Malaysia’s investment appeal at risk as state-owned operator, private telcos hit impasse in 5G deal

CNA04-19

KUALA LUMPUR: The mess surrounding Malaysia’s ambitious rollout of its superfast fifth-generation cellular network, or 5G, has got messier. A complex government-sponsored settlement agreement reached...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMalaysia’s investment appeal at risk as state-owned operator, private telcos hit impasse in 5G deal\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-19 06:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.channelnewsasia.com/asia/malaysia-5g-deal-telcos-dnb-digital-nasional-berhad-4271661><strong>CNA</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>KUALA LUMPUR:  The mess surrounding Malaysia’s ambitious rollout of its superfast fifth-generation cellular network, or 5G, has got messier.\nA complex government-sponsored settlement agreement reached...</p>\n\n<a href=\"https://www.channelnewsasia.com/asia/malaysia-5g-deal-telcos-dnb-digital-nasional-berhad-4271661\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU1261432733.SGD","symbol_name":"Fidelity World A-ACC-SGD","start_time":0,"source_url":"https://www.channelnewsasia.com/asia/malaysia-5g-deal-telcos-dnb-digital-nasional-berhad-4271661","article_id":"2428257755","we_media_id":null,"thumbnails":["https://onecms-res.cloudinary.com/image/upload/s--r0Moiczy--/c_crop,h_545,w_969,x_137,y_37/c_fill,g_auto,h_468,w_830/f_auto,q_auto/v1/mediacorp/cna/image/2023/12/12/anwar%20ibrahim%20cabinet%20reshuffle.jpeg?itok=yRBiL7-i"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2428257755","pubTimestamp":1713477600,"sourceInfo":{"source_id":"can_highlight","name":"CNA"},"weMediaInfo":null,"summary":"The government could be forced to reconsider allowing a second 5G operator, as a settlement between state-owned Digital Nasional Bhd and the politically powerful private telcos hits a stalemate, say industry sources.","collect":0,"end_time":0,"defaultTopTitle":"channelnewsasia.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU1261432733.SGD":"Fidelity World A-ACC-SGD","BK4585":"ETF&股票定投概念","BK4588":"碎股","SWN":"美国西南能源","BK4213":"石油与天然气的勘探与生产","DNB":"邓白氏","BK4123":"调查和咨询服务","BK4016":"铁路","CP":"加拿大太平洋铁路"},"translate_title":"马来西亚的投资吸引力面临风险国有运营商和私营电信公司在5G交易中陷入僵局","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CP":1,"DNB":1,"SWN":1},"content_text":"KUALA LUMPUR:  The mess surrounding Malaysia’s ambitious rollout of its superfast fifth-generation cellular network, or 5G, has got messier.\nA complex government-sponsored settlement agreement reached in early December between state-owned 5G operator, Digital Nasional Bhd (DNB), and the country’s five private mobile telecommunications companies has broken down.\nPrime Minister Anwar Ibrahim’s government brought the warring factions together in a compromise that would potentially see the private telcos taking a stake in DNB, or forming a separate joint venture to become Malaysia’s second 5G operator to provide competition in the country’s booming mobile telecommunications sector.\nGovernment officials and industry executives have acknowledged that after more than four months, both sides have yet to agree on so-called condition precedents (CP), legal parlance for events that must take place before a contract can come into effect.  \nThe CPs include the appointment of directors who would represent the private telcos in DNB, and the completion of three confidential audits on the state-owned entity by external experts. \nThe audits would cover its financial standing, due diligence on large contracts the company has signed and a technical evaluation of its 5G systems.\n“The audits are ongoing, but there is no agreement on the composition of the board. Nothing is moving because telcos are starting to have doubts on the path forward,” acknowledged a senior Finance Ministry official, who is monitoring the 5G situation. \nHOLDING PATTERN\nThe protracted impasse between DNB and the country's politically powerful private telcos is presenting the Anwar government with one of its most complex economic policy challenges and could have a huge impact on the country’s investment climate.\nIndustry executives noted that the uncertainty surrounding Malaysia’s 5G rollout is likely to sideline potential investors interested in leveraging on the benefits of a superfast wireless network.\n\n\n\n\nAnalysts also noted that there is lack of visibility in the offtake of 5G and Malaysia’s relatively small market remains a serious issue.\n“The whole situation is fuzzy because there is no clarity on the pricing of the 5G services and also the question of the shareholding at DNB,” said a chief of a bank-owned investment research firm.\nStill, other analysts believe that there could be upside for the economy.\n“Given the delay and uncertainty of network operational readiness, the bright shining opportunity is potentially the explosive growth in the semiconductor industry in  Southeast Asia, where Malaysia is well-placed and positioned,” said Mr Jaafar Ismail of Fergana Advisory in Kuala Lumpur.