As the process of appointing a strategic partner at Nepal Telecom could take at least two years to complete, the government is mulling awarding a short-term management contract to a competitive firm or individual as an immediate measure to instill better management practice at the company.
This is what the fourth committee formed to look after NT’s strategic partner issue has suggested. The idea of awarding a management contract to a third party, according to the committee, is to help NT develop better management practice to attract foreign investors.
A management contract is an arrangement under which operational control of an enterprise is vested by the contract in a separate enterprise which performs the necessary managerial functions in return for a fee.
“We are considering the management contract as a short-term measure that will be put in place until the process of finding a strategic partner is completed,” said Baikuntha Aryal, who leads the committee. “This would make NT an attractive prospect for foreign investors seeking strategic partnership with NT.”
The report has suggested that the management contract can be awarded for a maximum period of three years. The report has given three options for NT’s revival — appointing a strategic partner, management contract, and setting up a subsidiary company and then inviting a strategic partner in the subsidiary company.
As NT is currently operating in profit, the report has suggested that it is the perfect time for inviting a strategic partner. The committee suggested divesting 30 percent stake to the strategic partner. Earlier committees had recommended divesting 26-20 percent stake.
The report has 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 stated any company seeking the strategic partnership should have shareholders equity three times of NT’s.
The committee also suggested making NT free from the Public Procurement Act’s purview. For this, the report suggested amending the definition of ‘Public Entity’ mentioned in the Public Procurement Act’s clause 2. The word company should be removed from the definition of ‘Public Entity’.
The NT management has been saying that along with bringing in a strategic partner, the Public Procurement Act should also be amended. NT, according to them, has been struggling to compete with its rivals as it has to adhere to the government rules and regulations, including the Public Procurement Act, when it comes to implementing new projects.
This, according to top NT officials, makes the whole process lengthy and cumbersome in comparison to private telecom companies that can start new projects instantly. The report has said the whole process will take at least two years to complete even if the work moves smoothly, and the plan should be executed in two phases. The first phase includes calling Expression of Interest, preparing NT’s Due Diligence Report, appointing a consultant. The second phase includes preparing bid documents and condition of contract, calling tender and selecting a strategic partner.
The process, however, needs the Cabinet’s approval. Khum Raj Punjali, chief of Public Enterprise Coordination Division of the Finance Ministry, said the report will be submitted to the Privatisation Committee, which will then present the proposal to the Cabinet. “We will discuss the proposal with the Finance Minister, who heads the Privatisation Committee, for a decision on the matter,” said Punjali.
NT had proposed the idea of bringing in a strategic partner three years ago.