A Project Report on Nepal 

Telecom
CHAPTER - ONE
INTRODUCTION
1.1    Company’s profile:
NEPAL TELECOM was registered on 2060-10-22 under Company Act,
2053. Then Nepal Telecommunications Corporation (NTC) was dissolved
and all assets and liabilities were transferred to Nepal Telecom effective from
2061-01-01 (i.e. 13th April 2004). The company with its long history is on
the way of customer service and nation building.
In Nepal, operating any form of telecommunication service dates back to 94
years in B.S. 1970. But formally telecom service was provided mainly after
the establishment of MOHAN AKASHWANI in B.S. 2005.Later as per the
plan formulated in First National Five year plan (2012-2017);
Telecommunication Department was established in B.S.2016. To modernize
the telecommunications services and to expand the services, during third five-
year plan (2023-2028), Telecommunication Department was converted into
Telecommunications Development Board in B.S.2026. After the enactment
of Communications Corporation Act 2028, it was formally established as
fully owned Government Corporation called Nepal Telecommunications
Corporation in B.S. 2032 for the purpose of providing telecommunications
services to Nepalese People. After serving the nation for 29 years with great
pride and a sense of accomplishment, Nepal Telecommunication Corporation
was transformed into Nepal Doorsanchar Company Limited from Baisakh 1,
2061. Nepal Doorsanchar Company Limited is a company registered under
the companies Act 2053. However the company is known to the general
public by the brand name Nepal Telecom as registered trademark. Nepal
Telecom has always put its endeavors in providing its valued customers a
quality service since its inception. To achieve this goal, technologies best
meeting the interest of its customers has always been selected. The
nationwide reach of the organization, from urban areas to the economically
non- viable most remote locations, is the result of all these efforts that makes
this organization different from others. Definitely Nepal Telecom’s
widespread reach will assist in the socio-economic development of the urban
as well as rural areas, as telecommunications is one of the most important
infrastructures required for development. Accordingly in the era of
globalization, it is felt that milestones and achievements of the past are not
adequate enough to catch up with the global trend in the development of
telecommunication sector and the growth of telecommunication services in
the country will be guided by Technology, Declining equipment prices,
market growth due to increase in standard of life and finally by healthy
competition. Converting NT from government owned Monopoly Company to
private owned, business oriented, customer focused company in a
competitive environment, Nepal Telecom invites its all-probable shareholders
in the sacred work of nation building.
1.2 Objective
1.2.1 Mission
“Nepal Telecom, as a progressive, customer spirited and consumer
responsive entity, is committed to provide nation-wide reliable
telecommunication services to serve as an impetus to the social, political and
economic development of the country.”
1.2.2 Vision
“NT vision is to remain a market leader in information and technology sector
in the country while also extending reliable and cost effective services to all.”
1.2.3 Goal
“NT goal is to provide cost effective telecommunication services to every
nook and corner of the country.”
1.3 Product and services:
Nepal Telecom is the key market player as it holds about 60.30% of totals no.
mobile phones and 91 % of total no of Fixed Telephones. (NTC-MIS-2067,
Aswin). It has 221 Public Switch Telephone Network (PSTN) exchanges in
72 districts and has covered all 2915 VDC with Basic Telephone service. It
offers various products like Basic telephone, Mobile telephone, Internet,
ISDN,PSTN, Leased  line, CDMA phone, sky data card, etc. It has starred
 SIP telephony service for the Nepalese lying beyond the country to call Nepal
from round the world in its own tariff through internet.
 
1.4 Objective of the Study:
Objectives  of  the  study  are  guidelines  by  which  the  study  can  be 
conducted  in  a systematic  manner.  The  main  objective  is  to  assess  the 
strengths  and  weakness  of Nepal Telecom. The specific objectives are:

1. To analyze the contribution of Nepal Telecom in total revenue of

government of Nepal as a largest tax payer of a nation.
2. To examine financial position of the company.

