Malaysia replots unique approach to 5G

Malaysia replots unique approach to 5G

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Why has the new government backtracked on the single wholesale model?

Malaysia is set to implement a second wholesale network, in light of a review of its unique but criticised approach to 5G deployment.

The Malaysian government first announced in 2021 their intention to implement a single national 5G network and appointed Digital Nasional Berhad (DNB) to roll it out. The announcement initially received backlash with the DNB themselves admitting in a 2021 blogpost, “The decision to entrust the 5G rollout to DNB drew the inevitable criticism from many parties, and it was a decision that had not been carried out elsewhere with any degree of success as concerns centred over the effectiveness of the model, which was never tested elsewhere in the world as far as 5G is concerned.”

Prior to this announcement, Malaysia had been expected to hold a 5G spectrum auction, and MNOs had been preparing for a business-as-usual rollout. In 2019, Maxis announced it planned to use Huawei to build its network ahead of an anticipated spectrum auction, that never came to be.

Despite being formed in March 2021, various issues meant that the launch was delayed until October 2022. A mere month prior to a general election, which saw a new government formed and led by Prime Minister, Anwar Ibrahim. The move attracted widespread criticism of the project which was designed to cut waste and fast-track deployment.

In March 2022, the previous government revealed plans to allow the country’s diverse and competitive MNO market to buy into DNB, releasing 70% of the equity to the telcos. In the end, four of the major MNOs acquired 65% of the operator.

Celcom (Axiata) and Digi (Telenor), who have since merged to form CelcomDigi, took 12.5% each while YES and Telekom Malaysia each took a 20% stake. The other two MNOs, U Mobile, and Maxis, declined to take a stake, meaning the Government still owns the remaining 35% of the company.

All but one MNO agreed commercial terms to access the 5G network in late 2022, with Maxis deferring until the new governments review of the rollout was completed.

DNB’s progress so far

While founded in March 2021, DNB was initially slow out of the gate. A US$2.6bn deal was reached with Ericson in September that year, and by December the network was launched. A year on, 5G was still only available in Malaysia’s administrative capital of Putrajaya (about 25km south of Kuala Lumpur) and adjacent Cyberjaya.

Since then, as Covid-related logistical disruption and chip-shortages have subsided, progress has been far more positive. In an interview with a Malaysian news channel, towerco EdgePoint Infrastructure’s CEO Suresh Sidhu, noted that, “While Malaysia had been behind in 5G rollout, it has now overtaken other ASEAN markets such as Indonesia and The Philippines.”

As part of its phase 1 rollout, DNB completed 3,906 5G sites in 2022, with 2,800 on air. MNOs must choose which sites they operate their networks from, which means that despite the network covering 50% of populated areas, 5G services are only available to 38%.

The target for coverage in 2022 was 40%. DNB aims to complete a further 3,603 sites by the end of 2023 to cover 80% of populated areas. Recently the Malaysian Prime Minister, Anwar Ibrahim, reduced the second target by a year.

All sites were built in collaboration with towercos, either as co-locations or new builds. Gayan Koralage, director of strategy and commercial at EDOTCO, said that his firm have taken a 30% share of the sites deployed by DNB so far.

Koralage commented, “Bringing forward this deadline is good. It brings faster deployment of 5G infrastructure, which helps to better connect people and businesses to 5G use cases and will reduce the price per GB for telcos and consumers.”

While towercos in Malaysia have been able to lease up space to DNB, it could be perceived that losing out on the revenue from 5G technology installed on their sites by all major MNOs would weaken their financial position. Koralage does not believe this to be the case.

“Alongside 5G deployment by DNB, MNOs are still investing heavily in their 4G networks,” he explains. “There will be a significant increase in data consumption in Malaysia in the coming years, and we anticipate that 4G technology will account for around 20% of this.”

Why was the DNB under review, and what would be the impact of moving to a dual wholesale network?

A second wholesale network resolves a number of concerns raised by the industry over the single wholesale model.

Firstly, The move would mitigate concerns over network security. “With a single wholesale network, you run the risk of a network outage having disastrous consequences with no backup network to rely on.” Koralage says.

Sidhu agreed with this viewpoint during his television interview. He commented. “The industry would certainly prefer a second network.”

Ibrahim’s government have investigated several government projects since taking office, with a goal of strengthening governance and reducing wasteful spending.

Ibrahim is also likely to be keen to deflect criticism from the DNB vendor contracts. Whilst Koralage and Sidhu agree that DNB is a well-run and professional organisation, Sidhu believes more transparency is needed on tenders and pricing. As a government run project, there have been calls for more clarity around how DNB is spending its money.

5G wholesale pricing is not regulated by MCMC, but the need for transparency was echoed by the finance and communications ministers ahead of the pre-budget tabling in March 2023.

This extended to regulators, MNOs, and the MNOs end customers, to ensure greater confidence that normal practices are being followed in what is in no doubt an abnormal model for 5G deployment.

"This model also takes into account the sustainability of the telecommunications industry ecosystem in Malaysia thus ending the monopoly element that is often associated with DNB," said telecoms minister Fahmi Fadzil alongside the announcement.

The implementation of a second network also offers Ericsson’s competitors a chance to enter the Malaysian market. Ericsson will maintain sole responsibility for DNB’s rollout, but the vendor selection process for the second will be left to the open market.

This has attracted criticism from the EU and US, as Malaysia have refused to rule out working with Huawei. Western nations have largely excluded Huawei from their 5G networks over national security concerns that the vendor is spying for Beijing. However, Ibrahim’s government was keen to emphasise that they would make the decision themselves and act independently.

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