COMMUNICATIONS and Digital Minister Fahmi Fadzil on May 2 said the cabinet had made several decisions regarding the 5G rollout in Malaysia. 

It decided to move away from the proven failure of a single wholesale network (SWN) to a more diversified and credible way of deploying a new-generation framework. Emir Research firmly believes this is a step in the right direction, but the devil is in the details (or lack thereof).

The minister said the transition from SWN to a dual wholesale network (DWN) is to be done in two phases:

– Phase 1: 5G deployment to be continued by Digital Nasional Bhd (DNB) for up to 80% of populated area coverage (Copa) by the end of 2023.

– Phase 2: To start shifting to DWN early this year following global standards, which is expected to end DNB’s monopoly and manifest inclusivity. 

Fahmi said the decision was made by a joint task force comprising officials from his ministry and the Finance Ministry to ensure a smooth rollout without affecting investor interests. DNB will continue to function with some mobile network operators (MNOs) taking equity in DNB.

Notably, the nature of the new entity’s makeup was not mentioned. It appears the government is to maintain its golden share in DNB, at least to the end of phase 1. Fahmi said there has been no equity uptake in DNB (even though DNB was earlier trying to convince the public otherwise) but expects this to change. It was reported last year CelcomDigi Bhd had agreed to take up a 65% stake in DNB alongside YTL Communications Sdn Bhd and Telekom Malaysia Bhd.

Emir Research believes the same key objectives – 80% of Copa by the end of 2023 and a competitive 5G rollout in line with the global best practices – can be achieved more efficiently and effectively if the government divests its share in DNB, allowing its complete takeover by major MNOs.

In their current formulation, phases 1 and 2 sound awkward and are wide open to sabotage of the current administration’s best intentions by Malaysian super politico-corporate elites and neo-colonialists who have been holding Malaysia’s 5G rollout initiative hostage for their gains at the expense of the nation for at least four years.

Under the current setup, why would MNOs want to keep equity in DNB?

The completely unsurprising move by CelcomDigi to pull out from this deal might be recreated by other MNOs.

Fahmi said all major MNOs except Maxis had signed the access agreement, but this doesn’t necessarily mean they will be part of phase 1. If anything, it could be more enticing for them to join phase 2. After all, as is well documented in the public domain, Maxis and UMobile did not agree to the equity uptake in DNB in the first place.

If major MNOs pull out of the equity deal and DNB is again on its own to complete the Copa, this raises several serious considerations.

It took over two years to reach the current reported CoPA of 57.8%. How another 22% (roughly 2,000 sites) can be completed in about half a year is unclear.

But all this talk about rushing the Copa target misses a crucial point. It matters not if rollout is at 50% or if adoption is at 1%.

If MNOs pull out of equity participation and DNB has cash flow problems due to poor uptake of equity and/or financing by financial institutions and other investors, they have to look elsewhere for capital, such as raising sukuk/bonds against projected future cash flow from the exclusive use of spectrum (DNB’s pure rent-seeking business model), which will have to be backed by government guarantees for it to be bought by investors.

However, in the case of a 100% joint takeover of the DNB’s assets by MNOs, the government would be immediately relieved of significant financial burdens.

Sufficient spectrum availability at affordable prices for MNOs, coupled with the solid national spectrum roadmap, are cornerstones of the successful rollout for successive networks. Such policies provide certainty about the spectrum and encourage investment into newer technologies. 

However, as we all witnessed, all these fundamental principles (see Figure 1) have been grossly violated. The figure summarises 10 fundamental principles of a successful spectrum policy based on global experience.

The recent announcement also assumes a transition to a DWN. 

We should not forget the painful SWN experience in Mexico where multinational consortium Altán Redes was allowed to operate alongside private networks. As a result (and as expected), the SWN could not compete with the MNOs and Altán Redes filed for bankruptcy halfway through 2021, only to be bailed out by the government a year later.

Under the DWN scenario, it is reasonable to expect DNB’s failure to leave Malaysia again with the SWN. This should not be allowed. Malaysia has no more room for inefficient use of resources.

This is why since day one of the 5G rollout debate, Emir Research has advocated multiple wholesale networks (MWN) globally.

The policy shift from a monopolistic to a competitive model is indeed laudable that will benefit many. Emir Research has been consistent in championing the competitive model since the 5G voyage began in Malaysia. 

Congruently, with these suggestions and important details above, Malaysia too can ensure effective and efficient transition and close the door to potential policy reversals by neo-colonialists, both foreign and local, bent on advancing their “vested interests” to the detriment of our nation and people. – May 16, 2023. 

* Rais Hussin is president and CEO of Emir Research, a think tank focused on strategic policy recommendations.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.