Nepal’s Telecom Sector Faces Deepening Crisis Amid Shift to OTT Platforms, New Study Reveals

Kathmandu. Nepal’s telecom companies are facing a growing crisis as most young users move away from traditional voice calls. A recent journal article by researcher Madhu Sudan Dahal, published in ScienceDirect, found that 66.7 percent of users in Nepal make regular phone calls only when the internet is unavailable.

The study also found that 33.3 percent of young users rely on traditional calls only during emergencies. This suggests that conventional voice calling is increasingly being used as a backup option, raising concerns about the long-term future of telecom companies.

Once seen as a major pillar of state revenue, telecom companies now appear to be struggling to maintain their relevance. This shift is being driven largely by changing consumer habits and rapid technological advancement. 

Young people, particularly those aged 18 to 34, have largely replaced conventional voice calls with over-the-top (OTT) platforms such as Messenger, WhatsApp, and Viber as their primary communication tools.

According to Dahal’s findings, 77.9 percent of users in Nepal prefer making voice and video calls through OTT platforms rather than traditional phone calls. The report, titled ‘Telecom Under Pressure: Analyzing the Triple Threat of OTT, High Fees/Taxes, and policy gaps in Nepal,’ highlights how this shift is not simply a passing trend, but one strongly linked to concerns over cost and service quality.

Cost and Quality Drive the Shift

According to the research, people aged 18 to 34 are 6.17 times more likely to use OTT platforms than traditional telecom services. The study identifies cost sensitivity, service quality, and digital literacy as the three main factors driving this shift among younger users.

The findings show that 83.3 percent of participants chose OTT platforms because of their lower cost, while 60 percent said call quality on such platforms is better than conventional voice calls. Another 40 percent said they prefer OTT apps because they allow free international calls. Dahal notes in the report that young consumers are highly conscious of value and quickly move away from older technologies when affordable, higher-quality alternatives become available through mobile data packages.

Revenue Plunges Despite an 833 Percent Surge in Data Consumption​

Nepal’s telecom industry is facing what Dahal describes as a ‘data revenue paradox.’ While mobile data usage surged by 833 percent between 2017 and 2024, revenue generated from data services rose by only 377 percent during the same period.

According to the report, the gap is largely driven by a sharp fall in data prices. Over the past decade, the per-unit cost of data has dropped by 96.84 percent, from 95 paisa per MB in 2014 to just 3 paisa per MB in 2024. The study notes that fierce market competition and aggressive pricing strategies boosted consumption, but telecom operators have been unable to convert that growth into proportional revenue gains.

Decline in International Calls​

The Research concludes that Nepal’s telecom industry is being squeezed by a ‘triple crisis.’ The first crisis is the replacement of traditional voice and SMS services by OTT platforms. The second is the sharp decline in profits and investment capacity, while the third is the continued burden of outdated laws and heavy taxation.

The scale of the crisis is especially visible in international calling trends. Nepal received around 12.34 million minutes of incoming international calls per day in 2012, but by 2024 that figure had fallen to just 1.65 million minutes. As Nepalis working abroad increasingly turn to platforms such as WhatsApp and Messenger to communicate with their families, one of telecom companies’ most important revenue sources has steadily dried up. Dahal’s report further shows that total income from voice calls dropped by 37.4 percent between 2014 and 2024.

Digital Divide: Modernity in Bagmati, Dependence in Karnali​

Nepal’s geographical complexity and uneven infrastructure development have also widened the country’s digital divide. According to provincial data cited in the research, Bagmati Province has the highest share of OTT users at 23.3 percent. With better internet access and high smartphone penetration in Kathmandu Valley and surrounding areas, young people there have rapidly embraced digital communication platforms.

In sharp contrast, Karnali Province records only 6.7 percent OTT usage. Instead, 23.5 percent of people there still depend on traditional telecom services. The findings suggest that conventional telecom services remain stronger in areas where internet infrastructure is limited or digital literacy remains low. However, the report indicates that as connectivity expands, demand for traditional voice calls is also likely to decline in those regions.

Sharp Decline in Contribution to GDP​

The telecommunications industry, once a key pillar of Nepal’s economy, is steadily losing its economic role. According to the report, the sector’s contribution to Nepal’s Gross Domestic Product (GDP) fell from 4.19 percent in the fiscal year 2016/17 to just 1.38 percent by 2024/25.

The report also points to a sharp decline in infrastructure investment as revenues and profits fall. Telecom companies that previously spent around 18 percent of their income on new technology and service expansion in 2014 had reduced that figure to only 5 percent by 2024. As a result, the study warns that introductions of new technologies like 5G and improving service quality in remote areas have become increasingly difficult.

Outdated 30-Year-Old Act Hindering 5G Expansion​

Researcher Madhu Sudan Dahal identifies weak and outdated policies as one of the biggest challenges facing Nepal’s telecom sector. Nepal’s Telecommunications Act was enacted in 1996, when mobile services were only beginning to emerge in the country. “In most parts of the world, technology and regulations evolve every five-six years, but Nepal is trying to build a 5G future under a 30-year-old law,” Dahal states in the report.

The study argues that outdated regulations have also discouraged foreign investment. Provisions such as the automatic transfer of assets to the government after the expiration of licenses held by foreign-invested companies have created uncertainty in the market. It further notes that the frequency and license renewal fees remain unusually high and impractical. In Nepal, telecom operators are required to pay Rs 2 billion every five years for license renewal, a cost significantly higher than in many other South Asian countries.

Tax Burden: Consumers and Companies Under Pressure​

Telecom consumers in Nepal are among the most heavily taxed in the world, according to research. The study notes that users pay nearly 25 percent extra in charges and taxes, including TSC, VAT, and ownership tax. At the same time, telecom companies themselves face significant fiscal pressure, with more than 48 percent of their total revenue going to the government through royalties, frequency fees, and various taxes.

Dahal’s report further highlights a direct impact of taxation on sector growth, stating that every 1 percent increase in tax burden reduces annual telecom revenue growth by 0.22 percent. “When the government views this sector only as a revenue-generating machine, its long-term development becomes hindered,” Dahal noted in the study. 

The Road Ahead for Nepal’s Telecom Sector​

Dahal calls for urgent ‘surgical’ reforms to safeguard Nepal’s struggling telecommunications industry. His recommendations include repealing the outdated 30-year-old law and replacing it with a modern, technology-friendly regulatory framework. He also proposes restructuring license and frequency fees to make them revenue-based, along with bringing OTT service providers under appropriate tax and regulatory systems. The report notes that shifting consumer behaviour, particularly among younger users, is unlikely to reverse. 

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