Nepal’s data-centric future beyond Covid-19

Andy Chong was appointed CEO/MD of Ncell in November 2019 and has been with the Axiata Group since 2008. He has held top management positions in Malaysia, Singapore and Indonesia. Chong is a cycling enthusiast and spends weekends exploring the terrain around the Valley and is interested in discovering challenging routes across Nepal. He spoke to Nepali Times this week about telecommunications during the Covid-19 crisis.

Nepali Times: Economic activity has come to a standstill globally, yet the telecommunication business appears to be least affected. Is this also the case in Nepal?

Andy Chong: It is true telecommunications businesses have been more resilient than many other industries which have been impaired by as much as 95%. For Ncell, while we are in a relatively better position compared to other big businesses, the telecoms are not spared. Telecommunication is a utility to a large extent, and during times like this, access to communications, content, services, entertainment are almost uniquely channeled via data connectivity has been heightened. In Nepal, telecommunications network utilisation has increased by more than 40%. However, the impact of increased use of services with people living at home and working from home has not translated to higher revenues.

Telecom companies were compelled to provide this essential service at subsidised rate to ensure our customers had connectivity during lockdowns. For example, we provided 120% bonus on top up, increased saapati amount, made balance transfer service available for free, provided 25% discount in data service, among others.

Has there been a slowdown in Ncell's growth in terms of customers as well as profit?

During the lockdown data traffic had jumped up by 40%, while overall income declined by 35%, and we believe the same was the case with other telcos. With easing of lockdown there is sign of some hope with business recovering to 28% of pre-lockdown levels. Yet, this will take some time to reach to normalcy.

It is evident that consumer consumption behaviour has changed – we saw substantial shift from voice usage to data during the lockdown. We have continued to invest in our data carrying capacity throughout the last eight months.

As many as 1 million Ncell customers stopped using their services after lockdown which, we assume, is due to unemployment. Only 3% of our PoS were opened during the lockdown which affected our business and when the government eased lockdown, around 25% of PoS were re-opened.  This has a direct correlation to the recharge activities of consumers.

I do not foresee businesses including ours, will return to pre-covid normalcy in the next 9 to 12 months. The impact has dug deep into the structure of Nepal’s economy and will need a longer runway to recover, which at least for our industry, will follow a moderate L-shape. It will be a good outcome if all of us recover to within 90% of pre-covid levels before end 2021. We will be fortunate if we can get back to 80%-90% of normal business of pre-pandemic within next one-and-half years.

How do you see the future grown of the telecommunication sector in Nepal, and your own market share?

We will give priority to digitalisation of our key business areas as much as we can so when we get out of the pandemic, we are ahead of the curve and better able to serve our customers.

Our business strategy remains on track and investments as planned remain unchanged. We are going to be data oriented. Nepal is not ‘digital’ enough today – both from a supply and demand perspective. Had Nepal been up the curve in terms of its digital economy, the impact would have been lessened with easy access to services for customers.

Various challenges including impact of COVID impacted Ncell’s performance as July YTD20 revenue (ex-device) declined 22.5%, affected by drops across voice, data and ILD. EBITDA slid 31.9% due to revenue decline coupled with higher network cost. Contribution of data in total revenue has increased to 24% in the Q2 from 22% of FY2019.

Data is the future and there is significant opportunity for growth as Nepal embraces a digital future. Share of data in revenue of telecom companies have been increasing every year whilst voice remains relatively constant. We aspire to be a digital telco and strategy is data-centric, which for enterprises, we hope to be first choice of Nepali businesses to help them achieve their aspiration.

Any plans to introduce 5G in Nepal?

We want to rollout our 4G nationwide but that is a function of spectrum. We will require multiple frequencies – both for capacity enhancement and for expansion of coverage We launched 4G in June 2017 and expanded it to all provinces of Nepal.

