Axiata concludes sale of Ncell, exits Nepal


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  • Jan 3, 2023
    Malaysian telecommunications group Axiata Group is exiting the Nepal market by selling Reynolds Holding, which holds an 80% equity stake in Ncell Axiata, to local shareholder Spectrlite UK. ‘The group’s decision to withdraw from Nepal is based on a thorough evaluation of the prevailing business environment in Nepal,’ Axiata said in a statement on Friday. Continuing operations under the current conditions of ‘unfair taxation and regulatory uncertainties’ were no longer sustainable for the company, it added. Axiata had acquired the controlling stake in Ncell in 2016 following the purchase of Reynolds Holding for USD1.37 billion.

    Axiata will sell Ncell for a fixed consideration of USD50 million, of which USD5 million is payable within six months of transaction completion and the remainder after 48 months. The terms of the deal also include a conditional consideration of a share of distributions based on the future business performance and net distributions declared by Ncell until 2029, and any windfall gains secured by the purchaser during this period. The purchaser will further indemnify Axiata against existing and future Nepalese tax claims in relation to Ncell.

    Commenting on the deal, Axiata chairman Tan Sri Shahril Ridza Ridzuan said: ‘This transaction has allowed us to exit the country in a responsible manner. The closing of the sale and the completion of our exit from Nepal enables us to focus on our strategic priorities and continue our value creation journey. We are now in a much stronger position to deliver on our strategy, refine our capital allocation priorities and explore the right strategic partnerships.’

    Axiata noted it paid NPR47 billion (USD421.9 million) in capital gains tax to the Large Taxpayers Office of Nepal (LTPO) in April 2020 for the acquisition of its 80% stake in Ncell, and stated it received confirmation from the body that there would be no further taxes. However, the authorities subsequently demanded NPR57.9 billion extra for the transaction after further assessment in January 2021. Collection of this assessment has been suspended due to an interim order issued by the Supreme Court of Nepal, while the International Centre for the Settlement of Investment Disputes ruled in June this year that Nepal should refrain from demanding any further taxation. ‘Considering the imminent and existential exposure arising from the scenario of double taxation, additional risk associated with the expiry of the company’s mobile license in 2029, with the potential of expropriation of Axiata’s stake by the Government of Nepal and the unfavourable foreign investment protection environment in Nepal, Axiata had accelerated its exploration of an exit,’ the group stated.