Necon, Shangri-La to merge operations

Post Report

KATHMANDU, Sept 5 – Two private airlines operating largely on the domestic sector have agreed to work out a merger to streamline operations, airline industry sources told The Kathmandu Post on Wednesday.

Necon Air, one of Nepal’s largest private airlines which also operates to nearby Indian cities, and relative newcomer Shangri-La Air are pursuing merger talks to work under the same umbrella. Executives close to the airlines say that though a final deal has yet to be reached, it is almost certain that Necon Air would be buying almost all shares of Shangri-La Air.

Talking to The Kathmandu Post Narayan Singh Pun, the Chairman of Necon Air Pvt. Limited informed that the airline would purchase all shares of the Shangri-La Air. He said "After the acquisition, Shangri-La Air would work as a subsidiary company of Necon Air."

He added "Due to the increased costs of the airline companies it has been difficult to survive in the present competition and this decision has been made in order to reduce the administrative costs and for the optimal utilization of the existing resources."

Shangri-La air officials confirmed the talks but said no final decision has been reached yet. "The talks of merger are going on. But we have not decided on the issue yet." said an official of the Shangri-La Air, requesting anonymity.

The merger is the first such deal and bucks the trend in Nepal’s aviation scene where some newer start ups are actually splinters of older airlines. The deal comes at a time when the leading domestic airline companies have been complaining about the low rate of return in the airlines sector due to which most of the domestic airlines are facing financial difficulties. They have been arguing that domestic air fares has not been reasonably revised since last couple of years, despite the multi-fold increment of aviation fuel, customs duties on parts of the airplanes and other major expenditures.

Necon Air limited was established in 1992 by a group of Nepali entrepreneurs with the paid up capital of Rs 180 million. The company currently provides its air services to the Indian cities Patna and Varanasi and also to Bhadrapur, Biratnagar, Janakpur, Bhairahawa, Nepalgunj. The company owns two 50-seater ATR- aircraft and an Avro.

Necon Air is the only private sector airlines to receive the permission to start the international flights.

Similarly, the Shangri-La Air was established in December 1999. The company has its flight to the major towns inside the country. It presently owns two Twin Ottor aircraft, and has three aircraft on lease.

Special rural telecom project fails to hit target

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KATHMANDU, Sept 5 - The government’s commitment to provide telephone services to 2,153 Village Development Committees (VDCs) out of 3,914 VDCs by July 2003 through Special Rural Telecommunications Program, has been delayed by two years, making it impossible to hit the target.

The government could not provide the committed amount for the project as it could not accumulate necessary fund from donor communities and had to spend limited internal resources in other priority sectors, says Pralhad Pokhrel, Under Secretary at the Ministry of Information and Communications.

Out of an estimated total cost of US $ 70 million project, the government had committed to provide 30 per cent grant and 30 per cent soft loan and the NTC had committed to bear the rest of 40 per cent cost.

According to Bhesh Raj Kanel, Director of NTC Rural Service Directorate, out of the committed amount, NTC has already allocated US $ 23 million for the project.

"Contracts have already been signed with Himalayan Futuristic of India for Western Development Region and TCom of Singapore for the Himalayan region except for the Eastern Development Region," he says.

He also said that the process of tender for the central region is going on. The contract signing with the Himalayan Futuristic was delayed by 19 months and with TCom by 23 months due to delay in the decision process of NTC, dashing the hopes of rural folks of getting the long-cherished service.

The government has made a provision of involving private sector for the installation of over 1,000 telephone connections in 534 VDCs in the Eastern region based on Wireless in Local Loop (WLL) technology.

According to Nepal Telecommunications Authority (NTA), the regulatory body of telecom services, it has already issued Letter of Intent (LoI) to a private joint venture company to operate the service.

The government in November, 1999 came out with the special rural telecom program targeting to provide at least two telephone lines to all the VDCs by 2003, involving private sector and the state-run Nepal Telecommunications Corporation (NTC).

WLL technology will be used in the Western region to cover 230 VDCs and Very Small Aperture Terminals (VSATs) will be used in the Hilly and Himalayan regions, depending on demand density and infrastructures.

"NTC does not have enough fund to invest in the installation of telephone service in the Hills as most of the remote VDCs do not have even electricity, which is a prerequisites to launch telecom service," says Kanel.

The delay in the expansion of telecom service in the remote areas has hit hard to the rural populace as they have to walk days even to make a phone call. Owing to topographical structure and lack of infrastructure, installation of telecom service has become very expensive in the rural areas, he says.

We have also suggested the government to channelize the existing two per cent Rural Telephone Development Tax and four per cent royalty for the rural telecom project, he adds.

Following the completion of the project, at least 450 people would get employment and it would generate other employment opportunities.