Increased licence fee, foreign exchange losses, and falling revenues caused by changing consumer tastes and preferences has pulled the Nepal Telecom (NT) net profit down by 42 per cent – compared to the last fiscal year – in the fiscal year 2018-19 that ended on July 16.
According to a consolidated interim financial report released by Nepal Telecom today, its net profit dropped to Rs 10.20 billion in the fiscal year 2018-19 from Rs 17.48 billion in fiscal year 2017-18, after it was obligated to pay Rs 4.02 billion for the second renewal of its licence, which had expired in 2014.
The state-owned utility still has to pay around Rs 16 billion in pending licence fees to the Nepal Telecommunications Authority (NTA). And as the second renewal has also expired in May, there is uncertainty over fees for a third renewal too.
According to the telecom service provider, the company was obligated to pay Rs 20 billion, despite a dispute with the regulating authority over the payment of Global System of Mobile Communication (GSM) renewal fees, which had accrued on May 12, 2014.
Though, the government rescheduled – on May 24 – the payment, and allowed to settle in five annual installments from the fiscal year 2018-19 to save the state-owned, the employees' union of the NT has demanded that the fee be withdrawn.
According to a statement released by the union, the company which has a paid-up capital of Rs 15 billion – Rs 5 billion less than the fee amount sought by the regulator – should not be subjected to such a huge fee as it will lead to a massive financial burden.
The Nepal Telecom had received approval to sell GSM services in 1999. Since there was no fixed charges set for approval and renewal fees at the time. The telecom company had, however, agreed to pay the amount which would be paid by other service providers in the future.
In 2004, when Spice Nepal – now Ncell – began operations, it had agreed to pay Rs 210 million for approval to run GSM service and Rs 20 billion after 10 years for renewal, which has put pressure on Nepal Telecom to pay the same charge as default fees for renewal of the GSM licence.
Telecom operators are, now required to renew their licences every five years after 10 years of operation. “The issue of quantification of the GSM licence renewal fee that expired in May this year is not settled within the authority,” Nepal Telecom said, adding that the company renewed its licence by paying nearly Rs 190 million and has amortised the cost accordingly. “The fee liability of third renewal, if confirmed and quantified may result in further cost to the company and hence, the net profit after tax will be adjusted by that extent.”
Apart from renewal fee, the telecom also attributed the decline in its net profit to a fall in revenue as it recorded Rs 36.78 billion in total income in the last fiscal year, a drop of Rs 2.24 billion compared to revenues of Rs 39.02 billion in the fiscal year 2017-18. The fall in profit has hit the public listed company’s earning per share as it has dropped to Rs 68.05 per share from Rs 116.56 in a year, according to the unaudited financial statement of Nepal Telecom. “The company also suffered a foreign exchange loss of Rs 153.79 million in the fiscal year 2018-19 against a gain of Rs 635.55 million in foreign exchange in 2017-18.”
The marketing schemes also cost the company Rs 775.26 million in discount schemes on recharge card sales.
The telecom has blamed growing use of over-the-top messaging services like WhatsApp and Facebook Messenger over long distance and domestic voice calls for the decline in revenue, despite a growth in subscriptions. Earlier, long distance voice calls used to contribute a major chunk to the revenue, according to the telecom that has planned to expand the 4G network – to again gain the market – and also replace ADSL with fibre to the home (FTTH) connection.
The political bickering and red tape also forced the telecom service provider to loose its ground with the private players.
According to a consolidated interim financial report released by Nepal Telecom today, its net profit dropped to Rs 10.20 billion in the fiscal year 2018-19 from Rs 17.48 billion in fiscal year 2017-18, after it was obligated to pay Rs 4.02 billion for the second renewal of its licence, which had expired in 2014.
The state-owned utility still has to pay around Rs 16 billion in pending licence fees to the Nepal Telecommunications Authority (NTA). And as the second renewal has also expired in May, there is uncertainty over fees for a third renewal too.
According to the telecom service provider, the company was obligated to pay Rs 20 billion, despite a dispute with the regulating authority over the payment of Global System of Mobile Communication (GSM) renewal fees, which had accrued on May 12, 2014.
Though, the government rescheduled – on May 24 – the payment, and allowed to settle in five annual installments from the fiscal year 2018-19 to save the state-owned, the employees' union of the NT has demanded that the fee be withdrawn.
According to a statement released by the union, the company which has a paid-up capital of Rs 15 billion – Rs 5 billion less than the fee amount sought by the regulator – should not be subjected to such a huge fee as it will lead to a massive financial burden.
The Nepal Telecom had received approval to sell GSM services in 1999. Since there was no fixed charges set for approval and renewal fees at the time. The telecom company had, however, agreed to pay the amount which would be paid by other service providers in the future.
In 2004, when Spice Nepal – now Ncell – began operations, it had agreed to pay Rs 210 million for approval to run GSM service and Rs 20 billion after 10 years for renewal, which has put pressure on Nepal Telecom to pay the same charge as default fees for renewal of the GSM licence.
Telecom operators are, now required to renew their licences every five years after 10 years of operation. “The issue of quantification of the GSM licence renewal fee that expired in May this year is not settled within the authority,” Nepal Telecom said, adding that the company renewed its licence by paying nearly Rs 190 million and has amortised the cost accordingly. “The fee liability of third renewal, if confirmed and quantified may result in further cost to the company and hence, the net profit after tax will be adjusted by that extent.”
Apart from renewal fee, the telecom also attributed the decline in its net profit to a fall in revenue as it recorded Rs 36.78 billion in total income in the last fiscal year, a drop of Rs 2.24 billion compared to revenues of Rs 39.02 billion in the fiscal year 2017-18. The fall in profit has hit the public listed company’s earning per share as it has dropped to Rs 68.05 per share from Rs 116.56 in a year, according to the unaudited financial statement of Nepal Telecom. “The company also suffered a foreign exchange loss of Rs 153.79 million in the fiscal year 2018-19 against a gain of Rs 635.55 million in foreign exchange in 2017-18.”
The marketing schemes also cost the company Rs 775.26 million in discount schemes on recharge card sales.
The telecom has blamed growing use of over-the-top messaging services like WhatsApp and Facebook Messenger over long distance and domestic voice calls for the decline in revenue, despite a growth in subscriptions. Earlier, long distance voice calls used to contribute a major chunk to the revenue, according to the telecom that has planned to expand the 4G network – to again gain the market – and also replace ADSL with fibre to the home (FTTH) connection.
The political bickering and red tape also forced the telecom service provider to loose its ground with the private players.
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