Since its inception 16 years ago, mobile service provider Ncell continues to be a major force in the Nepali telecommunications market. The company, which became a part of the Malaysian multinational conglomerate Axiata Group Berhad in April 2016, is not only one of the largest taxpayers in Nepal but is also highly regarded for its products and services that have helped transform the domestic telecommunications sector. Andy Chong is the CEO and Managing Director of Ncell since November 2019. Sanjeev Sharma of New Business Age speaks to Chong about the 5G network launch in Nepal, expansion of Ncell services across the country, new initiatives, its focus on Corporate Social Responsibility (CSR) and other related topics. Excerpts:
The government and the telecommunications sector regulator in Nepal have expressed their willingness to facilitate the launch of 5G network. So, how do you view the progress in this?
The discussions to rollout 5G in Nepal have just started. The regulator, Nepal Telecommunications Authority (NTA) has said that it will make sure that the 5G license will be given out in consultation with the industry. I believe the plan is they’re going to start with limited tests and trial licenses first. So, there’s still a long way ahead to see a commercially operating 5G. But nonetheless, we are looking forward to doing tests and trials on a limited basis to evaluate feasibility, technical considerations, and so on and so forth, before we will make that strategic decision.
How much time do you think will it take to launch 5G in Nepal?
Assuming that we have all the necessary policies, regulations and spectrums in place, and that the test and trials are positive, it will take somewhere between seven to nine months to rollout 5G in Nepal on a commercially meaningful basis. This means we need a big enough footprint to make it commercially viable, and this is how we started 4G as well. We will not be going ‘big bang’ across the country, so it will likely be selective in hotspot areas. In any case, devices that support 5G are also mostly foundin the urban areas.
How is Ncell getting the spectrum for 5G?
There have been some discussions with NTA in this regard. In our conversations with NTA, they have put together a draft policy and directional statement for purpose of initiating 5G trials. We have not seen the final documents as yet. As I said earlier, it will likely start with extending tests and trials spectrums to the telecommunications operators who are interested rolling out 5G before the whole 5G spectrum band will be decided. For an operator, we need absolute certainty of policies and spectrums before we can make a significant commitment to 5G investments.
Ncell is definitely ready for tests and trails of 5G. But as I have indicated, it may not be feasible for us to commit to what a 5G network in Nepal might look like until the tests and trials are in place and the data suggests feasibility.
As we brace for 5G, it still seems many customers are not switching to 4G. How will you rate the quality of 4G services in Nepal?
In terms of coverage and quality of services, 4G network in Nepal is as good as in any other global market, from benchmark perspective. But I don’t know if consumers understand the difference between 4G and 5G networks. 5G really isn’t designed for consumers. It is more for machine to machine (M2M), doing things that are practically not possible with 4G because of issues related to latency. For example, remote surgery can’t be done with 4G because the latency will render such use cases impossible. 5G is almost instant and that’s the reason why 5G has more M2M type applications as probably the biggest use case.
Many parts of Nepal still do not have good telecommunication connectivity. What kind of government support does a company like NCELL seek to expand broadband services throughout the country?
We went with 2G, 3G and 4G networks, and whilst we are serving over 92 percent of population, our 4G service is still limited to about 60 percent of the population. To move beyond that 60 percent of LTE coverage, there was a spectrum constraint. We are very much thankful to the regulator for the recent awarding of the incremental L900/L2100 spectrum to us. Spectrum is crucial as many rural areas cannot be served and it is not economically feasible with existing L1800 band. While extending the network coverage, there are also limitations in terms of where we can build network towers, and it is a challenge today to install towers on a building top or even in semi-public areas. For example, a lot of these areas where towers are required to deliver the services are national reserves, and we need approvals from the Ministry of Forests and Environment and NTA to assist us in the right manner.
In its 16 years, Ncell has launched several types of new products such as single rate tariff, bundled offers and different types of data/voice plans. How will the company expand its business at present and the foreseeable future?
We have an extensive infrastructure in the country and we are looking at overlaying new services on top of this infrastructure.Firstly, we are expending significant efforts to digitalised our engagements with our customers; the way we engage with customers today is not entirely digital. Secondly, we are looking at enterprise business. We started about two years ago and have been serving enterprise clients for their mobility needs which include SIM cards, but now to include solutions and IP transit basis. In parallel, we are also looking at home internet services from a convergence perspective. Currently, ISPs are the only players in the area of home internet services. But ISPs have their own limitations to go beyond semi-urban areas to rural areas. We will be serving consumers in such areas with fixed wireless access and bundled mobility services.
The price of mobile data in Nepal is considered to be the most expensive in the South Asia region. What needs to be done to bring down the price of data?
This is a million dollar question. Presently, our cost per gigabyte is over 60 cents. And our yield today, based on all that we’ve done in the last 12 months by offering aggressive market propositions, is below 60 cents per gigabyte. So, our cost is higher than what we are charging for the data services we provide. To bridge that gap we need spectrum and that’s what we are hoping to be resolved soon. There is really no other way to bring our (data) costs down.
The recent years have seen the revenue of Nepali telecommunications operators declining. Does this indicate that the telecom business in Nepal has saturated?