1.5 Research methodology

The first step in preparation of this report is to design the framework of the
research. The task begins with the collection of necessary data and
information concerning the study. The data and information collected has
been studied carefully and presented them systematically and get them
analyzed so as to meet the objective of the report. All data provided has been
thoroughly studied and then search design was planned.
1.5.1 Source of data collection.
Data are collected both from primary and secondary sources from the
organization.
1.5.1.1 Primary data: The data collected for the very first time by
observation, discussion and interviewing Mr. Prakash Pokhrel, senior
assistance, Tax-Vat section at NTC’s central office Bhadrakali.
1.5.1.2 Secondary data: The data were collected from various booklets,
pamphlets, magazines and websites and reports submitted by seniors and
colleagues to the SMART team during SMART report making and
presentation.
 
  
 
 
 
 
1.6 Limitation

1. The time to complete this report was very limited.

2. Group coordination became a great limitation.
3. As it was our first financials study of an organization, how far we did
too but we were unable to cover all financial information.
4. We were unable to interview top managers of NTC.
5. Due to the secrecy of the performance evaluation, the exact data is not
available.
6. Some of the information was extracted from the website, magazines so
that data may not be accurate and updated.

                                                 CHAPTER 2
ANALYSIS AND INTERPRETATION
2.1 Sales and Services
The main services provided by the communication companies categorized
and described as follows:
2.1.1 PSTN
2.1.1.1Public switch telephone network (PSTN): PSTN is a wired
telephony service where a wire in the field of Telecommunications, Nepal
Telecom has been the trusted partner of the people of Nepal since 2032. In
order to make life of a Nepali easier, Nepal Telecom makes continuous effort
to introduce the latest technology of communications. As always, Nepal
Telecom is devoted towards our customer satisfaction and national
development with all communicational prospect and technologies.
2.1.1.2 ADSL (Asymmetric direct subscriber line): It is the broad band
internet service provided by Nepal telecom where a single PSTN line is
capable of providing the internet and voice data at a time.
2.1.1.3 Dial-Up: Dial-Up is the narrow band internet service where a modem
is to be connected to the computer. Laptop computer is unable of using dial-
up connection. Using dial-up only one task can be done.
2.1.2 GSM
2.1.2.1  3G Service (WCDMA Service):To fulfill the ever growing demands
and to browse and access the web pages like video based programs (Live TV
browsing) NT installed WCDMA based 3G system which offers 384 kbps of
downloading and 64kbps of uploading data speed. This 3G 1X (Third
Generation Technology) allows the subscribers to have the instant data
transfer/connectivity with high speeds up. This technology enables
easier/smooth migration to other higher EVDO/EVDV systems (i.e. data only
and /or data with voice systems).
 
2.1.2.2 GPRS (General packet radio service): It is the mobile internet
service provided by NTC and is most famous amongst the users. It is the
cheapest internet charge amongst the service providers. The charge costs
15paisa per 100kb data transfer.
2.1.2.3 Post-paid and Pre-Paid service: This is the service where a GSM
user can switch into a prepaid and postpaid tariff.
2.1.2.4 WiMAX service: Nepal Telecom (NT) launched the 4G WiMAX
IEEE 802.16e service first time in Nepal. This service is available throughout
the country.
WiMAX enables broadband wireless anytime; anywhere using any WiMAX
enabled devices, whether it is a laptop, desktop modem, digital phone or even
a game device. Mobile WiMAX creates a seamless broadband environment at
home, in the office and on the move.
2.1.3 CDMA Service
2.1.3.1 CDMA phone: It is the service provided by NTC where the priority
is given to the remote costumers. The foremost application of CDMA is the
digital cellular phone technology from QUALCOMM that operates in the
800MHz band and 1.9GHz PCS band. CDMA phones are noted for their call
quality
2.1.3.2 Sky Data Card: It is the volume based internet service. It is focused
for the researchers and visitors exploring new places and connecting from
there.
 
