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Foreign Direct Investment (FDI) in Telecommunication Sector in Nepal

November 16, 2025 by Khum Weblink NGO & INGO
Home | NGO & INGO | Foreign Direct Investment (FDI) in Telecommunication Sector in Nepal

Introduction

Foreign Direct Investment (FDI) in Nepal’s telecommunication sector has been one of the most significant contributors to the country’s technological and economic growth. The Government of Nepal has opened the telecommunication and information technology industries for foreign investors under the Industrial Enterprise Act and the Foreign Investment and Technology Transfer Act (FITTA). This has encouraged foreign participation in developing infrastructure, expanding services, and introducing modern technologies.

Scope of FDI in Telecommunication

FDI in Nepal’s telecommunication industry covers a wide range of information and communication technology-based services, such as:

  • Internet Service Providers (ISP)
  • Telephone and Mobile Phone Operator Services
  • Mobile Satellite Phone and Teleport Services
  • Establishment and Operation of Satellites and Broadcasting Centers
  • VSAT (Very Small Aperture Terminal) Services
  • Broadband Infrastructure, Telecom Towers, and Optical Fiber Networks

These areas form the backbone of Nepal’s ICT development and digital communication systems.

Nepal’s Telecommunications Landscape: Market Overview

In recent years, Nepal’s telecommunications industry has witnessed remarkable growth and modernization. The sector has evolved from a system dominated by limited fixed-line connections to one characterized by extensive mobile and internet connectivity. As of early 2025, the country’s mobile penetration ratehas reached approximately 138% (including users with multiple SIMs), while internet penetration stands at around 82%, reflecting Nepal’s increasing digital integration and connectivity.

Current Market Structure

Mobile Network Operators:
Nepal’s mobile services are primarily provided by three key players  Nepal Telecom (a government-owned enterprise), Ncell(a private operator with foreign investment), and Smart Telecom (a smaller private operator). These companies collectively dominate the nation’s mobile communication market.

Internet Service Providers (ISPs):
There are more than 40 licensed ISPs operating across Nepal, offering a variety of broadband and wireless internet services to both urban and rural consumers.

Network Coverage:
The telecommunication network in Nepal now reaches approximately 95% of the population for voice services, while broadband coverage extends to nearly 75%, demonstrating substantial progress in digital inclusion.

Technology Mix:
Nepal’s telecom infrastructure currently supports 2G, 3G, and 4G networks, with 5G trials already in progress, signaling the country’s readiness to adopt next-generation communication technologies.

Fiber Optic Network:
The nation’s fiber optic network has expanded to more than 30,000 kilometers, with ongoing projects aimed at further extending high-speed connectivity to remote and underserved regions.

Overall, Nepal’s telecommunications sector is rapidly evolving, supported by growing FDI, policy reforms, and infrastructure expansion, positioning the country toward a more connected and digitally empowered future.

Legal and Regulatory Framework

The telecommunications sector operates under several key laws:

  • Telecommunications Act 2053 (1997) – Primary legislation regulating telecom operations.
  • FITTA 2019 – Governs foreign investment and technology transfer.
  • Companies Act 2063 (2006) – Regulates company formation and management.
  • Competition Promotion and Market Protection Act 2063 (2007) – Ensures fair competition.
  • Nepal Telecommunications Authority (NTA) – Regulates licensing, spectrum management and service standards.

Foreign investors must bring a minimum investment of NPR 50 million (USD 378,000). Ownership is allowed up to 80% in basic telecom services and 100% in value-added services. Investors have repatriation rights and protection against nationalization or expropriation, with access to international arbitration for dispute settlement.

Provisions Related to Foreign Investment

• Minimum Investment Requirement :
Foreign investors must bring a minimum investment of NPR 50 million  to be eligible to invest in Nepal’s telecommunication and ICT sector.

• Foreign Ownership Limits :

  • Telecommunication Sector: Up to 80% foreign ownershippermitted.
  • Banking and Financial Institutions (BFIs): Minimum 20% and maximum 85% foreign ownership permitted.
  • Insurance Companies: Up to 80% foreign ownership permitted.

• Repatriation Rights:
Foreign investors are allowed to repatriate dividends, capital gains, loan repayments, and technology transfer fees in accordance with Nepal Rastra Bank regulations.

• Investment Protection:
Nepali law provides strong protection against nationalization and expropriation, ensuring the safety of foreign investors’ assets, profits, and lawful returns.

• Dispute Resolution Mechanism:
Foreign investors have access to international arbitration in case of disputes, enhancing confidence and fairness in the investment environment.

FDI Investment and Licensing Process in Nepal’s Telecommunications Sector

  • Company Formation:
    • Register with the Department of Industry (DoI)and Office of the Company Registrar (OCR).
    • Obtain Permanent Account Number (PAN) from the Inland Revenue Department.
    • Open a corporate bank account for investment and operational transactions.
  • FDI Approval:
    • Submit a business proposal to the DoI with financial and project details.
    • Approval usually takes 7–30 days.
    • Receive the FDI approval certificate to legally bring foreign capital into Nepal.
  • Telecommunications Licensing:
    • Apply to the Nepal Telecommunications Authority (NTA) with technical, financial, and service rollout plans.
    • Additional approvals may include spectrum allocation, frequency coordination, and international gateway permissions.
    • License processing typically takes 60–90 days.
  • Operational Setup:
    • Deploy network infrastructure including towers, fiber optics, and data centers.
    • Establish interconnection agreements with other operators.
    • Recruit and train skilled staff.
    • Ensure regulatory compliance with NTA, including quality of service, consumer protection, and reporting obligations.
  • Outcome:
    • Enables legal, efficient, and high-quality telecom operations while contributing to Nepal’s digital infrastructure and economy.

