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Smartphones are very expensive in Nepal – Here’s Why!

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It is no news that the price of smartphones in Nepal is crazy. I mean, yes, we might be used to with expensive prices, but compare those prices to international ones, or even the neighbouring country for that matter, and you’ll know. When you allocate some budget to get a good phone, you check out reviews and stuff. And just when you think you can have the one, you have your heart set on, the price differs – by a lot! And it is, of course, common to accuse retailers here of extracting a large profit, but there are also quite a few reasons why smartphones are so expensive in Nepal.

1. Taxes, Taxes

The current fiscal year of Nepal brought quite a few changes in the Nepali tax policies. Prices of almost everything went up, including electronics and gadgets. Before this new tax policies, smartphone importers paid only 13% of tax. And on top of that, 40% of VAT was refunded to them at the end of the fiscal year. That made it a net total of 7.8% on taxes.

But with the new policy, the 40% VAT refund has been waived. And in addition to the 13% tax, another 5% of excise duty has been added, making it a net total of 18.65% on taxes alone! And that is enough to stir the prices of such phones and gadgets upwards. This, however, is only for smartphones. There are other policies for other electronics and automobiles.

2. Distribution Channels

The economy of the country is not strong enough to attract official retailers themselves. For example, we only have Samsung, Huawei and Xiaomi’s official presence in Nepal. But for other phones, they arrive through various distribution channels. There are agents, regional distributors, wholesalers, etc. before the products even make it to retailers. And with each part of the distribution channel nicking off some profit, it’s only natural that the prices go up.

How does it work? First, there’s the company, i.e. the brand itself. Then come the National Distributors (NDs), followed by Regional Distributors (RDs), Retailers and Mobile Stores. NDs import the smartphones for which, they pay a certain bank guarantee to the brand. This assurace financial safety to the company as well. The same thing happens with NDs and RDs. RDs are responsible for placement of phones to retailers, who, in turn, deal with mobile brands. Hence, this creates a long chain, where each party involved has a certain profit margin.

Also, NDs have their own team of sales promoters, who promote their products in mobile stores. Ever seen someone in the company mascot’s costume? Yeah…that’s them. They also have their own marketing team, sales officers and product team who help improve sales and marketing of a product. As for RDs, they possess local level knowledge of the market, and maintain good relation with retailers. Thus, from the company’s point of view, these parties are necessary link in the chain too. So, we can see why they are needed.

And if you ask why don’t the company’s bring the phones straight to retailers, here’s why:

3. Lack of proper e-commerce

The smartphone marketplace of Nepal, or any other small developing countries for that matter, differs a lot from international scenario. Many phone companies have a strong presence in e-commerce and sell their product online via sites like Amazon, BestBuy, GearBest, etc. And they even provide various discounts from time to time. Their online presence is so strong that they even have online exclusive brands!

For example, there are brands like Realme, which is an online exclusive brand internationally. Honor, is also an online exclusive brand but is slowly moving to offline as well. Samsung’s new phones, the M-series are also online exclusive. But, in Nepal, all of these three are sold offline. Because, the e-commerce platform is not very developed. There is lack of proper e-payment gateways, and most people hesitate to buy things online, for good reasons.

This leads to popularity of brick-and-mortar stores, which increases the expenditures of phone retailers. And that too, leads to an increase in pricing. If you compare the pricing of Honor phones in Nepal with international market, you’ll know!

4. Economies of Scale

If you are a little bit familiar with the Economics, then, you probably know the economies of scale – i.e. larger the quantity, lower the price. It applies almost anywhere – from printing stuff, to banquet halls and yes, smartphones. Since the economy of Nepal is not as strong, the number of phones sold in the country are a lot less than in others.

While smartphones ship by the millions in other countries, we play in thousands here, and only among hundreds for very expensive flagship ones. This affects the cost per unit of these products, hence, adding up more burden to their prices.

5. Everything is imported!

This is no surprise. Since almost all of what we use are imported, smartphones are the same. What I mean is, there are no in-house manufacturing plants to make smartphones, or even assembling houses to assemble components. Countries like China and India have their own manufacturing plants, so, they can price the phones accordingly.

When whole gadgets are imported instead of parts, the excise duties are considerably higher. Add the distribution channelling to it, and shipping costs, you get the Nepali prices for smartphones!

So, why are smartphones so expensive in Nepal? You have the answer.

A version of this article appears on GadgetByte Nepal. Do check the website for more tech-news and such.

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Tell us about your business

Tell us about your business/company and we will turn them into an article for Internet users.

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Hello all business owners and entrepreneurs out there,

We are pleased to announce that we are creating company profiles and publishing them through our website, so that our readers and audience get to know about your company and your business in much simplistic way.  We also believe that with right SEO and web management, those information will be reaching to many internet users, which shall benefit you in a longer run.

Our plan

The provided information will be compiled to turn into an informative article as a company profile and publish them through this website, so that whenever someone wants to learn about your company by searching through Search Engine or by directly on our website, they get to learn basics about your company with an ease.

Why we are doing this

  1.  We are mission-based company, in a mission of “creating an informed society.”  It’s part of our mission to create information about companies and businesses from Nepal and make the information easily accessible to people on internet.
  2.  Your company’s basic background information will be handy for us when we plan to interview or cover your business.
  3.  Our mission is also “to promote local businesses and activities.