2.1.4 SIP PPP: It is the internet phone provided by the organization where a
costumer around the globe can log in the website and can download the
software and can call Nepal as per the tariff. It requires broadband internet.
2.2 Competitors analysis
2.2.1 Spice Nepal private limited 
2.2.1.1Profile: Popularly known as “Ncell”, Spice Nepal Private Limited is
the first private GSM mobile operator in Nepal. The company was
established in 2004 and commercially launched on 17th September 2005.
Ncell is tied up with many different international Operators of more than 31
countries adding up to 74 operators around the world.
2.2.1.2 Profile of the current business, both marketplace (physical) and
market space (electronic):
The core business of SNPL is providing GSM mobile service which includes
sales of sim card and wireless voice module service. The sales of the sim card
are physically by filling up required firms through the firm’s sales counters
and its local agents. Other related services enabled through internet are GPRS
(General Packet Radio Service), MMS (Multimedia Messaging Service),
PRBT (Personal Ring Back Tone), Voice call, SMS, Voice Mail, Sms2Email,
Missed Call Notification, and related value added services. Ncell operates on
dual band frequency; 900 MHz and 1800 MHz and also allows effective and
higher capacity and data transfer for services like GPRS and EDGE.
2.2.1.3 Key (current and emerging) business model in the industry
The distribution of Ncell sim card is prompt on demand basis. IT is not used
for the distribution process but is used for vendor identification of suppliers
and customer care management in its Value Chain. Customer care service
and value addition services are competitive advantage over its rivals through
the use of Information Technology as claimed by the IT officer.
Information Technology is an integral part of functional activities
(Marketing, HR, Finance and Sales) for the company and also is highly
implemented for providing services (business) through SNPL’s website. The
company do not uses MIS system but is extensively using features of the ERP
system for co-ordination and regulation of functional units for consolidated
activities. Automated interdepartmental emailing, file sharing features and
interdepartmental meeting schedulers are the core features of the system
incorporated between different functional units.
The focus of the company in the coming years will be on value added
services and expansion of its data and voice related services. IP phones will
be introduced which will provide high speed internet connectivity. Some of
the main IT enabled mobile services in the present are; WAP (Wireless
Application Protocol), GPRS (General Packet Radio Service), EDGE
(Enhanced Data rates for GSM Evolution) or EGPRS, PRBT (pre-define-
specific Ring Back Tone) and SMS2Email.
2.2.2 United telecom limited
2.2.2.1Profile: United Telecom Limited (UTL) is a consortium of 4
companies, who have come together in a joint venture to explore various
telecom opportunities in Nepal. UTL had participated in the tender floated by
NTA for Basic Services Based on WLL Technology for the then Kingdom of
Nepal. After going through all NTA requirements, UTL was awarded the
Letter of Intent by NTA to provide WLL based services, International Long
Distance, Domestic Long Distance and Lease Lines Services.
2.2.2.2 Profile of the current business, both marketplace (physical) and
market space (electronic):
UTL provides mobile service based on WLL and uses CDMA technology.
Both pre and post paid business models are offered and are provided
impromptu from the firm’s sales unit. Code Division Multiple Access
 (CDMA) technology is the state-of-the-art technology offering reliable
service with high-speed data capability. UTL has procured the equipment,
which offers the following features; CDMA 3G 1X(IS-2000)
with Voice, G3 Fax and Data.
Besides the sales and voice transfer UTL also offers value added services and
customer based services through its websites. The system, in addition to
voice and data services, would be capable of providing the following
features:

1. Wake-up Call/ Reminder Facility

2. Abbreviated Dialing
3. Call forwarding
4. Call Transfer
5. Call Waiting (Call Alert)
6. Dynamic STD/ ISD facility
7. Call Hunting Facility/Mobile Access Hunting
8. Voice Mail Service(VMS)
9. G3 Fax
10. Data Service
11. SLA( Selective Line Access)
12. Conference Calling
13. Three Way Call (TWC)
14. Conference Calling (CC)
15. CLIP( Calling Line Identification Presentation)

