Is govt making mistake over second 5G network?

The key considerations for allowing the setting up of a second 5G telecommunications network are whether it will lower costs for users, lead to a cheaper yet more efficient network, and more competition. Nothing else matters much.

Communications Minister Fahmi Fadzil said on Tuesday that 5G coverage reached 80.2 percent on Dec 31, exceeding the 80 percent threshold it set for a decision on whether a second 5G network should be allowed.

While Fahmi is in charge of communications, the new Digital Minister Gobind Singh Deo (since Dec 12) is in charge of digital which means Digital Nasional Berhad (DNB) now comes under him.

Fahmi in May 2023 announced that the government will allow the setting up of a second 5G network once DNB’s coverage hits 80 percent.

The government must consider this carefully because the ramifications are serious. Let’s look at the issues minus technical jargon. Basically, 5G increases digital communication speeds considerably. Everyone agrees we need it. It’s a question of how to implement it, not whether to do it or not.

The issue of a second operator was revived after the new Pakatan Harapan-led government came to power in November 2022. The previous government decided on a single operator - everything was set up and capital expenditures, budget planning, and so on were made on that basis.

Communications Minister Fahmi Fadzil

After some back and forth, on Dec 1, five main mobile network operators – CelcomDigi, Maxis, U Mobile, Telekom Malaysia, and YTL Power International executed share subscription agreements to take up equity stakes of 14 percent each in DNB. Maxis and U Mobile had earlier stayed out.

The government retained the other 30 percent and held a golden share, with rights and privileges covering areas such as ownership, sale, or transfer of shares.

The puzzling thing is this - if all the major network providers are already shareholders in DNB, who is providing the second 5G network? Surely the second provider cannot have an interest in the first provider.

Next, if DNB was set up on the assumption that it would be the only 5G operator in Malaysia, then its entire capital expenditure, budgets, capacity planning, and execution would be based on that. Its website says its total expenditure is expected to be RM16.5 billion for all this.

If the government now goes against DNB and allows another operator, surely this will affect the financial viability of DNB which has already procured equipment and has 80 percent coverage of the country by now. A further expenditure of RM15-20 billion by the second operator will mean an appropriate return on that investment as well, which spells higher 5G rates all around.

Also, that will mean that any telco setting up a competing network is climbing a steep hill - it will have high capital expenditure and will have to catch up with some three years of work already done competently by DNB.

DNB’s commendable track record

One of the complaints made against DNB was that its first main contract award to Ericsson was not competitive to which DNB said in a statement in July 2021 that the design, build, and maintenance contract of RM11 billion is around RM700 million lower than the next lowest bid.

DNB’s track record so far is commendable - awarding a major tender in less than four months after set-up, achieving 80 percent coverage by Dec 31, less than three years after set-up, and meeting stated targets.

It was started because the existing network operators were dragging their feet over using a 5G network, instead milking the most out of their outdated 4G network and setting high rates cartel-like when compared to other countries with newer networks.

To quote one of DNB’s responses in a 2022 media statement: “If the country waited for the telcos, the 5G network would likely have been delayed to 2023 or 2024. And certainly not as early as Dec 15, 2021, which saw 5G being made available for the first time in Malaysia (in Kuala Lumpur, Putrajaya, and Cyberjaya) just nine months after the establishment of DNB in March 2021.”

It’s been speculated that there are other tie-ups and arrangements that benefit certain individuals and companies, but there is little fault that can be found with DNB itself. The simple solution to this is to cut those ties, if indeed there are, not set up a second network.

With all major network providers already on board as shareholders of DNB and the government with a 30 percent stake and a golden share, it makes eminently good sense to stay with this and draw upon the entire industry and the government for impartial expertise in DNB to provide excellent services for all.

Essentially, a basic utility - 5G, much like electricity and water - is being provided at the lowest cost possible at the back end. Competition can be at the front end where the network operators will use the same level of access to the 5G pipeline to provide the best services.

Further, as DNB explains in its media statement, concerns over a single network failing are alleviated by built-in technical duplications.

Possible public listing for DNB

Verdict: There is no need for a second network, although many clamour for it because they can supply goods and services. What it will do is effectively raise the cost of providing the same services which will translate into higher fees for 5G.

If DNB is properly run, it will become a large utility that can be listed on the stock market. The government can sell its 30 percent stake, hopefully for a good profit, and retain its golden share.

The telcos can sell down their stakes to 10 percent each - they will own 50 percent collectively while the public will hold 50 percent. We will have a strong, viable utility that will become a top 10 company and widen investment possibilities for the public. And 5G rates will be low, a true win-win for all - telcos, the government, corporates, and the public.

Why, it may become a good model for other public-private partnerships in place of some of the sham ones we currently have which give private, connected parties free access to valuable government guarantees and other largesse such as free land, concessionary financing, tax exemptions, etc. - Mkini

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P GUNASEGARAM says it’s time the government stopped shooting down their investments and companies in favour of selected private parties - remember Tenaga Nasional?

The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.