Nepal’s Telecom Industry is Faltering Under Heavy Tax Burden?

Last Updated on September 24, 2026

Nepal’s telecommunications industry has changed dramatically. The service has expanded across the nation in leaps and bounds. A few years ago, a new SIM translated to a new customer and more revenue. Today, the traditional voice market has matured, and there is limited room to grow simply by adding new subscribers.

On the contrary, data usage keeps rising, but the only problem is that it has not translated into higher revenue for the telcos. Part of the reason is that the telcos are in fierce competition and they are having to offer services at affordable rates. That’s a debate, but anyway, the telcos would still argue for it. Likewise, operators continue to spend heavily on towers, fiber, spectrum, license renewal, electricity, network upgrades, and new technologies such as 5G.

This is where Nepal’s telecom industry’s growing concern over taxes and regulatory costs comes in.

✅Comparison of tariffs of Ntc and Ncell services 

Telecom industry’s tax burden: Revenue model has changed

Traditionally, operators earned through voice and SMS services. But these legacy services seem to have fallen ill in recent years, owing to the surge in data usage. Even text messaging is less in use these days, as more users prefer WhatsApp, Messenger, and other OTT platforms. These services still generate huge amounts of data traffic, but operators earn mainly from the data packages rather than from the communication services themselves.

At the same time, telecom companies in Nepal face several financial obligations. Besides income tax and VAT, operators pay 4% royalty and 2% to the Rural Telecommunication Development Fund (RTDF), along with license, renewal, spectrum, and other regulatory charges. License renewal alone costs Rs 20 billion every five years.

These payments are necessary. The taxes are used to expand and improve telecom services across the country. The question is whether the overall structure remains suitable for a mature telecom market where revenue growth is slowing while investment requirements remain high.

So, the term goes beyond “high taxes”. Market saturation, falling voice revenue from voice and SMS, competitive data pricing, infrastructure maintenance costs, and regulatory uncertainty are all putting pressure on operators.

Fewer operators should concern the state

Currently, Nepal only has two operators, Nepal Telecom (NTC) and Ncell. Smart Telecom and United Telecom Limited (UTL) struggled financially and have lost their operating licenses. Both have set a painful precedent for the industry in terms of financial struggles. And in both cases, it was mostly about the high taxes.

With the mobile market now largely dominated by the above-mentioned two, further reduction in competition could have implications for consumers, investment, and government revenue.

The industry needs long-term certainty

Ncell’s situation also highlights the importance of long-term investment certainty. Nepal’s prevailing Telecommunications Act, 1997 allows a company a maximum of a 25-year license period. After the expiry, the telco’s assets go under state ownership, which is managed by the state. Such provisions can raise questions about the incentive for private operators to make major long-term investments as the license period approaches its end.

Axiata’s Ncell exit in late 2023 had very much to do with the taxes and the 25-year license clause. Ncell’s 25-year license ends in 2029.

At the same time, operators are under constant pressure to introduce new and innovative technologies despite bearing heavy expenses. Currently, both NTC and Ncell are improving their networks while expanding them nationwide. Both are also focusing on launching 5G in Nepal.

Nepal needs a broader telecom policy review

Economist Chandramani Adhikari has argued that telecom taxation should be reviewed from a wider economic perspective. He opines that if a more reasonable tax burden allows operators to invest more, that investment could generate additional economic activity, employment and indirect government revenue.

The idea is not that telecom companies should be exempt from taxation. But with the conditions right now, there could be space for leniency from the state to help it breathe freely. Telcos should not be seen merely as large taxpayers. They are the infrastructure supporting Nepal’s digital transformation, lives, and the national economy.

The question for policymakers is therefore not only how much tax can be collected from telecom companies today, but whether the current system leaves the industry strong enough to keep investing tomorrow.

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