Telecom Industry Heading Toward Crisis as 5G Rollout Remains Uncertain

Nepal’s telecommunications industry is heading toward a crisis as the growing popularity of over-the-top (OTT) platforms such as WhatsApp, Viber, and Messenger continues to eat into the revenues of telecom operators. With declining earnings, the rollout of 5G services—requiring massive financial investment—has become increasingly uncertain.

According to unaudited financial statements recently published by Nepal Telecom (NT), the company’s net profit plunged by nearly 57 percent in Fiscal Year 2024/25, shrinking to Rs 2.66 billion from Rs 6.23 billion a year earlier. NT attributed the drop mainly to a sharp decline in financial income, which fell from Rs 6.78 billion in FY 2023/24 to Rs 3.70 billion in FY 2024/25. The fall was largely due to a reduction in interest rates on fixed deposits in which NT had invested. Revenue from service sales also slipped slightly to Rs 34.53 billion, down from Rs 34.56 billion in the previous year.

The company cited multiple factors behind the downturn, including declining mobile data consumption as internet service providers (ISPs) expand Wi-Fi services, high operating costs due to extension of services even in remote areas, and reduced tariffs following changes in government policy. NT also reported additional strain from pension obligations amounting to Rs 13.15 billion in FY 2024/25. “Free calls over the internet have surged, reducing voice calls by nearly 60 percent compared to earlier, while data consumption has failed to grow. These are the main reasons for declining revenues,” a senior NT official said.

The situation is similar for Ncell, Nepal’s other major telecom operator, which has also been struggling to maintain revenues. Although the government has announced plans in the budget for FY 2025/26 to launch 5G services in Kathmandu Valley and major urban centers, falling revenues among operators have become a key obstacle. According to a senior Ncell official, telecom revenues have been declining steadily for the past seven years, and if the trend continues, it will be “extremely difficult” to manage the financial resources required for 5G rollout. Industry experts estimate that each operator would need to invest around Rs 45 billion to expand 5G nationwide.

The sector’s income has already dropped significantly—from Rs 98.72 billion in FY 2017/18 to Rs 68.43 billion in FY 2023/24. If the trend persists, revenues are projected to fall further to Rs 56.37 billion by FY 2027/28. Officials argue that unless the government intervenes by reducing operators’ costs, the 5G launch will remain stalled. They have urged the government to adopt a subscription-based model for mobile services, distribute spectrum free of cost, cut customs duties on telecom equipment, and allow network sharing among providers.

Ncell has also complained of regulatory hurdles, including delays in foreign exchange approvals, which have prevented the company from adding new towers for four years and disrupted bandwidth payments. Additionally, operators face heavy financial burdens due to licensing rules. Telecom companies currently pay an initial license fee of Rs 210 million and are required to renew their licenses every five years at a cost of Rs 20 billion. NT has already paid Rs 20 billion for its third license renewal along with nearly Rs 3 billion in spectrum and related fees, while Ncell has begun paying its renewal fee in installments.

Officials further warn that a legal provision requiring Ncell to be nationalized after five years has created uncertainty over whether operators will invest billions more in the sector.

“With shrinking revenues, government tax collection has also declined. Both major operators would need to invest nearly Rs 60 billion in the next two to three years for 5G, but given the current financial situation, this looks unfeasible,” another Ncell official said.

Industry insiders caution that without urgent policy reforms, telecom operators will not be able to upgrade networks, introduce new technologies, or improve customer services. Even maintaining and upgrading existing infrastructure has become difficult due to funding shortages, while high taxes and regulatory fees have further discouraged investment in the sector.