FINANCIAL ANALYSIS OF PUBLIC COMPANY AND ITS

CONTRIBUTION TO NEPALESE ECONOMY: A CASE STUDY OF

NEPAL TELECOM
By:
Nisha Maharjan
People’s Campus
Exam Roll No.: 2710009
T.U. Regd. No.:7-2-39-1295-2009

A Proposal Submitted to:

Office of the Dean
Faculty of Management
Tribhuvan University

In partial fulfillment of the requirement for the degree of Mater of

Business Studies (M.B.S.)
Kathmandu, Nepal
2020
1. INTRODUCTION
1.1. Background of the Study
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 have always been selected. The nationwide reach of the organization, from
urban areas to the economically nonviable most remote locations, is the result of all these
efforts that makes this organization different from others.

In Nepal, operating any form of telecommunication service dates back to B.S. 1973. 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 a fully owned
Government Corporation called Nepal Telecommunications Corporation in B.S. 2032 for
the purpose of providing telecommunications services. 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 (NDCL) from
Baisakh 1, 2061. Nepal Doorsanchar company Limited is a company registered under the
Company Act 2053. However, the company is known to the general public by the brand
name "Nepal Telecom" as its 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 Nepal Telecom from a government owned monopoly to a business oriented,

customer focused company in the competitive environment, Nepal Telecom invites all
the shareholders in the sacred work of nation building.
1.2. Statement of the Problem
Nepal telecom in one of the major public enterprises in Nepal. It has an immense role in
the infrastructure development of overall country. But currently the company is mired in
fee burden and loss of revenue. it is also facing the brunt of soaring cost and changes in
the tax regimen.

Nepal Telecom saw its net profit tumble 42 percent year-on-year for the fiscal year 2018-
19 ended July 16, which it attributed to a steep license fee, foreign exchange losses, and
falling revenues caused by changing consumer tastes and preferences.

A consolidated interim financial report released by the state-owned telecom shows that
the net profit plunged to Rs10.20 billion in fiscal 2018-19 from Rs17.48 billion in fiscal
2017-18 after it was obligated to shell out Rs4.02 billion for the second renewal of its
license which had expired in 2014.Things are not looking bright for the state-owned
utility as it still has to pay around Rs16 billion in pending license fees to the regulator, the
Nepal Telecommunications Authority. And as the second renewal has also expired in
May, there is uncertainty over fees for a third renewal.

The state-owned telecom operator had received approval to sell GSM services in 1999.
At the time, no fixed charges were set for approval and renewal fees, and the telecom
company had agreed to pay the amount which would be paid by other service providers
in the future.

The decline in net profit is also attributed to a fall in revenue as the telecom operator
recorded Rs36.78 billion in total income in the last fiscal, a drop of Rs2.24 billion
compared to revenues of Rs39.02 billion in the fiscal year 2017-18.

The decline, despite a growth in subscriptions, has been attributed to growing use of
over-the-top messaging services like WhatsApp and Facebook Messenger over long
distance and domestic voice calls, and slow growth of labour migration in key
employment destinations. Earlier, long distance voice calls contributed a major chunk of
its revenue. But times have changed.In recent years, due to the popularity of over-the-top
services, the interconnection business was negatively affected, and the result of which is
seen in the company's revenue from that service,” said Nepal Telecom while stating that
it had taken measures to offset the impact of over-the-top services with new revenue
sources. There is an industry-wide slowdown in revenues from long distance calls, which
used to be a major source of income, mainly because of over-the-top services,” Dilli Ram
Adhikari, managing director of Nepal Telecom, recently told the Post. “To offset the
impact of over-the-top services, we are expanding our 4G network, particularly focusing
on rural areas to meet mobile data needs, and replacing ADSL lines with fibre to the
home connection.”

In the aftermath of dwindling profits, the company’s earnings per share has fallen to
Rs68.05 per share from Rs116.56 per share in a year. The company, mired in fee burden
and loss of revenue, is also facing the brunt of soaring costs and changes in the tax
regimen.

