Telecom companies in Nepal can merge just like banks and financial institutions. Telecom regulator Nepal Telecommunications Authority (NTA) has recently passed Merger & Acquisition Regulation, 2079 which paves the way for operators to merge.
The game-changing regulation also clarifies the basis on which a company can acquire another company.
To merge, a telecom company has to meet certain criteria. As per the regulations, the company that seeks to merge or acquire another operator has to apply to NTA after passing a special proposal from its general meeting or special general meeting with the deadline and the proposed action plan.
The regulation has set a provision that if the regulator is convinced that the merger enhances the state of the country’s telecommunication service, and exerts no negative impact on fair competition, it can provide consent in principle.
Following the approval, the companies’ evaluation report including all the details of the share price, the total number of customers, profit, and loss along with the evaluation of the assets and liabilities of such organization and the last period of business shall be submitted to the authority by an appraiser. The appraiser is appointed by the board of directors of the merging or acquiring organization.
If it’s necessary to review, the authority can conduct an independent review of the details. Likewise, a Chartered Accountant or another expert can also assess the documents to ensure their authenticity.
Following this, the companies in concern need to reach an agreement with each other. They need to mention specific matters to proceed with the merger or acquisition. The regulation states that such an agreement must address the rights and interests of the customers, the valuation of assets, the company’s management structure, etc.
Then the companies must submit an application for approval to NTA with details. The application must include the agreement in principle and other key particulars, Gorkhapatra writes.
Telecom companies can merge if it has no adverse impact on the industry
Then, the regulator will evaluate the application. If it finds that the merger or the acquisition has no negative impact on the telecom industry, it will proceed to determine its approval. It will decide whether it should allow for the merger or acquisition or disapprove it within 60 days, and provide information to the companies.
After receiving the approval, the company will need to publish a notice at least twice in a national daily newspaper. It is to notify the general public regarding the process.
If approved, the telcos need to complete the merger in one year. If it can’t be completed, then they can apply and receive a 6-months extension. The failure to merge during this period will result in the automatic cancellation of the entire process.
NTA can direct telecom companies to merger
The regulation also holds that if the authority finds it necessary, it can also give instructions for telecom companies to merge.
If it is necessary to replenish the investment, if the market has a monopoly, and if there’s a negative impact on foreign investment or better use of frequencies is necessary, the authority can urge companies to merge.
The merged company will acquire the frequency obtained in the past even after the merger. It can get the spectrums in any frequency band but not exceed the limit set by the policy.
Similarly, the regulation has made arrangements for the merging organization to get the previous phone numbers and the “right of way”.
Conditions that won’t allow merger or acquisition
The regulation also enlists criteria that will bar companies from mergers or acquisitions.
- If the licensed company has not completed three years of operation,
- If the entire market share of the telecom company exceeds 40 percent after the merger,
- If an unhealthy environment is established, or
- If the payment is outstanding.
If the above condition prevails, the merger or acquisition of telecom companies won’t go ahead.
Currently, there are 4 telecom companies with a license to provide telecom services with only three operating. Among them, Ntc and Ncell occupy 53.69% and 40.63% respectively. On the other hand, the financially strained, Smart Cell has a minimal 5.67% market share and influence. UTL has not yet started its service after getting the unified license.
Due to the duopoly of Ntc, and Ncell, often Nepali mobile subscribers have called for a competitive third telecom company. CG though has shown a keen interest to enter the telecom market but has not yet received a unified license to operate.
Do you think the merger and acquisition regulation will bring a fruitful transition in Nepal’s much-awaited transition in the telecom industry? Do write in the comments below.
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