KUALA LUMPUR, Nov 10 (Reuters) - None of Malaysia's major
mobile carriers have agreed to use the government's 5G network
yet due to transparency and pricing issues, ahead of a rollout
planned for next month, a state agency and industry executives
However, state-owned network wholesaler Digital Nasional
Berhad (DNB) told Reuters it still hoped to launch 5G services
in three urban centres, as talks continue with mobile operators.
The Southeast Asian country, a regional laggard in 5G
rollout, unveiled a plan for a single shared network in
February, hoping it would help accelerate nationwide
infrastructure buildup. Similar state-led approaches have been
tested in some other markets including Mexico, but largely
The lack of industry support for the Malaysian initiative
underscores corporate concerns over state meddling and
transparency in a country still reeling from a
multibillion-dollar corruption scandal at state fund 1Malaysia
Development Berhad (1MDB) https://www.reuters.com/world/asia-pacific/how-malaysia-is-seeking-recover-billions-dollars-missing-1mdb-2021-05-11.
Malaysia has been losing foreign investor confidence
recently amid political instability https://www.reuters.com/world/asia-pacific/malaysias-king-expected-name-new-pm-after-rulers-meet-2021-08-20,
with the third administration in as many years coming into
power in August. The 1MDB scandal also tainted its reputation
and implicated a former prime minister.
DNB confirmed that no agreement with carriers has been
reached and acknowledged its initial timeline for negotiations
had been "too optimistic".
The agency will now seek to have formal long-term agreements
early next year and continues talks to deploy 5G services in
three central areas, including the capital Kuala Lumpur, next
"The target now is to have a live network, covering... a
total of 500 sites by the end of December, with at least some
operators on board to provide a 5G network to end-users," Chief
Technology Officer Ken Tan said. DNB did not say what would
happen if no operators agreed to be part of the deployment.
Carriers, which had already invested in infrastructure
upgrades to support 5G services, are concerned the 5G network
plan would result in a nationalised monopoly, hurting their
business and limiting their access to future technology, said
seven current and former industry sources.
They declined to be identified due to the sensitivity of the
Three sources estimated the government plan could destroy up
to 45 billion ringgit ($10.8 billion) in market value across all
mobile operators including Axiata Group, DiGi.com
The sources did not specify over what period the losses
would be incurred.
"By 2030, the majority of the network will be on 5G, then
there are enforced limitations on our existing (non-5G network)
assets," one of the sources said.
"Valuations (of our business) will go down over time and it
will go back and hurt our shareholders."
Under the plan, DNB would hold all 5G spectrum rights as
well as build and maintain the entire network, with operators
using the infrastructure to provide mobile services.
Axiata and DiGi declined to comment.
Maxis said in a statement that it has long been ready to
roll out 5G in the country.
"We will continue to focus on our purpose to serve the
people and enterprises of Malaysia, and playing a key role to
support the digital ambitions of the nation," it said.
STABLE SHARE PRICES
The company sources said under the proposed pricing plan,
the telcos could end up paying more than they would have if they
rolled out 5G on their own. The plan did not take into account
additional requirements related to traffic volumes and
contingency costs, among other issues, they said.
According to internal documents reviewed by Reuters, the
carriers have asked for "extensive revisions" to DNB's pricing
proposal, saying it did not demonstrate the cost efficiencies
"The price is a function of how much assurance we can get on
quality of the network," a source said.
The sources said the companies had also sought assurances
that DNB would operate solely as a wholesale provider and would
not reserve 5G capacity for itself or harbour any retail
The concerns highlight investor worries about the Malaysian
government's influence in corporate issues, with most large cap
public companies in the country counting state-linked investment
firms as top shareholders.
DNB said share prices of leading telcos have been stable
since the plan's announcement eight months ago.
It also said a fast rollout would lead to an increase in
data traffic that would boost operator revenues, while the
wholesale plan will help carriers save billions of dollars of
DNB Chief Operating Officer Dushyan Vaithiyanathan said the
plan would likely cost only around 16.5 billion ringgit, around
half the 30-35 billion ringgit carriers would have needed to
spend to build the 5G network themselves.
"The government isn't trying to take away (telcos') rice
bowl... We want to deliver the highest quality of services at
the lowest price, so that it gives us more certainty in terms of
recovery costs as we kickstart the 5G rollout," Dushyan told
DNB however acknowledged its transparency has been
questioned, adding that the country's communications regulator
would put in place stringent guidelines in public to ensure fair
pricing and a smooth rollout.
"We are working closely with (the regulators). We want the
scrutiny, so that people cannot come in and change the
principles of what we are aiming with 5G," Dushyan said.
($1 = 4.1580 ringgit)
(Reporting by Rozanna Latiff and Liz Lee; Editing by Miyoung
Kim and Raju Gopalakrishnan)