Who will be second 5G provider?

KUALA LUMPUR: Malaysia's decision to shift to dual network from single wholesale network (SWN) may see the entry of Maxis Bhd, or even YTL Corp Bhd and Telekom Malaysia Bhd (TM), as the second 5G network provider, industry observers said.

Any of the companies could be up for the job against CelcomDigi Bhd, which on Wednesday announced it had pulled out from subscribing for shares in Digital Nasional Bhd (DNB), which solely handles the 5G rollout.

This came hours after Communications and Digital Minister Fahmi Fadzil said the government would allow the entry of a second 5G network provider as early as next year.

Industry observers said the move, which would break DNB's monopoly, might allow China's Huawei Technologies Co Ltd to participate as a development partner, like what Swedish telecoms giant Ericsson is doing for DNB.

On Wednesday, the government announced that DNB would continue to roll out the 5G network infrastructure nationwide until 80 per cent coverage is achieved by the end of the year.

This came amid widespread concerns about pricing and competition if there was a single state-run network.

DNB was formed as a special purpose vehicle by the Finance Ministry to own the full 5G spectrum under the SWN model, with various carriers using the infrastructure to provide mobile services.

Fahmi, at a press conference, had said DNB would continue to function after the 80 per cent coverage was met.

A second network provider would start working on the second network as early as January next year to avoid a "single point of failure" under DNB and increase capacity without affecting speed.

DNB had achieved 57.8 per cent coverage of populated areas and was on track to reach 80 per cent by the end of the year, he said.

Mobile network operators (MNOs), such as CelcomDigi (prior to its Wednesday announcement), TM and YTL Corp's unit, YTL Communications Sdn Bhd, collectively own nearly a 70 per cent stake in DNB.

Any shareholder can opt out of DNB and continue to participate in the 5G rollout as the second network provider or at least part of it. Maxis is one of the biggest MNO that has not taken up a stake in DNB.

"The minister did not reveal details, which adds to market uncertainty," said Malaysian Institute of Economic Research economist Dr Shankaran Nambiar when asked about the future of DNB and the possible company or companies that might become the second network provider.

"We know the global experience in SWN has not been very good. DNB will be tasked with completing its mandate, following which there will be another service provider.

"One of two scenarios is possible. We could have a consortium of providers, with Maxis being a part. We could also have Huawei entering in a big way to carry out the 5G rollout."

Malaysia University of Science and Technology's Dr Geoffrey Williams said it was not clear what would happen to DNB.

"It may be that once DNB's job is done when 80 per cent coverage is achieved, it may be wound down or it may continue in competition with the other provider, at least until the market is settled and the infrastructure is stable.

"Whether it survives in the long-term is a matter of policy and competition."

He said YTL, TM or Huawei might bid to be the second network provider.

He said having a second 5G network would increase competition and benefit consumers.

"Telcos will compete on price, quality and service options and as more 5G services and products become available, they will be introduced quicker rather than waiting for the government monopoly to catch-up."

He said what was good for telcos was also good for consumers, which would help the industry be more sustainable, innovative and competitive.

"The model for other similar examples shows this. If there is only one mobile network and one mobile company, the product options, service packages and quality would not have developed to become what it is today and prices would be much higher, maybe even excluding many low-income groups from mobile access."

EMIR Research president and chief executive officer Dr Rais Hussin criticised DNB's spectrum monopoly, saying the SWN approach DNB used was not the same as regulated monopolies in water and electricity utilities.

He said unlike genuine utility providers, DNB did not have sufficient internal capabilities to develop the network.

"It contracts this out to other parties, which locks Malaysia out of access to the pool of rapid global innovation in the telecommunications industry for a decade or more, at the minimum.

"Recently, we saw DNB trying to fix this through equity participation of telcos in DNB. This is complicated and unnecessary. Wholesalers and retailers under one roof would be tricky if not conflicting.

"It may promote anti-competitive behaviour, which is against the Communications and Multimedia Act 1998, such as price fixing and market sharing."

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