Where to start

We have embedded a google form in this article itself.  You either can fill it up directly here itself or you can CLICK HERE to open in separate browser and fill it up.  We expect all questions be answered since those answers are dots to draw a complete picture of your company, skipping which may give an incomplete looks to your company profile.

Once you have submitted the form, we will go through it and turn it into an article as your company profile, which will be notified to you through email or phone.

It’s indeed is a great opportunity for you and your company.  Hope you will grab it.



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What is Seed Capital?

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Just how a germinating seed needs water, sunlight and proper nutrients to grow into a beautiful plant, any budding entrepreneur also needs funds to implement his/her startup ideas. This initial investment which helps to cover up the basic operating expenses, research and development expenses etc to grow the business until the product itself starts generating revenue is called Seed capital or Seed funding. Generally, seed capital is considered as the first round of investment until one develop his/her business to a certain level after which he/she can find venture capitalists to invest in them. So, where does the seed capital come from? Some of the easy sources may include :

  1. Friends or Family
  2. Crowd Funding
  3. A seed-stage angel investor
  4. Corporate seed funds for startups
  5. Self – financing
  6. Government subsidized loans and grants

Finding an investor can be a challenging task as your startup is still in conceptual phase. Generally, the banks often ask for collateral against the applied loan. Even more, the interest rates may be high and not every person can afford to take the risk. On the other hand, investors may invest in you and your idea in exchange for certain equity in stake. This means you will be losing your share of full decision making authority over your business in exchange for his contributed amount of capital. However, reaching out for friends and family or using your own savings is always a good idea if you don’t want to get involved in debt. There are also government grants and subsidized loans in recent years that plan to support to aspiring entrepreneurs in the country. So, before you make your decision, make sure to do a good research and weigh all the pros and cons of each source to find one that actually compliments your business model, as it plays a determining role in the future of your business.

The author is a CA student.  If you want to add more information on the given post, please comment below and your comment will be incorporated in the article.


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A simple guide to “Ncell tax scandal” for dummies

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This article is created to give a simplest perspective on what’s the fuss and buzz on Ncell issue, for general public who are just curious to understand the issue for general knowledge purpose only.



First thing to understand

A foreign company can only invest in Nepal with local resident holding at least 20% of shares.  So there comes the company Raynold Holdings to invest in Ncell with 80% shares and 20% shares by local resident, Niraj Govinda Shrestha

Second thing to understand

There is a company TellaSonera Asia Holdings which owns 100% shares on Raynold Holdings.  That makes TellaSonera indirectly owning 80% shares on Ncell.

Before moving to next thing, let’s recap

Raynold Holdings, a foreign company, owned completely by another foreign company, had invested in Ncell taking 80% shares through FDI.

They made loads of money in Nepal.  Ncell was just 10 cr company and with its superb business success and growth, value went to multi crores.

WHAT HAPPENS NEXT

AXIATA, a UK-based company wants to invest in Ncell not by coming to Nepal directly through FDI but by buying Raynold Holdings from TeliaSonera.  AXIATA is based outside Nepal, and so the TeliaSonera which owns Raynold Holdings.

TeliaSonera then comes up official press release stating that “TeliaSonera has agreed to sell its 60.4 percent ownership in the Nepalese operator Ncell to Axiata, one of Asia’s largest telecommunication groups, for USD 1,030 million on a cash and debt free basis. At the same time, TeliaSonera will dissolve its economic interests in the 20 percent local ownership and receives approximately USD 48 million.

 

AXIATA gives the money to TeliaSonera and owns the company Raynold Holdings which is 80% shareholder of Ncell.

 SO WHAT IS THE ISSUE?

TeliaSonera made billions of dollars and didn’t pay a penny to government on capital gain tax.  AND THAT WAS THE ISSUE!!

Why?? Because, technically speaking TeliaSonera made billions simply by selling Raynold Holdings outside Nepal.  Just that by buying Raynold Holdings, all its assets  automatically went to the new buyer, which is AXIATA.  And one of the assets of Raynold Holdings is 80% shares on Ncell.   Even after the deal, the substantial holding of NCell would continue to remain with Reynolds Holding and so legally there would be no change in shareholding of NCell in Nepal. This is regarded as an indirect transfer of underlying ownership.

SO, IT WAS A WELL PLAYED GAME, HUH?

Very well played! In the eye of law, FDI Company Raynold Holdings is still the 80% owner of Ncell, which happened to have changed its parent company from TeliaSonera to Axiata — Raynold Holdings nor Ncell made any capital gain to tax.

And?

Well! TeliaSonera could not be taxed since legally speaking there was no buy and sell within the country, so Supreme Court on Wednesday issued a mandamus order directing the government to recover the due capital gains tax from Ncell and Axiata.

Will Ncell and Axiata pay the due capital gains which, principally speaking, is supposed to be paid by the party who actually had made the gain, is yet to see.

This interesting game of loophole is what made Ncell a curious case.





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Help Us Getting Better:

We put our utmost effort in creating genuine contents, factual and rational, and been working  hard to give best experience to our readers and users.  However, there can be mistakes, glitches and lapses.  Help us getting better by correcting us whenever you notice false information or wrong facts in our posts.  You can do that by commenting on the post or by mailing us in [email protected].  Also, if you experience any bug in our website or any kind of issue in our website, let us know immediately by mailing us.

Thank you for your time.  We are better together.

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