News

Domestic telcos hesitancy spanner in 5G rollout

Govt opts for the current plan to provide universal quality and availability of service and promote standard pricing for consumers

by ASILA JALIL / pic by BLOOMBERG

MALAYSIA’S 5G planned rollout may be derailed off schedule as domestic telcos are showing hesitancy to come on board the government’s open access model.

Fitch Solutions Head of ICT Research Andrew Kitson told The Malaysian Reserve (TMR) that it was unlikely the current government will abandon its open access 5G platform, but telcos not jumping to come on board is a sticking point.

Kitson said the government opted for the current plan to provide universal quality and availability of service and promote standard pricing for consumers so that no one is left behind.

“The sticking point at the moment is that major telcos want to control both infrastructure and services that would give them the ability to invest where potential returns are highest and risks are lowest, so the Digital Nasional Bhd (DNB) model is anathema to them,” he said.

He said a more viable approach would be if the government allows operators to build their own networks while establishing some ground rules.

Kitson said, in theory, the government’s open access network should be the cheapest and fairest means of ensuring everyone gets equal access to services but developing and maintaining any new network is costly and takes time to return investment.

Telcos want profits through diversification and high pricing but this is not available in the current model.

“Allowing operators to build their own networks but also establishing rules regarding infrastructure sharing to avoid asset duplication, and setting realistic price mechanisms from the outset would be a more viable approach.

“DNB must be more transparent on terms and pricing, encouraging one or two operators to commit,” he said.

Kitson said the open-access model had not been successful in other markets notably in Mexico where their equivalent of DNB is now insolvent.

He said existing investors in the sector are concerned about the government’s refusal to change its 5G model but their confidence in the industry is largely intact.

Network operators are already divesting passive assets to free up capital for more lucrative 5G backbone services, so industry confidence is still there.

“The fibre broadband rollout vision within Jendela still leaves it to operators’ investment plans, so there is no bleed-through to other parts of the industry just yet,” said Kitson.

However, it may need just one telco to sign up to the government’s plan to prod the rest to come on board, hoping that more favourable pricing and interconnection mechanisms can be introduced.

Meanwhile, Global System for Mobile Communications head of Asia Pacific Julian Gorman said a pragmatic approach is needed to ensure a smooth rollout of the 5G network.

The single wholesale network (SWN) model risks Malaysia’s thriving mobile economy and growing digital sector.

“The political determination to launch the DNB cannot be denied, however, there is no clarity on DNB’s mandate and the regulatory framework under which it will be governed.

“To mitigate the risks of the DNB, three things must be ensured.

“They include clarifying the DNB’s mandate and regularly monitoring its performance against its strategic objectives; introducing a fit for purpose wholesale regulatory regime at the same time as the DNB starts its commercial operations, retaining flexibility to allow alternative delivery options for 5G networks and services in Malaysia,” he said.

Meanwhile, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said the 5G network will cost less than 20 sen per gigabytes (GB) for telcos via the SWN.

This is cheaper than the incremental cost for each GB for the 4G network produced by telcos which stands between 45 sen and 55 sen.

“The pricing process for 5G is almost finalised and it is very different and much lower than the cost per GB for 4G by telcos.

“I also understand that the DNB will charge less than 20 sen for each GB for 5G to telcos,” he said in the Dewan Rakyat yesterday.

Tengku Zafrul was responding to Sibuti MP Lukanisman Awang Sauni’s request for comment on the issue.

He added that through the SWN model, each telco is expected to pay the DNB between RM3.5 billion and RM4 billion within 10 years, or an average of RM350 million until RM400 million a year.

He said that amount was much cheaper than the capital expenditure for 4G paid by telcos each year which amounts to RM1 billion.

“They can save over 50% while reducing the charges imposed onto customers, and at the same time pay more dividends to their respective shareholders.

“The government is aware of the issues and challenges surrounding SWN in other countries and has taken steps to ensure the same mistake does not happen in Malaysia,” he said.

Besides the lower cost, telcos can also provide the network faster under the DNB compared to the duration they would need to launch the network themselves.

Tengku Zafrul acknowledged that telcos may prefer to implement 5G via a non-open access network to maintain their position, especially in securing profit margins.

“However, the model adopted by DNB will encourage telcos to compete in terms of pricing, products and services because they have saved the capital expenditure for the infrastructure which will be provided by the DNB.

“Industry players will profit from the rollout since the network will use existing infrastructure to increase efficiency.

“In this situation, questions, whether the implementation of 5G will affect investments and existing industry players, will not surface because the DNB is committed to working together instead of competing with local telcos,” he said in response to a query from Bangi MP Ong Kian Ming.

Tengku Zafrul said the cost for the implementation of 5G will be funded through combined deferred payments to vendors, trade financing and work capital and sukuk.

“It will not involve guarantees and funding from the government, especially indirect funding or off-balance sheets as claimed by some parties,” he said.

Zukri

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