Procedures applicable for foreign Investment approval

Step 1: Application for Foreign Investment Approval

The first step is to apply for approval of foreign investment under the Foreign Investment and Technology Transfer Act, 2019 (FITTA). The investor must submit an application to the Department of Industry with supporting documents such as a project proposal, investor profile, financial plan, joint venture agreement (if applicable), and proof of identity. Once the DoI is satisfied, it grants the foreign investment approval letter.

Step 2: Company Incorporation with the Company Registrar Office

After receiving the foreign investment approval, the next step is to register the company under the Companies Act, 2006. The applicant must submit the Memorandum and Articles of Association, details of shareholders and directors, and a prescribed registration fee to the Office of the Company Registrar. Upon verification, the OCR issues the Certificate of Incorporation.

Step 3: Tax Registration and PAN Issuance

The newly incorporated company must then register with the Inland Revenue Office to obtain a Permanent Account Number (PAN) for taxation purposes. This is mandatory to commence any commercial activity, issue invoices, and comply with Nepal’s tax laws under the Income Tax Act, 2002.

Step 4: Local Level Business Registration

The company must also register its office location and business activities at the respective Ward Office under the local government. This is required for local administrative recognition, and may be necessary for obtaining trade licenses or operation permits in specific jurisdictions.

Step 5: Registration of Industry at DOI

In the case of manufacturing, IT, and service-based industries, the company must also register itself as an industry at the Department of Industry. This ensures classification under the Industrial Enterprises Act, 2020, which may entitle the company to tax incentives, import benefits, and industry-specific support.

Step 6: Clearance from Credit Information Bureau

Before infusing capital into the country, the investor is required to obtain a Non-Blacklist Certificate from Nepal’s Credit Information Bureau. This certificate confirms that the foreign investor or entity is not listed as a defaulter or blacklisted for financial misconduct.

Step 7: Pre-Investment Notification to Nepal Rastra Bank

The investor must submit a statutory notification to the Foreign Exchange Department of Nepal Rastra Bank before bringing in the investment funds. This includes details of the approved investment, company registration, and the intended amount to be remitted.

Step 8: Capital Infusion via Formal Banking Channels

The approved foreign capital must be transferred into Nepal through formal banking channels (e.g., SWIFT) into a local commercial bank account opened in the name of the investing company. After verifying the source and amount, the bank issues an Investment Certificate, which acts as proof of the inflow of foreign capital.

Step 9: Recording of Foreign Investment at Nepal Rastra Bank

Once the capital is infused and the certificate is obtained, the company must ensure that the investment amount is formally recorded at the Nepal Rastra Bank. This step is crucial for enabling future repatriation of profits, dividends, or capital, as permitted under FITTA and NRB guidelines.

Required Documents for Foreign Investment Approval

  • To obtain approval for foreign investment in Nepal’s Information Communication Technology sector, the following documents must be submitted:
  • A comprehensive project report detailing the project background, market analysis, technical aspects, financial projections, and the source and structure of the proposed investment.
  • A bio-dataor company profile of the foreign investor, outlining their business experience and operational background.
  • A copy of the passport of the foreign investor (if the investor is an individual), or passports of the directors (if the investment is being made through a corporate entity).
  • A certified copy of the Certificate of Incorporation of the foreign investor company, along with its Memorandum and Articles of Association, and any other relevant registration documents.
  • A corporate resolution passed by the foreign investor’s board or governing body authorizing the decision to invest in Nepal.
  • A Financial Credibility Certificate (FCC) issued by a recognized bank in the investor’s home country, verifying the investor’s financial standing and capacity to invest.
  • A legally executed Power of Attorney, authorizing a designated individual to act on behalf of the investor for all matters related to the approval and registration process with the government authorities in Nepal.

FDI and Challenges in Nepal’s Telecommunications Sector

Nepal’s telecommunications sector has grown rapidly and remains one of the country’s largest revenue sources, with Nepal Telecom and Ncell among the top taxpayers. However, the industry now faces major challenges. The market has shifted from voice to data services, requiring heavy investment in new technologies, yet outdated license fees and rising competition from OTT platforms have reduced profits. Over the past six years, sector revenue has fallen by 26% and profit by 81%, discouraging new foreign investors.

While countries like India and Bangladesh attract telecom FDI, Nepal’s outdated laws and complex regulations have made the sector less viable. To restore growth, the government must modernize telecom policies, ensure fair treatment of investors, and create a level playing field for private and foreign companies. With timely reforms and investment-friendly policies, Nepal can revitalize its telecom industry and strengthen its digital economy.

Conclusion

Foreign Direct Investment (FDI) has played a pivotal role in transforming Nepal’s telecommunications sector, driving technological advancement, service quality, and market competitiveness. Investments from foreign companies have facilitated the expansion of mobile networks, broadband infrastructure, and fiber optic connectivity, even reaching remote areas. FDI has also introduced international standards of management, promoted healthy competition, created employment opportunities, and contributed significantly to national revenue.