In 2018-19, Nepal Telecom’s depreciation cost rose by nearly half a billion and it
disgorged an additional Rs901.29 million in current tax expenses compared to previous
fiscals as the corporate tax rate was increased to 30 percent from 25 percent, leading to a
fall in tax adjusted profit. And the company also suffered a foreign exchange loss of
Rs153.79 million in the fiscal year 2018-19 against a gain of Rs635.55 million in foreign
exchange in 2017-18.

This study seeks to measure these mainstream problems in light of significance. This
study however seeks to answer the following question

1. What if the actual financial condition of the Nepal Telecom and its impact in national
development
1.3. Objective of the Study
This study mainly concentrates on the financial performance of Nepal. Therefore, the
study has been carried out keeping in view the following objectives.
1. To analyze the financial performance of the company for the past ten years
2. To determine whether the financial performance is satisfactory or not
3. Providing suggestions for improvement of the financial status
4. To analyze the contribution of NTC in the economy of Nepal

2. Review of the Literature

This chapter refers with conceptual framework, review of related research articles and
reviews of related studies and also draws the gap in the research.

Mr. Bhola Nepal has submitted thesis on topic "Financial performance of Nepal
Telecom". The main objectives of the study are, to highlight the NTC in different aspects,
to analyze, examine & interpret the financial position of NTC by using various tools &
technique, to give workable recommendation, if there are weakness inherent in the
corporation and the main findings were .there is no serious liquidity problem in NTC.
The current assets of NTC are greater than current liabilities in each fiscal year. It shows
the better liquidity position of NTC But it does mean that there is not any liquidity
problem in NTC. The corporation has been following a uniform policy to finance current
assets & current liabilities.

Mr Dipendra Kr. Nuepane has submitted thesis on the topic " A study on profit planning
in Nepal Telecom." The general objective of the study were to examine the present
comprehensive profit planning system applied by NTC. The other specific objectives of
the study were to highlight NTC to analyze functional budgets adopted in the corporation,
to analyze ratio analysis & variances of NTC etc .The main findings were The
corporation has no skilled planers, Budgets are prepared just for the formalities and NTC
has not adequately considered controllable and non controllable variables affecting the
organization.

Mr. Rajendra Kumar Pokharel has conducted the research on topic "Traffic Structure of
Nepal Telecommunication in Nepal." The main objectives of the study were to examine
the present traffic structure of telecommunication in Nepal with reference to its target
population current efficiency & future development of services. to recommend valuable
measure to upgrade the services with reference to restructure of tariff system. The major
findings of his research were the tariff rates for local telephone STD, ISD & other service
are reasonable, time constraint is necessary but three minutes allotted at the presented
time is not sufficient, The interest rates provided by NTC for the amount of deposit by its
subscriber is relatively low in comparison to the rate of interest provided by the
banks,NTC takes differential tariff for the use of telecommunication facilities during the
day, evening & night time. It helps for the proper distribution of traffic load with respect
to time, improves the grade of service & encourages the low income group to get benefit
from the services.

Ms Beena Bajracharya has conducted a research in "An evaluation Study of

Telecommunication Development in Nepal." The main objectives of the research were
concerning the evaluation of telecommunication development in Nepal to examine the
present & expected future utilization of telecommunication facilities an to analyze the
pattern of telecommunication development in Nepal with reference to its part trend,
present performance & future prospects. The conclusions are the government of Nepal
has also stressed the development of telecommunication by giving high priority in each &
every development plans. But the telecommunication facilities in Nepal are very low in
comparison with the development countries. the main problems of telecommunication
development of Nepal are lack of financial resources, lack of technical knowledge &
problem of management & administration etc. In the process of development of Nepal
Telecommunication sector, foreign aid has played a signification role. International
telecommunication union has contributed to the establishment of a training institute to
train the telecommunication technicians of Nepal."10

3. Proposed Research Framework

Many studies have been conducted on financial performance of Nepal telecom.This thesis
includes the findings of a few of these studies. Besides all the effort there is still more
research that needs to be done. This study will serve as a valuable effort for further study
on this topic.

4. Research Methodology
This chapter concerns with research methodology adopted for study and includes the site
selection, research design, population and sample, nature and sources of data such as
primary data and secondary data, method of data collection, data analysis tools, analysis
model, means of preparation and presentation of the data and tools of analysis and
limitation of the methodology.

