Initial Public Offering (IPO) of Ncell Pvt. Ltd.

Public Issue of 30,000,000 Equity Shares of a face value NPR 100/- Each of the Company for
cash at a price of [] per Equity Share (including a share premium of [] per Equity Share).
Section 1
Introduction of the Industry
1. History of Telecommunication in Nepal dates back to 1913 when the first telephone line
was introduced in Kathmandu and with open wire trunk between Kathmandu and Raxaul
1914.
2. Major telecommunication companies are NCELL, Nepal Telecom, United Telecom along
with new entrants such as Hello Mobile and Smart Telecom. Nepal Telecom (previously
Nepal Telecommunication Corporation) is the state owned telecom operator and also the
only landline operator. Ncell (previously Spice Nepal), a subsidiary of Telia Sonera is the
leading GSM operator of the nation with more than 49 % of the market shares. UTL,
United Telecom is a JV of three Indian Telecom giants MTNL, TCIL and TCL is a
CDMA operator.
Analysis of market
1. Secondary market in Nepal is in bullish strength
2. There is excessive liquidity in the economy (NPR 60 billion excess liquidity)
3. Before Constitution Assembly Elections, Nepse index was around NRs. 430, which after
election reached Rs. 1083 (the highest recorded till date). Nepse earned 100% within 1
year after the elections.
4. The participation of the public in secondary market itself is very good. So, we can
assume that there will be an oversubscription of at least 3 times for Ncells shares.
5. Moreover, there has not been any issue of IPO of large companies recently.
NCELL
1. Ncell Pvt. Ltd earlier known as Spice Nepal Private Limited was established in 2004 as
the first private operator of mobile communication services in the GSM standard in
Nepal. The services were commercially launched under the Mero Mobile brand on
September 17, 2005. As of 2010, it has been operating under the Ncell brand whereN
stands for Nepal.
2. Ncell has been part of TeliaSonera, a leading European telecom company since October
2008. Supported by TeliaSonera, we have continued expanding coverage, enhancing
quality and bringing new, efficient and easy-to-use services to the people of Nepal.
3. NCell is constantly working towards the goals of connecting everyone in Nepal through
high quality, modern and cost effective services and creating value for our customers and
partners. Ncell contributes to the development of the countrys economy and
infrastructure, building best-in-class networks and bringing people in the remotest areas
of Nepal within the reach of communication.

Vision
Ncell is committed to being the best local mobile network for the people living in the country.
Strengths and Strategies
1. Ncell leads the market share with a total of 12.08 million subscribers among 22.85
million subscribers across all carriers, comprising 52% of total market share. This
number is ever growing with more customers shifting towards Ncell for its quality
service.
2. Ncell is backed up by its parent company, Telia Sonera that provides all the technological
and managerial expertise to succeed in the industry.
3. High brand equity with large customer loyalty.
4. In order to gain competitive advantage over competitors, focus has been on new
technologies for providing customers with adequate services at affordable prices.
5. Increasing Value Added Services (VAS) to cater the service expectation of the
customers.
6. Installation of additional and new equipments of wireless services and initiation of
regular process for monitoring and optimization.
7. Initiation for introducing Strategic Partner and/or acquisition and mergers of existing
firms providing similar services to contribute in long term Shareholders Wealth
Maximization.
SWOT ANALYSIS
Strengths:
1. High brand equity Ncell is among Nepals most visible brands omnipresent in most
parts of the nation through mobile and Internet services with attractive campaigns and
innovative advertising.
2. Superior overall network quality and reliability Ncell runs the best mobile networks in
Nepal. We have nationwide penetration, offering highest quality telecom service
experience as compared to most other service providers.
3. Latest Technology and Managerial Expertise - Ncell is backed up by its parent company,
Telia Sonera that provides all the technological and managerial expertise to succeed in
the industry.
Weaknesses:
1. Ncell Services are expensive for the customers when communicating with network
carriers other than its own. This is because it has to pay extra taxes as well as other tariffs
to Nepal Telecom.
2. Ncell has to pay royalty charges to the state owned Nepal Telecom (NTC) for its services,
tower rentals, etc.
3. High Cost of Operations - Due to Nepals topography, the installation charges and
infrastructure development become difficult and costly.

