Has Malaysia’s Billion –Dollar 5G Roll-Out Stumbling?

The government could be forced to reconsider allowing a second 5G operator, as a settlement between state-owned Digital Nasional Bhd and the private telcos has hit a stalemate. The government brought the warring factions together in a compromise that would potentially see the private telcos taking a stake in DNB. 

Source: https://www.telecomreviewasia.com

Government officials and industry executives have acknowledged that after more than four months, both sides have yet to agree on conditions precedent (CP). The CPs include the appointment of directors who would represent the private telcos in DNB, and the completion of three confidential audits on the state-owned entity by external experts. The audits would cover its financial standing, due diligence on large contracts the company has signed and a technical evaluation of its 5G systems.

The protracted impasse between DNB and the country's private telcos is presenting the Madani government with one of its most complex economic policy challenges.

Industry executives noted that the uncertainty surrounding Malaysia’s 5G roll-out is likely to sideline potential investors interested in leveraging on the benefits of a superfast wireless network.

Analysts also noted that there is a lack of visibility in the off-take of 5G and Malaysia’s relatively small market remains a serious issue.

It was just under a year ago that the government caved in to pressure from the country’s private telco lobby to break DNB’s monopoly in the 5G space as the country’s so-called single wholesale network operator (SWN) and allow competition with a second operator, comprising local mobile network operators (MNOs) and the possibility of China’s Huawei emerging as the new technology partner. Under the multi-tiered compromise settlement signed in December, the country’s five MNOs each paid DNB RM230 million (US$48.15 million), or a total of RM1.15 billion, as a pre-payment for access to the 5G network for a period of up to three years. 

DNB has already rolled out more than 80 per cent of its network to date and according to Malaysia’s Communications Minister, almost 10 million people have subscribed to the 5G service at end-January, marking an adoption rate of just under 30 per cent.

DNB’s roll-out, estimated to cost Malaysian taxpayers just over RM16.5 billion (US$3.44 billion), is now stirring debate if parties should push ahead with the SWN model. If so, the local players could acquire as much as a combined 70-per-cent interest in the state-owned concern, or simply dispose of a large stake in the company to an interested foreign entity.

Apart from transparency, and the nomination of MNO representatives to the board, DNB has insisted that only the board’s directors be allowed access to review the ongoing due diligence. The findings are to remain confidential and not be shared with the MNOs.

Industry executives noted that advisory firm PricewaterhouseCoopers is handling the financial review of DNB, while KPMG is overseeing the review of large contracts DNB has signed. United Kingdom-based Hardiman Telecommunications, a boutique telco consultancy, has been appointed to review DNB’s technology infrastructure. 

DNB has borrowed RM2 billion from the local banking system to fund the roll-out of 5G infrastructure, together with other financing arrangements. But the government guarantee for the company expires in December 2024.

Meanwhile, the MNOs have long griped that apart from being denied the rights to own spectrum under the 5G roll-out, they were victimised further by the decision of the former premier to appoint three local entities to be preferred partners for global cloud service providers such as Microsoft, Google and Amazon, which are expected to take a lead role in the building and managing of hyper-scale data centres. 

The appointments of public listed AwanBiru Technology, formerly known as Prestariang, and two other little-known entities, Enfrasys Solutions and Cloud Connect, were done without any open tender. The MNOs are privately demanding that the companies be stripped of their preferred partner status.

Madani Government cannot resolve issues because we dither in making difficult decisions. Hopefully, the new policy committee of the PM may help advise him. If not we will leave it to “takdir”.

Reference:

Malaysia’s billion-dollar 5G roll-out stumbles as deal breaks down between powerful telcos, state-owned operator,Leslie Lopez, Channel News Asia, 19 April 2024