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24 May 2022

Malaysia’s MNOs demand further concessions to support single 5G network

By Wireless Watch Staff

The saga regarding Malaysia’s government-driven project to deploy a single 5G national network continues to twist and turn.

The four main MNOs in the country – Celcom Axiata, Digi, Maxis and U-Mobile – have thrown various objections at the scheme since it was mooted in 2018 as a way to accelerate 5G roll-out by creating one wholesale-only network on which all the operators could launch services.

Earlier this year they insisted on being allowed to take a stake in the company set up to run the network, Digital Nasional Berhad (DNB). But then they balked at the government’s plan to sell 70% of that entity – but to allow five other companies to purchase stakes as well as the MNOs, giving the operators only a minority holding between them.

Now, according to Reuters reports, the MNOs are pushing for a guarantee that their combined stake will represent a majority holding in DNB, in order to safeguard their strategic interests.

In a letter to Malaysia’s finance ministry, the operators cited concerns that the latest government plan could delay build-out and argued that they would find it hard to justify investing in the wholesale network if they could not “exercise influence and control” over the 5G network.

The operators reportedly also asked DNB to review its proposed pricing model and network access plan.

The latest objections will disappoint the government, whose offer of stakes in the 5G network had seemed to promise a compromise solution in March this year. In the first quarter of 2022, the government rejected the telcos’ calls to issue a second 5G wholesale licence, but made concessions to some of their other concerns, particularly their wish to have stakes in the network.

The decision to sell 70% of DNB was a compromise that enabled the government to save its single wholesale network (SWN) plan while satisfying the operator, despite their preference for two networks to provide them with a choice of partners and competition in pricing. But the MNOs clearly assumed they would gain the whole 70%.

Government ministers have continued to defend the SWN strategy, claiming it was not cost-effective for operators to build separate networks. Communications and multimedia minister Tan Sri Annuar Musa said the deployment of multiple networks in previous generations had caused inefficiencies and excessive costs. “Now, there is the multi-operator core network (MOCN) technology that allows one tower to be shared by six companies,” he said. “Imagine how much savings can be made and the cost reduction that will be enjoyed by consumers. Our target is for the cost of 5G to be cheaper than 4G.”

DNB was set up by the finance ministry and funded mainly through commercial loans. It has a target to provide 5G coverage for 80% of the main population areas by 2024 and has already appointed Ericsson as its primary supplier in a 10-year, $2.7bn contract, beating Huawei.

In February this year, the CEO of DNB, Ralph Marshall, said the SWN had been “inordinately delayed” as a result of “posturing” by operators, which meant Malaysia’s 5G progress was now well behind that of neighbors such as Singapore or Thailand (both of which launched services in 2020).

Individual MNOs have said Malaysia would have made faster progress had they been allocated their own spectrum and allowed to roll out 5G individually – as in those neighboring markets – or in partnerships they decided for themselves. But Marshall said that having three or even two 5G networks would be economically non-viable and would have held back the progress of deployment, at least outside the biggest cities.

DNB launched its first 5G services in December 2021 but without the support of the MNOs. The original idea was for the main operators to form a consortium to fund and build the wholesale network, which they would then use, but also open up to other service providers in order to generate new revenues. That failed because of lack of MNO support, which Marshall blamed, in a response to parliamentary questions, on their conflicts of interest and lack of commitment.

“There was no urgency in the MNOs to implement 5G as they were content to further sweat the 4G network that they owned and were making substantial returns from,” he said in his public response. “Malaysia continued to slip behind its ASEAN neighbours in 5G roll-out.”

Marshall said the telcos’ demand for a second wholesale licence would threaten DNB’s own viability and that it was “highly unlikely” that DNB would survive in its current form if this plan were adopted. He argues that a utility model would make the best use of scarce spectrum resources and ensure fair 5G access for remote areas of Malaysia, but said of the MNOs that “it is not in their DNA to embrace a cost recovery model to roll out 5G infrastructure and pass on savings to end users”.

He said that a 2019 report by an industry taskforce had calculated the total cost of a multi-network 5G roll-out would be RM30bn ($7.2bn), whereas DNB says it will spend half that – RM16.5bn ($3.94bn) over 10 years, funded by commercial loans and just RM500m ($119m) equity from the government. That cost includes RM8.5bn ($2.03bn) for network infrastructure such as fiber and ducts, RM4bn ($1bn) for the Ericsson-supplied 5G RAN and core, and RM4bn ($1bn) in operating costs.

There have been many attempts to try to win the MNOs round to the DNB plan. In late 2021, the wholesaler tried to counter the claims of high wholesale access prices by offering its 5G services for free to MNOs during the initial roll-out phase. That free period has now been extended to June 2022.