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Government paid RM42 million Electricity Charges for Yes4G Telco Towers

The Malaysian Government is said to have paid close to RM42 million in electricity charges for YTL’s Yes4G Telecommunication towers in schools nationwide. These Yes4G Telco Towers are not only used to offer Internet services for the 1BestariNet project at schools, but also for commercial reasons, serving the existing Yes4G customer base surrounding the schools.

1bestarinet yes4g ytl moe

There are 2,715 Yes4G telecommunication towers at schools nationwide.

According to media reports, since the second phase of 1BestariNet started, YTL Communications Sdn Bhd (YTLC) never took on costs for telecommunications towers, and instead has charged the government RM41,881,384.98.

Initiated in March 2011, 1BestariNet is a project by the Malaysia Ministry of Education (MOE), carried out in partnership with YTL Communications. Under the project, 10,000 primary and secondary public schools in Malaysia will be equipped with “high-speed 4G Internet access” and a virtual learning platform within 30 months from December 13, 2011, providing high-speed Internet connectivity and access to a “world-class Integrated Learning Solution”.

However, the students and teachers were only given Internet speeds up to 4Mbps, which is inadequate for schools according to the Education Ministry.

The 1BestariNet project, in phases, would cost RM4bil over 15 years, and was supposed to provide 4G broadband connectivity (powered by Yes4G) and virtual learning environment (VLE) to the schools. YTLC was awarded the contract for the first phase of 1BestariNet for the period of Dec 13, 2011 to June 30, 2016, including a seven-time contract extension before the second phase contract from July 1, 2016 to June 30 this year. The project was not renewed for Phase 3.

Late last month, the MOE announced that Maxis, Celcom Axiata and Telekom Malaysia will supply internet access to schools nationwide from July 1 for six months. A new Internet Service Provider (ISP) will be selected for January 2020 onwards.

On Wednesday, YTL claimed that Government has breached the 1Bestarinet contract as it wasn’t renewed for Phase 3. The group said it had invested RM4bil building up the infrastructure in the schools for a 15 year project and it was their “legitimate expectation” that it would be given an extension of the contract into the next phase. The company has alleged that the Education Ministry (MOE) has hired three internet service providers for schools when YTLC offered to do so for free.

MOE has denied all the allegations.

“Among other things, YTLC’s offer was rejected because of hidden costs and YTLC never paid the electricity charges for telecommunication towers installed in schools,” said Education ministry secretary-general Mohd Gazali Abas.

The MOE had paid YTLC around RM3.8bil for Phase 1 and Phase 2 of the 1BestariNet project.

He also said that YTLC was only being charged RM10 per month as site rental for 1BestariNet Receiver Integrated System (1BRIS) when the average market rate for such Telecommunication tower is RM2,000 per month.

He acknowledged that this was the agreement in the Phase 1 contract, but that the ministry wanted to charge more since the towers are clearly not being used just for the schools.

The government stands to earn around RM32.5mil (throughout the six-month interim) in commercial structure rent if they charge the actual rate but, he continued, YTLC did not want to pay this price.

According to TA Securities, approximately half of YTLC’s network of 5,000 towers (population coverage: 85%) are located at school sites. Therefore, based estimates, YTLC would likely need to fork out additional incremental opex of RM69 million per annum for its former 1BestariNet towers. This includes electricity payments and assuming market rates for site rental.

“In our view, the loss of 1BestariNet (1BSN) contribution will likely create a gaping earnings hole for YTLC’s MBB segment. The latter has been reporting losses before tax (LBT) since 2011 (financial year 2018 [FY18]: RM91 million LBT, nine months of FY19 [9MFY19]: RM28 million LBT) on the back of low take-up rates for YES WiMax/4G (estimated subscriber base: 800,000). We estimate that 1BSN contributes annual revenue of RM500 million to YTLC’s MBB segment in FY20-21.”

The issue surrounding the 1Bestarinet project isn’t new.

In 2014, YTL Communications Sdn Bhd was fined RM2.4 million by the Malaysia Ministry of Education(MoE) for failing to provide all 10,000 schools with the 1BestariNet e-learning project.

In 2016, the Public Accounts Committee (PAC) found the Education Ministry guilty of contract mismanagement in their RM4 billion 1BestariNet project for schools. 1BestariNet, which involved all 10,000 schools nationwide (reaching 5,000,000 students, 500,000 teachers and 4,500,000 parents), had come under fire from both the Auditor General (A-G) and PAC for having failed to deliver on time.

The A-G report also noted that usage of the Virtual Learning Environment (VLE) by teachers, students and parents was said to be between 0.01% and 4.69% only. The VLE is powered by FrogAsia, a YTL company.

Daily utilisation of the e-learning by students was found to be between 0.17% and 0.63%, while usage by teachers was from 0.57% to 4.69%. The usage of the e-learning by parents was the lowest, at between 0.01% and 0.03%.

Back then, the PAC has asked the Auditor General (A-G) Department to undertake a second review of the 1BestariNet project however MOE continued the project with YTL for over 2 years until Phase 2 of the contract expired at the end of last month.

About Kugan

Kugan is the founder of MalaysianWireless. He has been observing the mobile industry since 2003. Connect with him on Twitter: @scamboy