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Challenges of Telecom operators in Nepal

Nepali Telecom companies have undergone huge pressure due to the descending profit and revenues in recent years. The reports of every quarter have also shown a drop in their revenues and then profit. They are currently tackling the challenge with their utmost effort to have a healthy standing. Although the revenue/profit decline seems the biggest challenge, there are whole lotta more issues to manage for their better business and maintaining position. Here are some of the challenges of telecom operators in Nepal.

Do read our previous post for the decline of revenues for the major telcos; NTC and Ncell.

1. 20 billion mobile license renewal

NTA has already decided that all of the telecom operators need to pay 20 billion Rs for the renewal of mobile license every 5 years. There could have been the second verse of the license renewal, but now it is the major barrier for a telecom company. The government telco: Nepal Telecom and its employee unions have been raising issues to the government and NTA for the whopping price tag, as they believe it will hamper the health and sustainability of the company.

Despite being able to pay in 5 installments, they argue this amount needs to be amended, as they already invest a huge amount just for the sake of providing communication services in areas with a low outcome.

2. Frequency spectrum

Telecom companies need an abundant amount of frequency spectrum for better quality and high-speed internet services. They are also seeking technology neutrality in all of the spectrum bands without paying a huge chunk of money. But the regulator has not been able to provide the frequency spectrum as per the demand of the telecom companies.

The first ever spectrum auction is also put on hold although only two of them had already applied for it. Some of the new spectrum bands for 4G and even for 5G have not been allowed for future-proofing, which telecom companies need to plan ahead for the latest technologies and demand. This is also the reason that Nepali telecom companies bring new technologies some years late, like in the case of 4G as we were 5 years late due to the indecision of technology neutrality issues.

3. Social issues (Radiation and Telecom tower height)

Telecom companies keep on adding new cellular towers as per the demand of better coverage and capacity. While putting a telecom tower on a rooftop of a city area, they face a difficult time convincing people of the radiation issue and the imminent danger of the telecom tower. Due to several complaints, NTA also had to clarify for the no harmful effect of the radiation.

The house-owners in some locality may not even allow telecom companies to put a telecom tower there due to those issues. Sometimes they even fail to convince the existing tower renting people, disturbing the quality of service in the area for the duration (in months) they need to find a new tower location.

READ ALSO: Telecom companies in Nepal.

4. Road construction and Fire in poles

While development needs to have some destruction, unplanned road construction has a serious effect on the telecom companies existing infrastructure. Due to which, the telcos to invest more for the building of new infrastructure after the destruction. Similarly, the outage of telecom equipment will also affect the current network quality and access to people.

The cut of the optical fiber (which connects several network elements) results in the outage of several telecom equipments like a mobile tower or landline equipment or internet devices. Similarly, the NEA poles regularly catch fire, affecting the telecom services due to burnt optical fiber and other cables. Optical fiber cut is one of the major challenges for telcos for maintaining quality of service, Read in details for how the fiber cut impacts telcos.

5. Declining revenues, look for new revenue streams.

We already mentioned the revenues, as well as profit, have declined largely due to the use of OTT apps and the increased tax for the data service. These days, the traditional service revenue out of voice and SMS have declined sharply. So, the telecom companies are looking for new revenue streams like Video/TV subscriptions, Music streaming and more.

But people have been hesitating to use the local applications for such applications. So, they need to create new services and attract people for that without affecting the current revenues.

6. Electricity issues.

As the scheduled power cut/load-shedding issue has been resolved, there are some places where a small change in weather like rainfall, storm affects the regular electricity supply and disrupt the regular functioning of telecom equipment.

In some areas, the electricity supply goes down for weeks, which becomes a big challenge for the telcos to manage the supply.

7. Uneven terrain

Nepal being a hilly/mountainous country have a very ardent terrain that needs much effort for the transportation of the equipment and the installation. Despite being difficult, the telecom companies have installed the telecom towers in high altitude areas to serve the people in those areas. It is also due to the uneven terrain, that telecom companies have a hard time improving the quality of service and coverage, as per people’s demand.

8. Smartphone and new technology (4G) usage

Although smartphone penetration has increased above 50 % in Nepal, it is still a lower value for the telecom company’s business. Despite having a capable device, a large chunk of people still prefers the old technology like 2G.

Telecom companies invest a huge sum to add up new towers and new technologies, but if the customers prefer the old technology like 2G, they could not earn much to that extent from 4G. Considering the huge investment, significant use of feature phones in Nepal is also detrimental. Read in detail for the feature phone usage and its impact in Nepal.

9. No encouragement to invest in rural areas

Private telecom companies mostly focus on the areas where they get a huge and instant outcome (mostly in the city areas) while not being interested in rural areas. Considering the ardent terrain, huge investment, and low outcome, huge rural areas have been left out for mobile coverage and more new services.

The regulatory body has also not been able to encourage all of the telecom companies to provide services in rural areas, with some subsidy and funds. Although they have a huge fund in the name of RTDF, they are only using it for optical fiber expansion and ICT/internet services.

10. Infrastructure sharing

Infrastructures not only need huge initial investment for the telcos but also the high operating cost. NTA had been talking of the sharing of infrastructure for the telcos for a long time but there has not been significant development till now.

With infrastructure sharing, new telcos can cut the CAPEX and OPEX costs for those infrastructures similarly, existing or incumbent telcos can earn some revenues by sharing their infrastructure with other telcos.

11. Local government taxes

While the federal government is asking for 20 billion Rs every 5 years, some of the local governments have also started to levy local taxes to the telecom operators for the telecom towers and infrastructures.

Some of the municipalities have written a letter to the local telco offices demanding 10s of thousands of Rupees amount for each telecom tower. Telecom companies argue that this sort of dual tax policy affects their normal functioning and has also asked the governments to relieve them from such a burden.

Conclusion

While some of the challenges are being addressed to some extent, but very least has been done for most of the above issues. Telecom companies have a hard time to handle the issue like declining ARPU (Average revenue per unit), huge investment barrier, more taxes and improving quality of service.

There is always a trade-off in providing 100 percent coverage, a better quality of service with the investment/cost that comes along with more telecom infrastructure, advanced tools, and more spectrum.

So, they need to find the optimum investment for the telecom infrastructure and more to satisfy the demand for telecom services. Similarly, government entities like MoCIT and the regulator NTA need to facilitate the telcos for friendly policy, level playing field, and win-win situation.

If you are one of those working in the telecom field, you might also point out the challenges of telecom operators in Nepal, which are not mentioned above.

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