\nIt was just under a year ago that the government caved in to pressure from the country’s private telco lobby to break DNB’s monopoly in the 5G space as the country’s so-called single wholesale network operator (SWN) and allow competition with a second operator, comprising local mobile network operators (MNOs) and the possibility of China’s Huawei emerging as the new technology partner. \nUnder the multi-tiered compromise settlement signed in December, the country’s five MNOs each paid DNB RM230 million (US$48.15 million), or a total of RM1.15 billion, as a pre-payment for access to the 5G network for a period of up to three years. \nThe second stage of the settlement called for due diligence into the operations of DNB that would allow the MNOs to decide whether to acquire stakes in the state-owned 5G entity or form a joint venture to operate a second network once more than 80 per cent of the current infrastructure is completed in populated areas, up from 73 per cent when the agreement was signed. \nThe due diligence reviews, which were expected to be completed in late January, are still ongoing, according to DNB executives who spoke on condition of anonymity. \nWhat’s more, DNB has already rolled out more than 80 per cent of its network to date and according to Malaysia’s Communications Minister Fahmi Fadzil, almost 10 million people have subscribed to the 5G service at end-January, marking an adoption rate of just under 30 per cent.\nOPTIONS GOING FORWARD\n“The big reason that the 5G situation is in a holding pattern is because there is a quiet rethink whether having a second network is the way forward,” noted a senior board director of state-controlled national telecommunications carrier Telekom Malaysia. Like other government representatives and industry executives, he spoke on condition of anonymity because of strict confidentiality agreements with regard to ongoing negotiations and the independent due diligence into DNB.\nDNB’s rollout, estimated to cost Malaysian taxpayers just over RM16.5 billion (US$3.44 billion), is now stirring debate within the government and private MNOs whether all parties should push ahead with the SWN model that could see the local players acquiring as much as a combined 70-per-cent interest in the state-owned concern, or simply disposing of a large stake in the company to an interested foreign entity.\n\n\n\n\n\n      Almost 10 million people have subscribed to 5G service at end-January, marking an adoption rate of just under 30 per cent, said Communications Minister Fahmi Fadzil.\n    \n\n\n\n\n“The economics at this time don’t stack up and maybe the best option would be to work on a solution using DNB’s infrastructure,” said a senior executive from Maxis, which is the country’s most dominant private mobile telco operator. At one time, it was a major proponent of the creation of a competing network. \nBut finding common ground is not expected to be easy.\nDEEP MISTRUST\nThere is deep mistrust between proponents of DNB and a majority of the country’s MNOs over the cloak of secrecy in the internal operations of the state-owned 5G operator, particularly with regard to the award of the contract to Ericsson to develop the 5G infrastructure – estimated to have cost close to RM5 billion – and other arrangements with third parties over software procurement, said industry executives and government officials. \n“Our issue with DNB has always been about transparency and that remains a hurdle,” noted the chief executive of a financial consulting agency, which has been engaged by one of the local MNOs.\nApart from Maxis, the other MNOs are the recently merged CelcomDigi, U Mobile, which is part owned by Singapore’s Straits Mobile Investment Pte Ltd, YTL Communications and Telekom Malaysia.\nTransparency issues have been central to failure among parties to reach an agreement on the so-called CPs to the settlement agreement signed in December. \nApart from the nomination of MNO representatives to the board, DNB has insisted that only the board’s directors will be allowed access to review the ongoing due diligence into its affairs. The findings are to remain confidential and not be shared with the MNOs.\nThe MNOs are also seeking clarity on other software contracts that DNB had signed, including the controversial deployment of a potentially lucrative cloud services platform that was awarded when DNB was set up in March 2021.\n\n\n\n\n\n      Malaysia's MNOs are Maxis, CelcomDigi, U Mobile, which is part owned by Singapore’s Straits Mobile Investment Pte Ltd, YTL Communications and Telekom Malaysia. (Photo: REUTERS/Lim Huey Teng)\n\n\n\n\n\nIndustry executives noted that advisory firm PricewaterhouseCoopers is handling the financial review of DNB, while KPMG is overseeing the review of large contracts DNB has signed. United Kingdom-based Hardiman Telecommunications, a boutique telco consultancy, has been appointed to review DNB’s technology infrastructure. \nGROWING FINANCIAL CONCERNS\nThere are also deepening financial concerns at DNB.\nDNB has borrowed RM2 billion from the local banking system to fund the rollout of 5G infrastructure, together with other financing arrangements. But the government guarantee for the company expires in December 2024, according DNB officials.\nDNB officials are pressuring the Anwar administration to break out of its policy inertia over the 5G rollout because the company could face a cash crunch in the coming months without a fresh injection of funds from the government.\n“Unless merger with the MNOs is resolved soon, DNB will need an extension on the government guarantee,” noted the Finance Ministry official, who has received feedback from the 5G operator that “bankers are getting nervous”. \nMeanwhile, the MNOs have long griped that apart from being denied the rights to own spectrum under the 5G rollout, they were victimised further by the decision of the former premier Muhyiddin Yassin’s government to appoint three local entities to be preferred partners for global cloud service providers such as Microsoft, Google and Amazon, which are expected to take a lead role in the building and managing of hyper-scale data centres. \nThe appointments of public listed AwanBiru Technology, formerly known as Prestariang, and two other little-known entities, Enfrasys Solutions and Cloud Connect, were done without any open tender and the MNOs are privately demanding that the companies be stripped of their preferred partner status.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2428257755"}