Opportunities:
1. The demand for Internet Service Providers is increasing in Nepal. The growing rate of
Internet penetration is an opportunity to tap the growing market.
2. In Nepal, there are only two brands leading the telecommunication market with the
existence of other minor providers. Mergers and acquisition of these minor providers
could be an opportunity for Ncell to have a stronghold in the market.
3. Data Usage is increasing at current date. Penetrating data packages at an effective rate
could be a major plus point of Ncell.
4. Providing connections to foreign telecommunication carriers for roaming is a good
source of income.
Threats:
1. High competition in the telecommunication market - Ncell is the most popular
telecommunication brand currently. With doors for investments open now, competition
in the telecommunication market is to come by.
2. Nepal is prone to natural calamities such as earthquakes, floods and landslides and is a
constant threat to damage of infrastructure.
3. Sudden change in Government and its Policies can be a threat to the company.
4. Introduction of possible large new service carriers as a FDI can be a tough competition.
Management Structure
Designation Age Nationality

Share
Ownership

Educational
Qualification

No.

Name

Telia Sonera

Mr. Mikko Kasonen

Board of
Director

42

Canadian

18300000

MBA

Mr. Peter Wiklund

Board of
Director

46

Swedish

14500000

BBA

Mr. Anil Kharel

Board of
Director

41

Nepalese

12800000

MBA

Mr. Ballav Shrestha

Board of
Director

40

Nepalese

12800000

BBA

41600000

Section 3 : Risk Factors:

External Risks:
Legal Risks: Nepal is currently at a state of political transformation. There might be changes in
the policies and rules governing the telecommunication industry. In case of such changes, there
might be adverse effects to the existing firms.

Competitors Strategy: Nepals Telecommunication Policy does not allow newcomers in the
market to enter the major market unless it operates in rural areas for a certain period of time. So,
competitors are unlikely to step in apart from the state-owned Nepal Telecom. Competitors
strategies may include advanced technological developments, adoption of new technology to
reduce cost and so on.
Contingent Liabilities: Every private telecommunication service provider has to pay a certain
amount of royalty Nepal Doorsanchar (Nepal Telecom). Due to this reason, is will be difficult
for private firms to excel over the state owned Nepal Telecom. Any kind of changes in the
telecommunication policies or policy revision by the government may bring adverse results to
the service providers.
Exchange Rate Impact: Most of the instruments, machines needed for telecommunication
operations are imported from abroad. Procurement of such instruments will be very expensive if
exchange rates are unfavourable. On the contrary, as exchange rate rises and Nepalese Rupees
(NPR) devaluates, telecommunication sector benefits from the revenues of international calls.
Subsidies or Taxation: The Government of Nepal provides subsidies for technologies which are
environment friendly and those based at rural areas. This might be a positive point for
competitors to step in. There might also be heavy taxation for import of new equipments and
adoption of new technologies.
Mergers and Acquisition: Merging of two other competing brands and/or acquisition of a
minor brand by a major competitor will reduce the competitive advantage of our brand.
Political Instability in the country may disturb the functioning of the firm. Due to frequent
strikes, difficulty in importing required machinery and equipments, it becomes difficult for firms
to function effectively.
Internal Risks:
High Employee Turnover rates due to better opportunities abroad. Brain drain is a major problem
in Nepal. For better opportunities abroad, a large number of skilled manpower move out of the
country. As such, if skilled employees move out of the company, it will prove to be a big
problem to look for replacements.

Section 3: Financials
Company Capital Structure
Authorized Capital: NPR 18,00,00,00,000 /- as of 1,80,00,00,000 shares
Issued Capital: NPR 13,00,00,00,000/- as of 1,30,00,00,000 shares
Paid up Capital: NPR 10,00,00,00,000 /- as of 1,00,00,00,000 shares

Summary Statement of Balance Statement

Actual ( in thousands)

As of Jan 29th '15

Pro forma ( in thousands)