4.1. Research Design

Research design is the plan. Structure and strategy of investigation conceived to obtain
answers to research questions and objective of this study. This study is conducted by the
descriptive and analytical method of research design. The necessary job of this task is
collecting important data and information from different reliable source. The data and
information gathered were analyzed carefully and present them in systematic way.

4.2. Nature and Source of Data

There are mainly two source of data collection i.e. Primary and Secondary Source of
Data. In this study, Secondary data were collected rather than primary data. The major
sources of data are form major sites of NTC,UTL, search engines like Google,
Wikipedia, etc.

4.3. Population and Sampling Technique

In this study, data has been collected through secondary sources. The data which are
related with Nepal Telecom are collected through the sampling of statistical data. There
are so many data about related studies but only required data has been collected,
tabulated, categorized, and interpreted according to the sampling method of data
collection. In order to achieve the good grasp of Nepal telecom data from 2008/09 to
2018/19 has been considered in the study. For this, data are mostly collected from Nepal
telecom website.

4.4. Methods of Analysis

All the data are from secondary sources in this paper. The major sources of data are the
major sites of NTC and search engines like Google, Wikipedia .According to research
planning and design, the data are represented systematically either the help of table,
excel, graphs and figures. to make the report more clear and scientific data are analyzed
with the comparative analysis of financial ratios of 10 years trend analysis.

4.5. Limitations of the Study

This study has been carried out with an aim to analyze the financial status of Nepal
Telecom. This study constitutes certain limitations.

• The required time period to complete this study was limited

• The research is unable to cover all the financial aspects
• Unable to interview with top level management
• Due to the secrecy of the performance evaluation of Nepal telecom, the
exact data is not available, while shorting out the quarterly based data
 analysis were based on the unedited financial statement published by
Nepal telecom.
• most of the information were extracted from website, magazines and
articles published so the accuracy depend upon the sources.

5. Organization of the study

This thesis is organized into five chapters. The first chapter is the introductory. This
chapter includes background of the study, introduction, statement of the problem,
objective of the study, significant of the study and organization of the study. Similarly
second chapter deals with review of the literature. In this chapter, review of conceptual,
review of related empirical studies, and concluding remarks are included. Third chapter
depicts research methodology of the study. It includes the research design, types of
research design, nature and source of data, population and sample, respondent profile,
methods of analysis and limitation of the study. Fourth chapter deals with the
presentation and analysis of data. Likewise, the last chapter consist the summary,
conclusion and recommendations of the study. Finally, bibliography has been included at
the end of the study.

6. Reference
KotlerP,Armstrong G(2004) “Principles of Marketing” New Delhi,prentice hall of India

Nepal Doorsanchar Smarika 2066

Khan, M.Y. & Jain, P.K. (2008).Financial management. New Delhi: Tata McGraw Hill
Publishing Company Ltd.

Jack R Meredith and Samuel J Mantel,JR Wiley publication ,University of Cincinnati

Prem raj pant(2011).Essentials of Business Reasearch

Method.Kathmandu,Nepal:Academic Enterprises P.ltd

Annual report 2009.Finance Kathmandu:Nepal Telecom Corporation

Annual report FY 2067/68 to FY 2076/77,Kathmandu:Nepal Telecom Corporation

Aryal, R. (2015). Environmental Analysis of Nepal Telecom. Retrieved

from http://rameshtalks.wordpress.com/2012/07/23/environmental-analysis-of-nepal-
telecom/
Google Scholar

NTC. (2015). Mission, Vision and Goals. Retrieved 12 July 2015,

from http://www.ntc.net.np/companyInfo/ntAchievement.php
Google Scholar

NTC. (2013). A Project Report on Nepal Telecom. Retrieved 25 June 2015,

from http://w4university.wordpress.com/2013/05/20/ntc/
Google Scholar

Dhurba Kumar Gautam(2016) NTC and Ncell: Telecommunication and Strategies

Faculty of Management, Tribhuvan University, Kathmandu, Nepal
Reports and Web Link
https://ntc.net.np/
https://www.researchgate.net/

https://en.wikipedia.org/wiki/Nepal_Telecom

https://kathmandupost.com/money/2019/08/16/nepal-telecom-s-profit-falls-42-
percent-to-rs10-20-billion