A culture of infrastructure sharing has existed in Malaysia since the turn of the millennium when the Malaysian Communications and Multimedia Commission (MCMC) licensed over a dozen state-backed towercos (SBCs) – one-stop agencies to permit and build towers in their respective states.
Alongside these entities, a healthy independent towerco market has developed, alongside Axiata carve-out EDOTCO, who own nearly half the towers on the market. Other notable towercos include EdgePoint Infrastructure, Naza Communications and OCK.
Continuing the theme of state-led shared infrastructure, the Malaysian government announced in 2021 that it planned to opt for a single national 5G network and appointed Digital Nasional Berhad (DNB) to build and run it, with the telcos acting as wholesale customers.
Prior to this announcement, Malaysia had been expected to hold a 5G spectrum auction, and MNOs had been preparing for a business-as-usual rollout. In 2019, for example, Maxis announced it planned to use Huawei to build its network ahead of an anticipated spectrum auction.
The announcement initially received backlash. Indeed on a blog post in October 2021, the DNB themselves admit “The decision to entrust the 5G rollout to DNB drew the inevitable criticism from many parties, and it was a decision that had not been carried out elsewhere with any degree of success as concerns centred over the effectiveness of the model, which was never tested elsewhere in the world as far as 5G is concerned.”
Despite being formed in March 2021, various delays and changes in policy from the government meant that commercial terms and 5G services being launched in Malaysia were delayed until October 2022, just a single month before a general election ushered in a new government led by Prime Minister Anwar Ibrahim.
In March 2022, the previous government revealed plans to allow the country’s diverse and competitive MNO market to buy into DNB, releasing 70% of the equity to the telcos. In the end, four of the major MNOs acquired 65% of the operator.
Celcom (Axiata) and Digi (Telenor), who have since merged to form CelcomDigi, took 12.5% each while YES and Telekom Malaysia each took a 20% stake. The other two MNOs, U Mobile and Maxis, declined to take a stake, meaning the Government still owns the remaining 35% of the company.
All but one MNO agreed commercial terms to access the 5G network in late 2022, with Maxis deferring until the new governments review of the rollout was completed.
That review is well underway, and according to sources speaking with Reuters, April 19th’s cabinet meeting allegedly saw Ibrahim’s government discuss plans to introduce a second wholesale operator in early 2024. No concrete plans have been unveiled and press secretary to the communications minister, Ahmad Firdaus Mohd, told Reuters in a text message that “The matter is still under review.”
DNB’s progress so far
While founded in March 2021, DNB was initially slow out of the gate. A US$2.6bn deal was reached with Ericson in September that year and by December the network had been launched. However, after a year 5G was only available in Malaysia’s administrative capital of Putrajaya (about 25km south of Kuala Lumpur) and adjacent Cyberjaya.
Since then however, as Covid-related logistical disruption and chip-shortages have subsided, progress has been far more positive. In an interview with Astro Awani, a Malaysian news channel, EdgePoint Infrastructure CEO Suresh Sidhu notes that “while Malaysia had been behind in 5G rollout, it has now overtaken other ASEAN markets such as Indonesia and The Philippines.”
As part of its phase 1 rollout, DNB completed 3,906 5G sites in 2022, with 2,800 on air. MNOs have to chose which sites they operate their networks from, which means that despite the network covering 50% of populated areas, 5G services are only available to 38%.
The target for coverage in 2022 was 40%, and in in 2023, DNB aims to complete a further 3,603 sites by the end of 2023 covering 80% populated areas. This second target that was brought forward a year by Ibrahim in February of this year.
All sites were built in collaboration with towercos, either as co-locations or new builds, with Gayan Koralage, Director of Strategy and Commercial at EDOTCO telling TowerXchange that his firm have taken a 30% share of the sites deployed by DNB so far.
“Bringing forward this deadline is good,” Gayan thinks. “It brings faster deployment of 5G infrastructure, which helps to better connect people and businesses to 5G use cases and will reduce the price per GB for telcos and consumers,” he continues.
While towercos in Malaysia have been able to lease up space to DNB, it could be anticipated that losing out on the revenue from 5G technology installed on their sites by all major MNOs would weaken their financial position, but Koralage believes this is not necessarily the case.
“Alongside 5G deployment by DNB, MNOs are still investing heavily in their 4G networks,” he explains. “There will be a significant increase in data consumption in Malaysia in the coming years, and we anticipate that 4G technology will account for around 20% of this.”
Why was the DNB under review, and what would be the impact of moving to a dual wholesale network?
Even still, a second wholesale network would no doubt be a positive for towercos in Malaysia, with yet another potential tenant needing to build or co-locate on new sites.
A second wholesale network would also mitigate concerns over network security.
“With a single wholesale network, you run the risk of a network outage having disastrous consequences with no backup network to rely on” Koralage says.
Sidhu agreed in his interview with Astro Awani, stating that “the industry would certainly prefer a second network” for the same reason.
Ibrahim’s government have investigated numerous government projects since taking office, with a goal of strengthening governance and reducing wasteful spending.
Ibrahim is also likely to be keen to deflect criticism of around the contracts that DNB have been agreeing with vendors. Koralage and Sidhu agree that DNB is a well-run and professional organisation, but Sidhu comments that how information about how tenders are offered, who wins them and the pricing achieved needs to be more transparent. As a government run project, there have been calls for more publicity around how DNB is spending its money to ensure better support from Malaysia’s citizens.
5G wholesale pricing is not currently regulated by MCMC, but again, calls have been made for greater transparency. These calls were echoed by the finance and communications ministers ahead of the pre-budget tabling in March 2023.
This extends to transparency for regulators, MNOs and the MNOs end customers, to ensure greater confidence that normal practices are being followed in what is in no doubt an abnormal model for 5G deployment.
Plans for 5G are expected to be put to the Malaysian government in the coming weeks, so whether more of these concerns can be addressed directly will hopefully soon become clear. If a second wholesale network is introduced however, this will no doubt reduce fears of monopolistic pricing from DNB.
A dual wholesale network could also open-up Malaysia to other equipment providers beyond Ericsson. Reports have circulated that Huawei have been using a combination of soft power and direct lobbying to break into the Malaysian market. A second network would potentially offer them this opportunity.
