In a major turn of events, the Malaysia Government decided that it will build and manage its own 5G network, in partnership with Telekom Malaysia (TM) and Huawei Technologies.
“Companies including Telekom Malaysia Bhd and Huawei Technologies Co are expected to play a significant role once the work begins “as soon as possible” to have the network available by end-2021, communications and multimedia Minister Saifuddin Abdullah said on Monday.
“We want to be among the first Asean member states to roll out 5G deployment and not just limit ourselves to 5G test labs,” he said. “It is very important for investment, and this is where companies like Huawei will play a very, very significant role.”
The current Malaysia Prime Minister Muhyiddin Yassin last Friday announced that Malaysia would invest RM15 billion over 10 years in the 5G network. The government will set up a special purpose vehicle that will own the spectrum and manage the network, he said.
The Government of Malaysia Special Purpose Vehicle (GOMSPV) for 5G will be wholly owned and maintained by the Finance Ministry, regulated by the Malaysian Communications and Multimedia Commission (MCMC) in partnership with Telekom Malaysia Bhd (TM) and Huawei Technologies Co., Ltd. The GOMSPV will offer 5G as a wholesale network service to other Telecommunication companies.
Telekom Malaysia (TM), a government-linked company (GLC), is the largest fixed broadband operator in the country with a global network of more than 20 submarine cable systems spanning 190,000km. Locally, it has a 570,000km fibre network nationwide, more fibre than any other Internet service provider in Malaysia.
Yesterday, Telekom Malaysia (TM) indicated that it is in the dark regarding the Government of Malaysia Special Purpose Vehicle (GOMSPV). When asked whether TM will be playing a role in the GOMSPV-driven 5G rollout, TM Chief Executive Officer (CEO) Imri Mokhtar during a quarterly result briefing said the government has yet to reveal details on how the implementation will be done. He said it is still at a preliminary stage and that the group “only knows as much as the media” on the matter, although he said TM is ready to provide its fibre network for a cost-effective rollout of 5G infrastructure.
Meanwhile, Huawei is a major Telecoms equipment and solutions provider. It is currently facing a major controversy including being banned from deploying 5G in multiple countries. Huawei is under scrutiny around the globe over concerns that its close ties with the Chinese government present national security threats to the U.S., Europe and allied countries. Huawei denied all the allegations.
The latest decision by the Malaysia Government appears to contradict a statement made in July 2020 where the Government said it was considering to award the 700Mhz spectrum for 5G to a consortium or individual licensees.
“We are still discussing the 700MHz frequency band, on the basis that we will give priority to telecommunication companies with existing subscribers. This discussion also involves whether it will be awarded to a consortium or be given directly to the company.” said Deputy Communications and Multimedia Minister Datuk Zahidi Zainul Abidin back then.
In May 2020, the new Communications and Multimedia Minister, Saifuddin Abdullah ordered the award of 5G spectrum to Altel Communications, Maxis, Celcom Axiata, Digi and Telekom Malaysia without any tender. The decision was then cancelled after an article published by MalaysianWireless.
Other major 5G frequencies for Malaysia include the 3.5GHz and 26/28GHz bands.
MalaysianWireless believes that the decision on GOMSPV by the Malaysia Government was made without any collaboration or discussion with the major wireless carriers. No tender was called.
Major mobile Telcos that are not part of the GOMSPV (at the time of writing) but have shown interest in 5G during the past few years are Maxis, Celcom Axiata, Digi and U Mobile. Others include fixed broadband provider Time dotcom, infrastructure solutions companies, edotco and ZTE Corporation.
In a statement yesterday, MCMC said that there will be “private sector involvement” but it did not say the current GOMSPV involved participation from major mobile Telcos. “There will be private sector involvement which will be explained in greater detail by the GOMSPV in due course.”
MCMC added, “The spectrum is provided to SPV to build the network and offer capacity via wholesale. The non-auction model adopted is part of the effort to not burden cost on a new network, in addition to ensuring that readily available network elements will be used and not laid new. The GOMSPV will be offering services via wholesale that is transparent and regulated. The service providers offering retails services will have an open, fair and equal access to the new network.”
“This will be a strong indication towards reducing infrastructure-based competition and enhancing a service based competition that will only benefit end users whilst reducing foreign outflow especially for new equipment if multiple players were to build out a network.”
“The retail service providers can invest in more innovative services that will help them generate better income whilst end users are able to use the new services to generate more digital related economy.” it said.
However a research firm has a different point of view.
“A centrally-coordinated rollout of 5G infrastructure in Malaysia would – in our view – be inefficient and likely to incur higher levels of capex compared to a scenario where operators pursue their own buildouts and network sharing arrangements,” according to Fitch Solutions, a research unit of Fitch Ratings.
“The lack of private sector involvement in the SPV also raises concerns that contracts might not follow open tender processes and that financial reporting obligations of the new entity might eschew transparency; this could open up opportunities for graft and corruption in the buildout process, although the telecoms regulator, the Malaysian Communications and Multimedia Commission has pledged to keep the operations of the SPV transparent.”
“In our view, the priority of government stimulus would be best focused on further subsidising the fibre infrastructure rollout of state-owned wireline incumbent Telekom Malaysia (TM), rather than on 5G equipment such as cell sites and street furniture.”[PDF]– Statement by MCMC on GOMSPV