Mobile subscriptions outnumber population

Nepal has 27.85 million mobile users, against population of 26.49 million

Kathmandu, June 14, 2016: The number of mobile subscriptions has outnumbered Nepal’s population.With a single person subscribing to more than one service, the mobile service penetration rate has hit 105.15 percent of the population, according to the latest Management Information System (MIS) Report of Nepal Telecommuni-cations Authority (NTA).

As of February, the number of mobile subscriptions in Nepal stands at 27.85 million, against the total population of 26.49 million. Among the telecommunications services, the least penetration is of fixed telephone—3.2 percent.

The growing mobile service penetration has also contributed to the rise in the sales of handled devices. Nepal imported 4.16 million handsets worth Rs14.63 billion as of mid-May this fiscal year—up 33.1 percent year-on-year, according to the Department of Customs.

“The telecommunications sector has witnessed both quantitative and qualitative growth as a result of the rise in the number of both service providers and service seekers, and technological innovation,” states the Economic Survey 2015.

With the rise in the number of mobile phone users, internet penetration has also increased to 44.89 percent of the total population as of mid October 2015, according to NTA. Two telecom giants—Nepal Telecom and Ncell—hold a 97 percent share in the domestic data market, which suggests most of the costumer use internet in their mobile devices. NT enjoys a market share of 56.99 percent, while Ncell has 40.62 percent share in the data market, according to NTA data.

There were less than 50 internet users in 1995, which grew to 12.51 million as of mid-February 2016, according to NTA. The rise has been attributed to the smartphone revolution in late 2000s that changed the way people communicate.

Although smartphones have become an integral part of people’s lives, importers say the domestic mobile phone industry has yet to see boom times. “Many people in rural areas are yet to switch to smartphones from bar phones,” said Nitesh Kumar Mundra, director of Vatsal Impex, authorised distributor for Xiaomi. “But the growth rate is very high and there is stiff competition.”

Smartphones bundled with engaging applications are the fastest selling gadgets in the world, and 1,000 mobile phones were shipped every 21.8 seconds during 2015, according International Data Corporation (IDC).

Mundra said with the entry of new players, market is moving towards rapid growth in upcoming years.

“The smartphone industry operates in a highly dynamic business environment because of the rate of technological obsolescence,” said Pawan Bhimseria, chairman of Genxt, official distributor of iPhone. “If unsold, the value of a smartphone depreciates by half in just few months.”

According to global forecasts, more than half of the adults own smartphones and the figure is predicted to reach 80 percent by 2020.

Moreover, Nepali telecom operators are planning to launch 4G technology next year. With the introduction of the technology, service quality and data speeds will further enhance. 4G networks based on LTE (long-term evolution) technology supports up to 100Mbps data speed, depending on the setup and traffic.

Traders’ concerns

Despite rising smartphone demand, lack of government policy, poor network and high tariff rates have been affecting sales, traders said. At a time when many countries have been cutting tariff rates, Nepal has failed to do so, they said.

Recently, all the 28 countries in the European Union have announced to completely remove roaming charges on voice services by the next year. They have also announced to reduce roaming charges on data by 75 percent.

The traders said the government’s recent decision to reduce the value added tax (VAT) rebate on imports of mobile phones could result in price hikes, making smartphones unaffordable to the masses.

In the budget for 2016-17, the government has announced to reduce the VAT rebate to 40 percent from existing 50 percent. The government decision, however, is based reports of the Office of Auditor General that the facility has been misused.

Sanjay Agrawal, director of Teletalk, authorised distributor of Gionee, said the reduction in VAT rebate could promote smuggling given smuggled phones would be cheaper.

However, the traders expressed hope the recent NTA decision making registration of International Mobile Equipment Identity (IMEI) number of every handset mandatory could discourage smuggling. Currently, only the importers have to register model numbers with the NTA. But with the latest NTA decision, every phone in use, no matter when bought, has to be registered by October.

What mobile phone traders say

‘Smartphones have become ubiquitous’

Pranaya Ratna Staphit

Deputy General Manager, Samsung Nepal

The market penetration of smartphones is increasing and the competition has grown. Globally-renowned companies entering the Nepali market proves Nepal is an attractive and high growth potential market. The development of mobile applications offering localised contents has helped the industry grow further. Smartphones are becoming more ubiquitous, content rich and powerful. As far as Samsung is concerned, we are the major market share holders thanks to the brand loyalty of our highly valued customers.

‘Hard to secure fair profit’

Pawan Kumar Bhimseria

Chairman, Genxt, authorised distributor of iPhone

Almost 75 percent of Nepalis own mobile phones these days. The dependency on cell phones has risen dramatically within the span of a few years. Competition has also increased in line with the surging demand for superior technology smartphones. But the government is not supportive. Reducing the VAT refund amid growing competition and grey market has made it more difficult to secure fair profits.

