The privatisation committee headed by the Finance Minster on Tuesday
decided to move ahead with the process of bringing in strategic partner
at Nepal Telecom by taking in-principle approval from the Cabinet.
The meeting, which took place after a 15-month hiatus, also decided to form a technical sub-committee which will be mandated to carry out procedural activities before sending the proposal to the Cabinet.
“The sub-committee will be mandated to carry out legal and procedural activities such as exploring potential partners, preparing legal framework, preparing bid documents within the next six months,” said Basu Sharma, under secretary at the Finance Ministry, who coordinates the privatisation affairs.
He said representatives to be included in the sub-committee have not been decided yet.
NT’s privatisation process had begun in May, 2010, with the formation of a sub-committee headed by lawmaker Hari Rokka. Since then, four studies have been carried out on NT divestment — one by the Industry Ministry and the other three by the Finance Ministry.
All the sub-committees had suggested that NT requires a strategic partner to keep its competitiveness intact in the changed environment and stiff competition.
The latest committee headed by Finance Ministry Joint Secretary Baikuntha Aryal has suggested it is the perfect time for inviting a strategic partner as NT is currently operating in profit. The panel has suggested the process of bringing in a strategic partner at NT should be executed in two phases.
The first phase includes calling Expression of Interest, preparing NT’s Due Diligence Audit Report and appointing a consultant, while second phase includes preparing bid documents and condition of contract, calling tender and selecting a partner.
Anoop Ranjan Bhattarai, deputy managing director at NT, said the work on bringing a competent strategic partner has to be intensified before it is too late. Although the company is still making huge profits, the profit growth rate has been on a decreasing trend for the last few years. NT has also been losing its market share to private sector GSM service provider Ncell, which has already overtaken NT in terms of subscriber base.
After the initiatives were taken to divest certain percentage of NT’s shares to strategic partners, global telecom companies have expressed interest in NT. A senior NT official said international operators like KDDI and Docomo of Japan and Singtel of Singapore have shown interest in forging partnership with NT. “Some had even hired international consultant and prepared report about NT and the possibility of partnership,” the official said.
The Aryal-led committee had put forth some pre-conditions for telecom companies seeking to forge strategic partnership with NT.
Among the pre-conditions are the prospective partners should have operations in at least three countries, a subscriber base of 20 million, annual income of $1 billion for the last three years and should be in profit for last three years.
With NT having shareholders’ equity worth Rs 60 billion, the report said any company seeking the strategic partnership should have shareholders equity three times that of NT.
The committee had suggested divesting 30 percent stake to the strategic partner although earlier committees had recommended divesting 26-30 percent. It also suggested making NT free from the Public Procurement Act’s purview, by removing the word “company” from the definition of public entity.
The NT management has long been lobbying to keep it out of the purview of the Act which has created difficulties in importing new equipment timely amid rising competition.
Stating that it could take at least two years to complete the task of bringing in a strategic partner, the Aryal-led committee has suggested awarding a short-term management contract to a competitive firm to help NT develop better management practice to attract foreign investors.
Source: The Kathmandu Post
The meeting, which took place after a 15-month hiatus, also decided to form a technical sub-committee which will be mandated to carry out procedural activities before sending the proposal to the Cabinet.
“The sub-committee will be mandated to carry out legal and procedural activities such as exploring potential partners, preparing legal framework, preparing bid documents within the next six months,” said Basu Sharma, under secretary at the Finance Ministry, who coordinates the privatisation affairs.
He said representatives to be included in the sub-committee have not been decided yet.
NT’s privatisation process had begun in May, 2010, with the formation of a sub-committee headed by lawmaker Hari Rokka. Since then, four studies have been carried out on NT divestment — one by the Industry Ministry and the other three by the Finance Ministry.
All the sub-committees had suggested that NT requires a strategic partner to keep its competitiveness intact in the changed environment and stiff competition.
The latest committee headed by Finance Ministry Joint Secretary Baikuntha Aryal has suggested it is the perfect time for inviting a strategic partner as NT is currently operating in profit. The panel has suggested the process of bringing in a strategic partner at NT should be executed in two phases.
The first phase includes calling Expression of Interest, preparing NT’s Due Diligence Audit Report and appointing a consultant, while second phase includes preparing bid documents and condition of contract, calling tender and selecting a partner.
Anoop Ranjan Bhattarai, deputy managing director at NT, said the work on bringing a competent strategic partner has to be intensified before it is too late. Although the company is still making huge profits, the profit growth rate has been on a decreasing trend for the last few years. NT has also been losing its market share to private sector GSM service provider Ncell, which has already overtaken NT in terms of subscriber base.
After the initiatives were taken to divest certain percentage of NT’s shares to strategic partners, global telecom companies have expressed interest in NT. A senior NT official said international operators like KDDI and Docomo of Japan and Singtel of Singapore have shown interest in forging partnership with NT. “Some had even hired international consultant and prepared report about NT and the possibility of partnership,” the official said.
The Aryal-led committee had put forth some pre-conditions for telecom companies seeking to forge strategic partnership with NT.
Among the pre-conditions are the prospective partners should have operations in at least three countries, a subscriber base of 20 million, annual income of $1 billion for the last three years and should be in profit for last three years.
With NT having shareholders’ equity worth Rs 60 billion, the report said any company seeking the strategic partnership should have shareholders equity three times that of NT.
The committee had suggested divesting 30 percent stake to the strategic partner although earlier committees had recommended divesting 26-30 percent. It also suggested making NT free from the Public Procurement Act’s purview, by removing the word “company” from the definition of public entity.
The NT management has long been lobbying to keep it out of the purview of the Act which has created difficulties in importing new equipment timely amid rising competition.
Stating that it could take at least two years to complete the task of bringing in a strategic partner, the Aryal-led committee has suggested awarding a short-term management contract to a competitive firm to help NT develop better management practice to attract foreign investors.
Source: The Kathmandu Post
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