A Project Report on Nepal 

Telecom
CHAPTER 1
                                                     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