 
2.2.2.3 Key (current and emerging) business model in the industry
The business model for the Wireless Local Loop (WLL) technology that UTL
conduct is “UTL is able to deliver telephones to local communities within
hours rather than every days or weeks or months”. The business model of
UTL takes the advantages of the fact that the people of Nepal find it difficult
to get the telephone connection or GSM service provided by the only player,
i.e NTC. Also the business model exists because of the people’s need for over
demand and less supply of this service.
In addition, migration to the future 3G systems (CDMA 2000 3X/ IMT-
2000/NGN- Next Generation Network), which are likely to be popular in the
coming decades, is possible. The proposed 3G 1X technology/ system allows
easy and smooth backward compatibility to the IS-95A and IS-95B. It is,
therefore, expected that this technology/state of art equipment will not
obsolesce for several decades. The system offers a wide range of
supplementary services and has the capability to support Intelligence
Network (IN) services.
2.2.3 Market power and market share:
The subscriber base of incumbent NDCL has reached 8, 68,046 whereas that
of Spice Nepal is 7, 02,975 hence a total of 15, 71,021 subscribers. The
number of postpaid subscribers has gone down by 1644. NDCL distributed
2,629 new lines in the last quarter whereas SNPL distributed 2, 12,260 lines
in the same period. SNPL now holds 44.75% of the market share, 8.75%
more than the previous quarter whereas that of NDCL continued to decrease
in this quarter as well, going down to 55.25%. The mobile customer base is
growing basically due to prepaid mobile scheme, which has crossed the 1.5
million mark at the end of this quarter. Apart from Kathmandu Valley,
NDCL is providing mobile service in 43 districts and Spice Nepal Pvt. Ltd.
too has extended its service in 25 districts. The mobile network of NDCL has
now 395 (previous data) Base Transceiver Stations (BTSs) whereas SNPL
has 315 BTS in 900 and 1800 MHz band. Hence the Number of subscriber to
Base Transceiver Station (BTS) ratio of NDCL is 2198 in comparison to
2232 of SNPL. The mobile penetration is increasing steadily to reach 5.95 in
this quarter. Total manpower involved in providing this service stands at 566.
Spice Nepal predicts that if the present discouraging rules and regulations of
NTA, lack of strict cyber laws etc., prevails then the industry would not be
able to enable IT even within the next five years.
UTL is planning to change their devices as technologies are changing rapidly
so they are planning to change their suppliers depending upon the technology
and price factor along with the quality. The proposed 3G 1X technology will
allow easy and smooth Backward Compatibility to IS-95A and IS-95B. It is,
therefore, expected that this technology/ state of art equipment will not be
 obsolete for several decades. UTL predicts that it will look into expanding its
operations into all related areas including:

1. Rural Telephony
2. Mobile Trunking
3. Total Network Solutions for Banks, etc

The NTA is soon to implement e-transactions in its operation and hence will
be e-ready to facilitate the companies in the firm. Further full enforcement of
cyber laws can bring trust and transparency for e-transactions. Expansion of
IT infrastructures such as VSATs and Tele-centers will increase awareness of
IT literacy and hence the web based customers. The firms as well as other
government agencies are focusing on various trainings and counseling
programs. This will help to increase IT and technology literacy for senior
staffs in the related organization. Further, the easy communication and global
telecommunication revolution will create both awareness and need for the
existing telecommunication industry to adapt both IT and other advanced
technology based application to integrate in its newer business models and
business processes.
2.3 Market analysis
Market analysis may take two distinct forms. In the first, it is a method used
by investors to look at the market and try to determine whether it is going up
or down, in order to make investment decisions. In the second, it is a field
used by marketers to analyze the target market of their clients and determine
the best courses of action to take to improve sales and profitability.
Market analysis as used by investors involves looking at numerical data and
attempting to discern patterns or determine probable future movement based
on that data. Investors using market analysis will look at how prices within
their specific sector are moving, how the market as a whole is tending, and
what individual events might affect the prices of stocks and commodities they
are trading in. When performing a market analysis, an investor must also
consider events such as announced mergers, profit predictions for a coming
quarter, and new technological discoveries. Some investors take a primarily
mathematical approach to market analysis, looking at reams of
historical market data and crunching every number at their disposal through
 their own algorithms in an attempt to predict the market’s future path. Other
investors take a more ‘gut’ approach to market analysis, relying on news
sources and rumors surrounding companies’ activities to sketch a rough
picture of possible market tendency.
2.3.1 Fields of market analysis:

1. Global market analysis

2. Industry market analysis
3. Market trend analysis
4. Business market analysis

2.4 Financial: present, past and future 

The company has different types of stakeholders like investors, employees,
customers, government, creditors etc. The types which show more concern to
the company’s financials are employees and investors. For employees and
investors, the concern is like how and to what extent the company will
prosper in coming days. Although we cannot predict future, but we can use
our intelligence and business acumen to deal with future if stakeholders’
concern are to be addressed properly. Before saying anything on future, we
should briefly see how the company performed in last ten years’ time. For
this purpose, financial statemenst are analyzed from the financial year
2056/57 to 2065/66.
If we analyze total revenue of the company for last ten years, compounded
Annual Growth rate (CAGR) of the company in terms of revenue has been
17.05%. So total revenue of Rs. 5.32 Billion has gone up to Rs.21.98 Billion
in F.Y.2065/66 i.e. it has gone up by more than four times the revenue of
2056/57. If we analyze the data on year on year basis, then it is evident that
initial few years growth is in the range of 10 plus percentage. But from year
2059/60 and afterwards, as GSM subscribers started to rise, revenue growth
happened on 15 plus percentage basis. Financial year 2061/62 is showing less
growth in comparison to other years due to the closure of GSM lines for a
significantly long period. After then as CDMA subscribers started to rise, like
anything in the range of 20-25%.
If we analyze expenses part of profit and loss account, expenses has shown a
compounded annual growth rate of 14.78%. In this period total expenses
Rs.2.45 Billion (F.Y. 2056/57) has gone up to Rs.8.48 Billion (F.Y.2056/57)
i.e. almost increased by 3.5 times. But analyzing the total expenses on year
on year basis, uneven fluctuations can be seen. In couple of financial years,
total expenses had decreased also in comparison to previous years. But in
totality, expenses have increased in the range of 10-20 percent. Major
component of cost is employee cost; it is almost in the range of 12-17% of
total revenue. Administrative expenses include 4% and 2% towards royalty
and contribution to rural development fund. This is bound to increase as
revenue of the company increase. One of the amortization cost depreciation is
likely to increase in coming years, as the rates applied for calculation is very
low which is in effect will inflate the profit. In an industry like telecom where
technological advances will make the asset no longer usable in shorter period
of time, useful life of the asset and depreciation rates have to be revised
accordingly.
As a rough estimate, from this year depreciation expenses would increase
almost in the range of 50 to 100% depending on the type and nature of the
asset. It is evident that the higher depreciation charge would have an impact
on the profits reported by the company. Similarly the profit after tax figure
has gone up from Rs. 2.17 Billion to Rs. 9.96 Billion having CAGR of
17.81% i.e. 4.37 times growth.
Similarly, if we talk from shareholder’s point of view, shareholders fund is
increased from Rs. 12.88 Billion to Rs. 42.16 Billion i.e.it has increased by
3.27 times. In the last couple of years net profit margin is also in the range of
40 plus percentage and return of shareholder’s fund is also around 22-25%. It
clearly tells us that as of present the financial health of the company is in
good position.
 