Spectrum in 900MHz is required to deliver population coverage. We have 54% 4G population coverage and as soon as we awarded technology neutral spectrum in this band, we will be able to expand 4G coverage to 90% of population coverage, so we will continue to investment in expanding our network.

With spectrum in 1800MHz band that we secured in December, we will give depth of 4G coverage to deliver higher data speeds and capacity within the coverage area. But to serve wider geography, we need technology neutral spectrum in 900MHz – we are hopeful this will be resolved soon so we can better serve consumers with 4G services.

So, for 5G, we would welcome Nepal Telecommunications Authority’s leadership in setting up industry consultations to ensure timely availability. From our point of view this will likely be post implementation of 4G nationwide.

Limited competition has been cited as the reason for high cost for calls and data in Nepal. How do we compare with other countries in the region?

For making the data service cheaper and profitable, spectrum is needed to expand further to the rural areas. Data price had dropped significantly after the launch of 4G. Cost of the voice has already come down and consumers are now concerned about data although they have alternatives – non-mobility data from their ISPs.

For example, in our Axiata operations in Cambodia can produce per GB data at a cost of 15-16 cents. But here in Ncell, due to the lack of sufficient spectrum, our per GB production cost approximately 70 cents. But for many of our data packs, our retail price per GB is well below 70 cents today. Therefore, to deliver lower price points to consumers, operators must be provided enough spectrum to lower its cost of production.

As the biggest foreign investor in Nepal today what needs to be done to attract more foreign investment into the country?

For a developing country like Nepal, Foreign Direct Investment (FDI) plays a vital and direct role in ensuring economic growth and prosperity in terms of capital formation and technology transfers. Ease of doing business within the country has to be facilitated. Political stability, infrastructure availability, facilitation from government, bureaucracy, and the overall political climate must be supportive for foreign investors.

The Foreign Investment and Technology Transfer Act, amendment to the Industrial Enterprises Act, Special Economic Zone Act and Public Private Partnership and Investment Act came into force in the past two years. As one of the biggest foreign investors in Nepal, we take pride for being one of the highest tax payers of the country. From the time of its inception till date, Ncell has paid over Rs240 billion in taxes to the government, with Rs30.22 billion just in the last fiscal year.

Our direct and indirect contribution to the country’s GDP stood at 2 percent in 2018/19. As a committed investor in Nepal, we have made a substantial investment in infrastructure for service expansion and enhancing quality. We put in Rs32-35 billion annually in capex and opex investment that directly or indirectly drive the economy. Infrastructure such as telecommunications have strong links to growth, poverty alleviation and environmental sustainability.

Through our investments, we have introduced new technological solutions that has resulted in positive externalities such as direct economic benefits via employment, affordable means of communications resulting in social and economic benefits for our customers, better provision of social services like education and health, decentralisation and integration processes, human welfare and overall economic development.

We have created employment opportunities for more than 90,000 people. Increased investment from company like Ncell will contribute to expand the overall infrastructural base of the country and further support National Digital Nepal 2020 initiatives.

Ncell has been actively supporting social causes. What are some of the highlights?

As part of our CSR, we have invested over Rs900 million with focus on education, health and environment like setting up Telemedicine and

Health Informatics Centre in collaboration with Kathmandu University

Hospital in Dhulikhel to serve remote and underserved communities through quality health care using technology and data-driven health care methods.

We are establishing modern digital labs in 60 community schools across the country in collaboration with Ministry of Communication and Information Technology. We have been working closely with the Ministry of Health and Population as an exclusive partner to raise health awareness. As part of it, we are currently engaged in Covid-19 information campaign with UNICEF support.

We have collaborated with the Department of Forest and Soil Conservation and have begun greening of the 10km Ring Road stretch from Koteswor to Kalanki. We thank our 16 million customers for their continuous support. We are committed to providing you with a dependable service no matter what the circumstances are. We have been and will continue to support and work with government bodies and the private sector in Nepal in addressing this crisis, and we must remain vigilant, be patient and stay safe.