Moreover, in Nepal, people bring expensive phones from abroad and claim maintenance and technical support from us. How can we provide after sales service to users who have not purchased their phones from our stores? The government should enforce strict rules against the grey market. But the new provisions favour illegal trade. We request the government to promote trade through legitimate channels.

‘Number of tech-savvy customers on the rise’

Nitesh Mundra                   

Director, Vatsal Impex, authorised distributor of Xiaomi mobile

A growing base of technology-friendly people has sped up market growth. The mobile market is a market for new technologies and its growth largely depends on the desire to acquire high-tech gadgets. Customers who cannot operate bar phones properly are also carrying smartphones these days. However, the Nepali market for mobile phones is still at its first phase of growth. Unlike in city areas, people in rural regions have started to develop user skills only recently.

‘Reducing VAT refund will give rise to grey market transactions’

Sanjay Agrawal                  

Director, TeleTalk, authorised distributor of Gionee, Colors

Mobile phones have played a crucial role in enhancing our living standard. Having said that, the government should understand the impact of the interventions it makes. After the VAT refund system was implemented years ago, grey market transactions fell to 10-15 percent. However, reducing VAT refund is likely to push up prices of handsets coming through legal channels. The government should implement a fixed rate instead of imposing VAT. On the other hand, removing VAT provisions will affect high-value smartphone brands. There are high chances of growth of grey market transactions if the government does not focus on promoting legal mobile phone businesses.

‘Govt should promote healthy competition’

Manish Rajbhandari                            

Managing Director, Allied Trade Link, authorised distributor of Panasonic mobile

The Nepali market is seeing rapid growth these days as more and more people are becoming technology-friendly. However, the new budgetary provisions will hamper legal trade while motivating black marketers. High prices in the domestic market means people will switch to less costly and illegally imported mobiles. The investment is high in the dynamic mobile business environment, and the government should focus on promoting healthy competition

Moreover, traders are also facing unnecessary hassles while registering the IMEI codes of imported phones. The Nepal Telecommuni-cations Authority should set up offices at customs points to speed up the process instead of compounding the hassles being faced by traders operating in a tough competitive environment.

‘Apart from phones, customers too have become smart’

Lokesh Oli                                

Managing Director, iHub Pvt Ltd, authorised distributor of One Plus mobile

There is no more information asymmetry between sellers and buyers. Customers are well aware and constantly update themselves on the features, product performance, specs, prices and trending tech innovations in the international market. The growth in online transactions in Nepal has taken competition to a new level. The market is moving towards saturation and price manipulation will bring losses.

‘Homework lacking for effective implementation’

Shirish Murarka                                  

Director, Pashupati Trade Link, authorised distributor of Micromax mobile

The market has gained pace in terms of revenue generation. Growth is largely fuelled by the rate of technological obsolescence. However, there are some major challenges like unfavourable policies on VAT and IMEI registration. A lot needs to be done to implement such a system and necessary homework for effective implementation is lacking. That has added to the hassles faced by traders. The government should speed up the process and undertake effective market monitoring to curb illegal trade. Moreover, announcing a new rule without adequate resources to implement it makes things more difficult. The policy is sound, now the government should implement it effectively.

‘Lack of skilled manpower for after sales service’

Sumit Pradhananga                          

Device Marketing Manager, Huawei Technologies Nepal

Branded mobile phone sellers also provide after sales service.

But lack of qualified personnel has affected smooth delivery of such services. However, we have prioritized after sales service because in case of failure, customers will not form a positive brand perception.

Moreover, the government is planning to launch 4G technology within a year. The upcoming models will have inbuilt functions in line with technological advancements.

‘Tech advancement drives market growth’

Ganesh Karna                                            

Business Head, LifeCom (Lenovo mobile)

The smartphone industry in Nepal is experiencing boom times. The competition has moved to the next level and the user base is also increasing rapidly. There is still a significant populace using bar phones, but it will change soon. With increasing usage of social media apps, rural mobile phone users will soon switch to high-end smartphones supporting fresh applications. With the introduction of high-speed data technologies, the industry will further grow as the desire to own a powerful device grips Nepali customers.

‘Mobile phone is not a luxury product’

Vikas Shah                                            

Director, Prism Technology (InFocus)

The mobile market is gradually increasing. Import of mobile phones equipped with new technology and design is also on the rise. It is traders’ responsibility to import devices as per customers’ needs. The reduction in VAT refund has demoralised the traders. The government should rethink its decision. Mobiles should not be considered as luxury products. It has become a necessity and the government should promote the business.