2013

2014

2015

2016

2017

Fixed assets

3,990,012.00

3,992,188.00

3,983,119.00

4,140,959.00

4,182,767.00

Current Assets

8,691,482.00

12,375,805.00

13,449,723.00

17,681,548.00

22,131,140.00

12,681,494.00

16,367,993.00

17,432,842.00

21,822,507.00

26,313,907.00

190,307.00

433,975.00

16,940.00

250,203.00

242,697.00

Current Liabilities

2,467,854.00

5,895,499.00

7,357,044.00

8,471,255.00

12,960,247.00

Total Liabilities

2,658,161.00

6,329,474.00

7,373,984.00

8,721,458.00

13,202,944.00

Net Worth

10,023,333.00

10,038,519.00

10,058,858.00

13,101,049.00

13,110,963.00

Share Capital

10,000,000.00

10,000,000.00

10,000,000.00

13,000,000.00

13,000,000.00

23,333.00

38,519.00

58,858.00

101,049.00

110,963.00

10,023,333.00

10,038,519.00

10,058,858.00

13,101,049.00

13,110,963.00

Total Assets
Non Current Liabilities

Reserve and Surplus

Total Equity

Figure: Balance Sheet

Financial
Snapshot

Summary Statement of Profit and Loss

(P & L Summary)
Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

35255000.00

212447000.00

154561500.00

189024000.00

207908000.00

107451000.00

13207500.00

81379000.00

66472500.00

76510400.00

87391000.00

6,6541000.00

2194000.00

14765000.00

13462000.00

17933500.00

22372000.00

33197500.00

in Thousands
Revenue from
Operations

EBITDA

Restated Profit
After Tax

Fig: Income Statement

Section 4: Offer Related Information

Investment Plans
Acquisition of United Telecom Limited (UTL): United Telecom Limited is one of the
carriers of home-based CDMA services in Nepal. Despite having a wide reach, UTL has
currently not been functioning well, and not clearing the government taxes. With the
acquisition of UTL, the customer base and reach of Ncell will increase. Ncell will be able
to tap in the home based phone users.
Upgrading existing towers and establishing new towers: With the capital collected from
the IPO, capital investments will be made to improve existing towers and establish new
ones. This shall help better the quality of service provided to existing customers and also
help expand in all areas of the country.
4G Tele communications Technology: Capital investments will also be made to acquire
4G infrastructure to deliver 4G services to the customers. 4G is the fourth generation of
mobile telecommunications technology, which provides mobile broadband Internet

access, for example to laptops with wireless modems, to smartphones, and to other
mobile devices. Potential and current applications include amended mobile web access,
IP telephony, gaming services, high-definition mobile TV, video conferencing, 3D
television, and cloud computing. Ncell will be the first telecommunication service
provider to bring 4G technology in Nepal. This will serve as an competitive advantage
over other service providers in the country and will also help develop the brand equity.
Internet Service Providers: Internet Services is a basic requirement for households as well
as corporate houses. Nepal ranks as one of the top 10 countries with the slowest internet
services. At present stage, the entire communication module is moving into the internet.
Less than 50% of the population in Nepal has access to Internet facilities. Ncell plans to
expand into the internet service market, bringing in high speed cable as well as wireless
internet services. The major focus is to expand to rural areas of the country where other
service providers are barely present. The demand for quality internet services is rapidly
growing and this shall prove to be a very good investment for us.
Research and development: Investments will also be made in the research and
development sectors to work for further development in technology and services
available. With development of newer and better technologies, the quality of service can
be enhanced and newer services can be developed, at a reasonable rate for the customers.

Issue Format: 100 % Book building Route

Qualified Institutional
Buyers

Large Investors
(Investing large than NPR
50,000)

Small Investors
(Investing less than
NPR 50,000)

Mode of
Allotment

Compulsorily in
dematerialised form.

Compulsorily in
dematerialised form.

Compulsorily in
dematerialised form.

Bid Lot

Bids can be made for a

minimum of 50 equity
shares and in addition of
10 equity shares
thereafter

Bids can be made for a

minimum of 50 equity shares
and in addition of 10 equity
shares thereafter

Bids can be made for a

minimum of 50 equity
shares and in addition of
10 equity shares
thereafter

Allotment
Lot

Remaining shares to be
allocated via pro-rata
basis

Remaining shares to be
allocated via pro-rata basis

75%

Trading
Lot

One Equity Share

One Equity Share

One Equity Share

Terms of

Full Bid Amount shall be Full Bid Amount shall be

Full Bid Amount shall

Payment

payable at the time of

submission of Bid cum
Application Form.

payable at the time of

submission of Bid cum
Application Form.

be payable at the time

of submission of Bid
cum Application Form.

Price Band
NPR 160- NPR 240 per share
IPO Grading
The Issue has been graded by ICRA as Grade II, indicating that the fundamentals of the Issue are
above average
Listing
Nepal Stock Exchange Ltd.
Book Running Lead Manager (Underwriter) and Issue Manager
NMB Bank Ltd
BaberMahal, Kathmandu, Nepal