Wednesday, 06 July 2022

Malaysian telcos continue to clash with govt over 5G

by Harry Baldock, Total Telecom
Wednesday 25 May 22

The government has rejected a proposal from the country’s four largest operators that would see the mobile players take a majority stake in the national 5G wholesale vehicle Digital Nasional Berhad (DNB)

When it comes to 5G, Malaysia’s strategic approach has been somewhat unorthodox, with the government setting up a national wholesale 5G network operator, DNB, back in 2021. This approach, the government claimed, would allow for a more efficient rollout of 5G infrastructure across the country and ensure fairer prices for the country’s citizens. The nation’s telcos, however, disagreed, saying that the wholesale prices proposed by DNB were too high and that it would be more effective for them to rollout 5G services themselves…

When it comes to 5G, Malaysia’s strategic approach has been somewhat unorthodox, with the government setting up a national wholesale 5G network operator, DNB, back in 2021.

This approach, the government claimed, would allow for a more efficient rollout of 5G infrastructure across the country and ensure fairer prices for the country’s citizens. The nation’s telcos, however, disagreed, saying that the wholesale prices proposed by DNB were too high and that it would be more effective for them to rollout 5G services themselves. 

By December 2021, uptake of DNB’s 5G offering was so low that the wholesale company was forced to take drastic measures, offering the telcos 5G services for free until the end of March 2022, a period that was later extended to the end of June. 

But despite this olive branch, the impasse between DNB and the telcos continued, leading the government to propose earlier this year that nine Malaysian telcos take a combined 70% stake in the state-owned company. 

At the time, this proposal seemed to please the operators, who said they looked forward to an approach typical of any normal mergers and acquisitions process. Fast-forward to last week, however, and the situation was still mired in controversy, with only Telekom Malaysia and YTL Communications, two of the country’s smaller mobile players, having signed agreements with DNB.

In fact, Malaysia’s four largest operators, Digi Telecom, Celcom Axiata, Maxis, and U Mobile, wrote a joint letter to the operator, suggesting that the minority stakes on offer would not offer them good value.

“The Ministry of Finance-proposed role as minority shareholders does not appear to make it feasible for any of us to add value as shareholders and is not commensurate to our contribution to the industry, or our duty to our shareholders and customers,” said a letter from the four incumbents to the government. 

They also complained that the proposed interconnection terms and the lack of transparency surrounding DNB’s rate of return.

As a result, the four operators last week offered a counterproposal, suggesting that the four of them should take a combined 51% stake in the business.

Now, the Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz has seemingly rejected this plan, according to reports from the Malay Mail. Tengku Zafrul said that the deadline to sign up to DNB’s 5G services by 30 would remain, with the operators left without access to 5G if they do not sign up.

Meanwhile, private equity has long been reported as interested in investing in DNB and, according to the government, these firms would be cleared to do so if the nation’s big four telcos refuse the current equity offer.

Malaysia is already considerably behind neighbouring countries when it comes to 5G, with most neighbouring countries already rolling out the required infrastructure having followed a more traditional spectrum allocation strategy. 


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