There are signs of contraction in the telecommunications business. But 2020 was a washout year for many businesses. So, if I may, we should reference your question in the right context. If you reference 2019 and exclude the impacts of the pandemic in 2020, there’s definitely a flattening or contraction of 2-3 percent. If you look at 2018, the total market size was estimated at Rs 100 billion but was only Rs 74 billion in 2020. As we know, the country’s economy has taken a beating due to the pandemic with over 1.5 people losing their jobs and many moving out of urban areas. Evaluating from that perspective, there’s certainly a decline in the mobile industry. But if you look at the industry as a whole to include fixed services, it grew slightly. We don’t look at the industry only as the mobile industry; we consider it as the overall industry where there are telecommunications companies and fixed players such as the ISPs. So from that point of view, there is an opportunity.
I think we can collectively work to expand the market. If all the actors in the industry, not just the telecommunications operators, but also the regulators and the businesses can work together to drive digital adoption across the nation, in a more aggressive manner and in the right ways, the industry will see growth. We’re still behind the curve in terms of digital adoption compared to many markets.
How do you see the prospects of realising the concept of infrastructure sharing to bring down the operation and service costs of telecom operators?
Directionally, this is a good thing. There were discussions about infrastructure sharing in the past when we talked about 3G and 4G which would have been even more meaningful. Now all operators have their own and extensive networks. I guess, the only opportunity left may be in 5G infrastructure sharing. We are beginning to see this scenario in many markets.
While the direction is good, I’m not certain how the policy is going to be defined or structured in this regard. There are pre-requisites to make it work. For example, how pricing/costs are defined, service-level agreements (SLA), and access; all these have to be made transparent and economically viable for it to be meaningful.
After converting into a public company from a privately held entity in August 2020, many have expected that Ncell Axiata Limited will float shares to the general public though the company is yet to make things clear in this regard. Where has the process of IPO reached?
The conversion to a public limited company is related to the statutory and regulatory requirement as part of the company’s licensing. It is obviously an aspiration for many companies to get listed in the stock market. There have been discussions in this regard, but this is a decision for the company’s shareholders and I’m sure they will consider it at the right time.
It’s been five years since Ncell became a part of the Axiata Group Berhad. What changes has the company gone through over these years in terms of operations and delivery of services?
The group drives the strategic imperative for us, and that we aspire to be a digital service operator by 2025. Obviously, driving growth and profitability is what shareholders of a company always seek and that will continue to be our focus. But what is important is to look at what we have done differently. There are four key areas we have done things differently. First, it is people development. Axiata Group believes that people development is key, not just for our businesses but also as part of getting the best out of our employees. To deliver against that, Axiata has systematic and extensive programs related to people development and we implement the same in NCELL.
Second, corporate governance is of critical importance for us. As a publicly listed company on Malaysian stock exchange, Axiata is governed by the Malaysian anti-corruption law. We take serious considerations to ensure that we are fully compliant and our governance is robust.
Third, we have made improvements in procurement, on a consolidated group wide basis. We have the Axiata Procurement Centre (APC) which drives major CAPEX purchases governed by robust benchmarks and practices and delivering far better outcomes in terms of managing costs on big ticket items.
Forth, in terms of best practices, we have set up specific pillars like the best practice in technology which we call the ‘collective brain technology’ where there are teams at both group and operating companies’ level where they define collectively what’s best for the companies of Axiata.
Ncell has been actively supporting IT startups for the last couple of years. Has the company achieved its objectives in supporting the startups?
We did a few app camps in the last 4-5 years and also launched the MIT Global Startup Lab programme in Nepal in partnership with MIT and Kathmandu University. Basically, our objective is not necessarily to develop startups to become unicorns but to encourage enterprising youths to become entrepreneurs, to take that route and get into the ‘startup’ space. So, from our perspective, the objective has been met because we see a lot of excitement among Nepali youths today, compared to say five years ago. But to make it a sustainable story, I think all actors of the tech industry need to come together. We need to develop a good ecosystem where there is focus not only in skill development, but also in areas like funding and marketplace for startups.
As per the government provision, companies with an annual turnover of Rs 150 million or over are required to invest 1 percent of their profit in CSR. How is Ncell doing in terms of CSR?
We have been a responsible corporate entity in terms of CSR regardless of the 1 percent spending provision. We do CSR not because of legal obligations, but because we want to do it and we have spent over Rs 1.27 billion in CSR so far. We believe, it is vital to consider in today’s world that consumers don’t buy from you because of who you are; they buy because of what you are. They like to know what you represent and that it resonates with them.
NCELL’s total spent during the FY2077 is estimated at USD 3 million. Of the areas recommended by the government, our primary focuses are mainly on health, environment and education. We have collaborated with Dhulikhel Hospital for Telemedicine and Health Informatics Programme to expand health facility in remote and underserved communities. In education, we have supported 60 rural schools by setting up digital labs. In the area of environment, we have done a lot over the years. We are beautifying a 10.2 km stretch of the Ring Road. We are also making a beautiful park located in front of our office building in Lainchaur which should be hopefully ready by October.
As NCELL is one of the largest taxpayers in the country, could you elaborate on its contributions to the national economy?
We have been a significant contributor to the Nepali economy. As of the last fiscal year, we have contributed more than Rs 242 billion in form of taxes and fees. Not only have we paid billions of rupees in taxes in the last four years but NCELL has also made a direct contribution to employment generation in the country as well.
We have a large number of people working with us in our point-of-sales and distributor channels. NCELL is probably the biggest company in Nepal to use outsource parties; there are 1,500 individuals for our outsourced works and support partners who provide services to us. All of these have created an estimated 95,000 employment opportunities, directly and indirectly. Besides, we spend about USD 215 million a year in operating expenses (OPEX) and capital expenditure (CAPEX) as well. We will continue to contribute to the Nepali economy going forward.