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Malaysia PM Anwar considers opening 5G ecosystem to more technology partners

source:Industry News release time:2023-04-17 Article author:sznbone Popular:Prison Jamming system

KUALA LUMPUR: Prime Minister Anwar Ibrahim is warming up to the prospect of opening Malaysia’s doors to other technology partners, breaking the current monopoly held by Swedish information and technology firm Ericsson.

The dismantling of the current 5G monopoly held by state-owned Digital Nasional Bhd (DNB) will be at the top of the agenda when officials from the Finance Ministry, a portfolio Mr Anwar helms, and the Digital and Communications Ministry hold talks soon on how to proceed with the country’s most important technology upgrade that is expected to cost more than RM16.5 billion (US$3.74 billion) over the next 10 years, senior government officials close to the situation told CNA.

The Cabinet is expected to make a final decision on the matter this month and close aides to the prime minister said that Mr Anwar is open to the idea of other technology players participating in the 5G rollout. 

According to the aides familiar with the Cabinet discussions, the government has received complaints from the country’s mobile telecommunication operators that their views were not sought when the previous government under Muhyiddin Yassin pushed ahead with the incorporation of DNB to lead the implementation of the 5G infrastructure in March 2021.

“They (the private mobile operators) have made representations and there is a strong possibility, more than a 50 per cent chance, of opening up the field,” said a Finance Ministry official who is familiar with ongoing internal discussions on the 5G review.

5G IMPLEMENTATION STEEPED IN CONTROVERSY

Implementing the 5G technology upgrade in Malaysia has been steeped in controversy from the beginning and Mr Anwar’s government is now juggling with some uncomfortable options on how to proceed. 

Detractors have accused the previous Muhyiddin government of bulldozing the plan without any consultation with the private sector players under the cover of the emergency proclamation Malaysia was blanketed in during the COVID-19 pandemic. 

The establishment of DNB as the country’s single-wholesale network (SWN) provider that left private telcos with no other choice but to lease 5G spectrum from the entity immediately raised concerns from both the public and economists. 

Industry analysts, who are opposed to the SWN model, have argued that Malaysia has always practised awarding spectrum to private telcos, an approach that has encouraged infrastructure-based competition and promoted innovation. 

Rais Hussin, who heads independent think tank Emir Research and is a vocal critic of Malaysia’s 5G rollout, said that the SWN model has generally failed internationally. As of February this year, more than 156 countries and territories have taken the competition route. “The must be a global wisdom out there that we could have borrowed,” he said.

Apart from sticking with the current model of DNB playing the role of the single wholesale network provider and leasing spectrum to the country’s telco operators, the other options are to allow a second operator or disband the 5G company and carry out auctions for the spectrum to pave the way for more networks. 

Another proposal being looked at is the outright sale of DNB to local telco players and foreign investors with the state retaining a golden share to give it veto rights over the company, telco industry sources familiar with ongoing discussions told CNA. 

Proponents of DNB have argued that the single wholesale network model was adopted because Malaysia’s telco sector is one of the most crowded in the region as a result of the privatisation policy under the Mahathir Mohamad government, which decided in the late 1990s to break the monopoly of state-controlled Telekom Malaysia and hand out mobile licences to private companies.

Malaysia today has six telco operators. Another three entities own valuable spectrum that is leased out to existing players.

Of the total estimated cost of RM16.5 billion for the 5G rollout over the next 10 years, DNB has announced that RM4 billion would be paid to Ericsson as the network equipment provider, and the remainder to finance network infrastructure, regulatory fees as well as corporate costs.

DNB officials noted that any reversal of the single wholesale network model could have huge financial ramifications because the company will need to honour various contracts that it has entered into for the infrastructure development, leading to further delays in Malaysia’s rollout of its 5G network.

But in a report released in February, Singapore-based global investment bank UOB Kay Hian noted that the introduction of a second vendor was still possible because it would lead to lower 5G deployment costs.

OTHER POTENTIAL TECH PARTNERS

Who are the other potential players in the frame?

The Finance Ministry official said that the lobby for China’s Huawei and other players, such as ZTE Corporation, which specialises in so-called cloud technologies that are vital to the 5G ecosystem, has been intensifying in the past month.

Huawei, which has set its sights on expanding into the markets of Southeast Asia and the Middle East to make up for the loss of business in the Western countries, has had mixed success pushing into ASEAN (Association of Southeast Asian Nations) markets. The Philippines and Cambodia have partnered Huawei, but other markets such as Singapore and Thailand have gone with Ericsson. 

A foothold in Malaysia would represent a huge breakthrough for Huawei, which already has a long-term strategic partnership with Maxis Bhd, the country’s largest private mobile telephone operator.

DNB executives have pushed back, arguing privately with the government regarding the potential diplomatic pitfalls in embracing Huawei, which has seen products banned in several Western countries over allegations that the equipment it supplies contains security gaps that could be exploited by the Chinese government for spying on foreign governments. 

“Malaysia needs to worry about the opposition from the Five Eyes because we need technology and investment from the Western countries,” said a senior consultant to DNB, referring to the global intelligence-sharing network comprising the US, Britain, Canada, Australia and New Zealand.  

Bob Fox, who previously worked in the Malaysian telco sector and is currently chairman of the Digital and ICT Group of the Joint Foreign Chambers of Commerce in Thailand and the European Association for Business and Commerce, noted that “cyber security policymakers need to ask themselves tough questions about the community of vendors they work with".

“Policymakers need to make up their minds whether all of those involved are going to act in the nation’s national interest,” said Mr Fox, who closely tracks regional telco developments.

“PM Anwar will have to make the final call. The US and EU sanctions on Chinese technology vendors are valid concerns,” said a former CEO of a local mobile company, who asked not to be named because of a confidentiality agreement he is bound by as advisor to several private mobile operators. 

The 5G project has already reached more than 95 per cent rollout in the dense urban regions of greater Kuala Lumpur and Penang and is also ahead of schedule in other suburban and rural areas. DNB officials expect the rollout to be completed before the end of the year and with more than 80 per cent of the populated areas in the country covered.

Indeed, the project has emerged as a policy dilemma for the Anwar administration.

“The (new) government wants to demonstrate that it can do the (5G) rollout better and cheaper with minimum cost to the taxpayer. But in a few months we would not have achieved anything because there are no good options,” said a former director of a large Malaysia mobile network, who is regularly consulted by the government on industry matters.


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