial Services.