No takers for Malaysia's 5G plan as major telcos balk over pricing, transparency

Kuala Lumpur

NONE of Malaysia's major mobile carriers have agreed to use the government's 5G network yet due to transparency and pricing issues, ahead of a roll-out planned for next month, a state agency and industry executives said.

However, state-owned network wholesaler Digital Nasional Berhad (DNB) told Reuters that it still hoped to launch 5G services in 3 urban centres, as talks continue with mobile operators.

Malaysia, a regional laggard in 5G roll-out, unveiled a plan for a single shared network in February, hoping it would help accelerate nationwide infrastructure build-up. Similar state-led approaches have been tested in some other markets including Mexico, but largely stumbled.

The lack of industry support for the Malaysian initiative underscores corporate concerns over state meddling and transparency, in a country still reeling from a multibillion-dollar corruption scandal at state investment firm 1Malaysia Development Berhad (1MDB).

Malaysia has been losing foreign investor confidence recently amid political instability, with the third administration in as many years coming into power in August. The 1MDB scandal also tainted its reputation and implicated former prime minister Najib Razak.

DNB confirmed that no agreement with carriers has been reached, and acknowledged its initial timeline for negotiations had been "too optimistic". The agency will now seek to have formal long-term agreements early next year, and continues talks to deploy 5G services in 3 central areas, including Kuala Lumpur, next month.

"The target now is to have a live network, covering... a total of 500 sites by the end of December, with at least some operators on board to provide a 5G network to end-users," chief technology officer Ken Tan said. DNB did not say what would happen if no operators agreed to be part of the deployment.

Carriers, which had already invested in infrastructure upgrades to support 5G services, are concerned the 5G network plan would result in a nationalised monopoly, hurting their business and limiting their access to future technology, said 7 current and former industry sources.

Three sources estimated the government plan could destroy up to RM45 billion (S$14.6 billion) in market value across all mobile operators including Axiata Group, DiGi.com and Maxis. It was not specified what period the losses would be incurred.

"By 2030, the majority of the network will be on 5G, then there are enforced limitations on our existing (non-5G network) assets," said one source. "Valuations (of our business) will go down over time and it will go back and hurt our shareholders."

Under the plan, DNB would hold all 5G spectrum rights, as well as build and maintain the entire network, with operators using the infrastructure to provide mobile services.

Axiata and DiGi declined to comment. Maxis said in a statement that it has long been ready to roll out 5G in the country.

"We will continue to focus on our purpose to serve the people and enterprises of Malaysia, and playing a key role to support the digital ambitions of the nation," a Maxis spokesperson said.

The company sources said under the proposed pricing plan, the telcos could end up paying more than they would have if they rolled out 5G on their own.

The plan did not take into account additional requirements related to traffic volumes and contingency costs, among other issues, they said.

According to internal documents reviewed by Reuters, the carriers have asked for "extensive revisions" to DNB's pricing proposal, saying it did not demonstrate the cost efficiencies promised.

The sources said the companies had also sought assurances that DNB would operate solely as a wholesale provider, and would not reserve 5G capacity for itself or harbour any retail ambitions. REUTERS