Axiata concludes sale of Ncell

KUALA LUMPUR: Following its decision to exit the Nepal market, Axiata Group Bhd announced it has entered into an unconditional sale and purchase agreement with Spectrlite UK Ltd to dispose of Reynolds Holdings Ltd, which owns about 80% stake n Ncell Axiata Ltd.

The disposal comes with a fixed consideration of US$50mil as well as a conditional consideration for Axiata to receive a share of the going forward distributions of Ncell, contingent upon its future business performance and net distributions until 2029, as well as any windfall gains during this period, said the telco in a statement.

In coming to its decision to withdraw, Axiata said it had evaluated several factors, including the Nepalese government’s attempts to enforce a January 2021 tax assessment, which is likely to carry a sum of US$433.6mil.

According to Axiata, the Nepalese government had failed to abide by the ruling delivered by the International Centre for the Settlement of Investment Disputes on June 9, 2023, which stipulated that it should refrain from demanding any further taxes and fees in relation to Axiata’s acquisition of Reynolds in 2016.

In particular, the tribunal ruled that Nepal should refrain from enforcing the January 2021 assessment.

Including Axiata’s settlement of NPR47bil (US$421.9mil) capital gains tax between 2016 and 2020, enforcement of the January 2021 assessment would take the total taxation on the transaction to US$855.5mil, representing 62.7% of the US$1.37bil transaction value.

“Considering the imminent and existential exposure arising from the scenario of double taxation, additional risk associated with the expiry of the company’s mobile license in 2029, with the potential of expropriation of Axiata’s stake by the Government of Nepal and the unfavourable foreign investment protection environment in Nepal, Axiata had accelerated its exploration of an exit.

“The terms of the share purchase agreement (SPA) with the purchaser would enable Axiata to exit on a clean basis,” said Axiata.

Axiata chairman Tan Sri Shahril Ridza Ridzuan noted that Ncell, as Nepal’s largest taxpayer, has contributed NPR283bil in taxes and fees as of the 2021/2022 fiscal year.

It has also made a total dividend contribution of RM2.2bil to the group over the past seven years.

“The closing of the sale and the completion of our exit from Nepal enables us to focus on our strategic priorities and continue our value creation journey.

“We are now in a much stronger position to deliver on our strategy, refine our capital allocation priorities and explore the right strategic partnerships,” he said.

Axiata group CEO and managing director Vivek Sood added that Ncell will retain full responsibility for its business and any of its liabilities while the purchaser will indemnify Axiata against any further Nepalese tax claims in relation to Ncell.