 
  TABLE 1: Financials of the company of last five years is stated below:

2061/2062 2062/2063 2063/2064 2064/2065 2065/2066

Total income ( in thousands) 9194297 11058915 14751624 17889310 2214782

Personnel cost 1418531 1486851 1764934 2204296 3580212

Maintenance & operation cost 552162 655127 797398 1219002 1578348

Depreciation 1048436 1195081 1366504 1486129 1681293

Other cost 1253640 868129 2839466 2108427 1673739

Total cost 4272768 4215188 6768302 7017854 8513529

Profit before tax 4921429 6843727 7983322 10871456 13633990

Profit after tax 3542461 4936647 5652688 7942902 10178025

Net profit ratio (%) 38.53 44.64 38.32 44.40 45.96

Total share holder equity 20825835 23686027 26794281 35343894 41629022

Total capital employed 20850094 23686027 27985961 35343894 43280625

Return to capital employed (%) 17.10 22.17 21.88 25.12 24.94

Return to share holder equity (%) 17.11 22.18 22.40 25.57 26.44
 Book value per share 138.84 137.91 178.63 235.63 277.53

No. Of shares 150000 150000 150000 150000 150000

EPS 23.62 32.91 37.68 52.95 67.85

 
After going through the figures put above, one can be reasonable satisfied
with the growth of the company. But no analysis can be done in isolation, so
we are comparing with one of the competitor in GSM Mobile, Spice Nepal.
Spice Nepal who as per latest reports claim to have subscriber base of 30,
00,000 and even if ARPU of Rs. 250-300 is estimated, rough annual revenue
will be in the range of Rs. 6 to 8 Billion. If they continue to grow like this,
very quickly they can touch the figure of Rs. 10-12 Billion in revenue.
Considering this success done within a span of 4 to 5 years, Nepal Telecom’s
financials robustness can be under threat if competitors grow like this.
                                                 CHAPTER 3
CONCLUSION AND RECOMMENDATION
3.1 Conclusion:
Nepal Telecom, a leading company in the telecommunication sector working
restlessly for decades has been providing world class services in Nepal
throughout the country covering all the 75 districts and covering all the
VDC’s. It has been providing best services regarding telephony and internet
access to the willing customers. It has completed successful seven years of
privatization. The organization is working for the social service and has been
continuing the joint venture with the traffic police and working for the
awareness in the road accidents and helping the needy during the natural
calamities. It is providing services as telephony (GSM, CDMA, PSTN, SIP
PPP) and internet as (Dial-up, ADSL,EVDO,GPRS) other entertaining
services as CRBT and free ten web sms provided. It covers about 4.5% of the
national revenue and is playing major role in the infrastructure development
by revenue. It has been recognizing itself as the largest tax payer to the
government and has been leading the nation by revenue.
Being a service provider it is facing a lot of challenges. The monopoly
market has no longer existed between the organizations. The competitors are
giving a heavy challenge to them; the competitors mainly Spice Nepal
working under the management of Telaia Sonera, a famous European
multinational company, United telecom (UTL), Smart telecom and Nepal
Satellite company limited are too involved in the race. Beyond these services
it has been implementing new technologies for fulfilling the desire of the
customers.
As a conclusion the services provided to the customers are satisfactory till
now but a lot of improvement and a regular cope-up is to be made to hold the
existing customers and to attract new customers from the competitive market
as well.
3.2 Recommendations  
Improvement in the managerial environment: managerial environment
includes the circulation of the internal commands, decisions,    it is very
important to cope up with the environment.
Improvement in the customer care: any organization, usually the service
based should always give first priority to the customers. Holding the existing
customer is more important than planning for inviting new ones because an
unsatisfied customer can stop ten new willing customers from joining the
organization.
Distribution of versatile services: Customers are not properly satisfied
themselves on the provided service as they want a complete and versatile
service. So Nepal telecom should always keep flexibility of the services in
majority to hold the existing customers and to attract new customers from the
competitive market.
Improvement in the decision making and policy: The decision making and
policy formulation is found to be worst in the organization. Decisions based
on the improvement and establishment of the new technology has not been
properly respected. ‘Right work in the right time’ must always be kept in the
prior consideration.
Relations between the trade unions and management: the current
cooperation between the trade unions and management is quite
unsatisfactory, if the organization wants proper survival in the competitive
environment it should always cope-up with the workers unions.
 References
www.ntc.net.np
www.google.com
wikepedia.org
NT Smarika 2066