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After govt delays 5G for over a year, Tengku Zafrul says telcos failed to deliver 5G under a private-led consortium

Soya Cincau logo Soya Cincau 26/11/2021 Alexander Wong
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Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz told Parliament yesterday that the previous plan to roll out 5G through a private-led consortium had failed due to differences of interest by the mobile network operators. He said efforts by the telcos to share network infrastructure, reduce cost, and launch 5G didn’t go according to plan. 

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He said due to the importance of the digital economy, the government launched MyDigital in February this year which included the formation of a special purpose vehicle, now known as Digital Malaysia Berhad, to roll out 5G quickly and in an inclusive manner. 

Why was Malaysia’s 5G rollout delayed in the first place?

During the Pakatan Harapan administration, Malaysia was supposed to launch 5G services in Q3 2020. After conducting a public inquiry in July 2019, the Malaysian Communications and Multimedia Commission (MCMC) released its final National 5G Task Force Report in December 2019 and recommended the allocation of the 700MHz and 3.5GHz 5G spectrum to a single private consortium formed by multiple telcos. According to the MCMC, the consortium approach will help lower capital expenditure (CAPEX) by telcos by minimising cost and duplication of network infrastructure. 

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The 5G spectrum assignment through a beauty contest process was supposed to commence in Q1 2020, however, the Pakatan Harapan government fell in February 2020. Since then, Malaysia’s 5G rollout plans were up in the air as there was no clear direction to deploy 5G by the new government.

In June 2020, the former Communications and Multimedia Minister Datuk Saifuddin Abdullah quietly assigned the 700MHz 5G spectrum directly to five telcos through a ministerial order. After public backlash, Saifuddin retracted the 700MHz spectrum assignment saying that the order has been revoked on the basis of technical issues, law and the need for transparency.

In August 2020, former Prime Minister Muhyiddin Yassin launched JENDELA, a plan to increase 4G population coverage up to 96.9% and to boost average mobile speeds to 35Mbps by 2022. There was no mention of 5G until November 2020 when Saifuddin Abdullah told Parliament that 5G deployment will only take place towards the end of 2022 or early 2023. He said there was no point in having 5G in selected areas when rural areas are struggling to get 4G. 

When Muhyiddin launched MyDigital in February 2021, talks about deploying 5G were put back on the table and it will be handled by a state-owned special purpose vehicle (SPV) under the Ministry of Finance. With the SPV approach, DNB will be given the 5G spectrum to deploy 5G while other telcos will have to gain access through a wholesale agreement.

It is surprising that Tengku Zafrul suggested that the consortium approach had failed to launch 5G as the government was changed less than 2 months after it was first announced. On top of that, Malaysia’s delay to roll out 5G was due to the government’s decision last year to put 5G on hold in favour of improving 4G coverage under the JENDELA Plan.

Telcos have collaborated for network sharing arrangements

Celcom and Maxis signs MOU on 5G Network Sharing © Provided by Soya Cincau Celcom and Maxis signs MOU on 5G Network Sharing

Local telcos have already collaborated to share their network infrastructure even before DNB was announced. In November 2019, Celcom and Maxis have signed an MoU for 5G network sharing and they conducted a successful 5G Multi-Operator Core Network (MOCN) trial in Langkawi which was the first of its kind in Southeast Asia. Similarly, TM, Digi and U Mobile have also conducted network sharing trials to explore network infrastructure sharing to enable a cost-effective and efficient rollout of 5G in Malaysia.  

Celcom and Maxis 5G MOCN trial in Langkawi © Provided by Soya Cincau Celcom and Maxis 5G MOCN trial in Langkawi

In March 2021, Celcom, Digi and Maxis have jointly signed a Definitive Agreement to jointly develop and share fibre infrastructure to deploy fibre backhaul to mobile base stations. The collaboration was aimed at improving 4G connectivity and to increase fibre infrastructure which will serve as a strong foundation for future 5G networks.

Is 5G really cheaper via DNB?

Source: MalayMail © Provided by Soya Cincau Source: MalayMail

Tengku Zafrul told Parliament that the final 5G wholesale pricing is almost finalised and it will be significantly cheaper than what telcos are now paying for 4G. He revealed that DNB will charge telcos less than 20 sen per GB for 5G data which is cheaper than the current cost by telcos to offer 4G on their own network which is estimated to be between 45 to 55 sen per GB. 

With DNB, he said each telco will pay DNB between RM3.5 billion to 4 billion over a period of 10 years, which calculates up to RM400 mil per year. He said this is far lower than the RM1 billion invested by telcos yearly on their 4G network.

However, the cost comparison between 5G and 4G is like comparing apples to oranges. It is a given that the latest technology will always be most cost-effective and 5G will make better use of the same spectrum compared to 4G. Less than a decade ago, consumers would have to fork out RM30 or more for 1GB of data on 3G and now you can get a GB of data as low as RM1 or less. 

On top of that, users are more likely to consume more data with 5G and it isn’t clear if 55%-65% cheaper cost per GB between 5G and 4G would translate to an overall lower monthly subscription fee for consumers. 

It is also worth pointing out that the 5G Task Force had previously estimated that Malaysia’s 5G deployment would cost RM7-8 billion which includes RM5.1 billion required to cover 10,000 sites. 

At the moment, DNB’s total cost of 5G rollout is estimated to be RM16.5 billion and it could swell to RM20 billion to anticipate an increase in capacity demand. From this figure, RM4 billion will be spent on start-up costs, consultation fees and staff compensation for over 600 employees for a period of 10 years.

Government wants to prove that SWN will work in Malaysia

Source: GSMA Intelligence © Provided by Soya Cincau Source: GSMA Intelligence

The Finance Minister also said the government is aware of the risk and challenges of the single-wholesale-network (SWN) model faced by other countries. He said the government is taking necessary steps to ensure that Malaysia won’t be making the same mistakes. 

Bangi MP asked what gives the government assurance that DNB, a fully-owned company under government, is able to roll out 5G faster and better than the private sector. Tengku Zafrul said such doubts must be dispelled as government-owned companies have been successful on the world stage such as Petronas, Tenaga Nasional Berhad and Telekom Malaysia. He said DNB has the potential to be equally as successful and what’s important is the level of capability and professionalism in executing the plan and strategy. 

He acknowledges the concerns about SWN failures in other countries but he said DNB is managed by a team of experienced telecommunications veterans. He said DNB deserves to be given the opportunity to prove doubters wrong and Malaysia can succeed in the SWN model for 5G. He added that 5G is expected to generate RM21 billion in direct economic activities. Quoting a report by Ernst & Young, 5G is expected to increase Malaysia’s gross domestic product (GBP) by RM122 billion in 2030.

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