Thursday 20 Jun 2024
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Response to media statement of YB Dr Ong Kian Ming on 7 February 2022

Dear Sir,

The implementation of the MyDIGITAL blueprint is critical for Malaysia to achieve its 4th Industrial Revolution goals and the targets set in the 12th Malaysia Plan to spur economic growth. The rollout of the 5G infrastructure is a key pillar towards this objective and 5G is no longer just about telecommunications and mobile network operators (MNOs) like 2G, 3G and 4G but a basic utility like electricity and water that is essential for quality of life and livelihood.

The primary motivation for the Government in opting for a 5G single wholesale network (SWN) approach to implement 5G nationwide is as follows:

  • To address the poor internet connectivity available in Malaysia, particularly in the suburban and rural areas where even 4G coverage and quality is marginal at best.
  • To remove the need for MNOs to invest heavily in 5G networks and to permit them to focus on the improvement required of their existing 4G and fibre networks under the JENDELA plan.
  • To ensure that all players — existing and new ones — have fair and equal access to the 5G network and its capacity.
  • To position communications as a utility and pass on cost savings to end users, while making it easier for them to take up 5G services. Existing telco operators have shown that it is not in their DNA to embrace a cost recovery model to roll out 5G infrastructure and pass on savings to end users.
  • To accelerate Malaysia’s launch of 5G and to catch up quickly with its near neighbours who are presently ahead in 5G roll out. This is not about ranking among our neighbours but about having better infrastructure and being competitively placed to attract foreign direct investment (FDI).

If it is accepted that these are important policy objectives, then it cannot be left to the private sector to implement at its pace, driven by profit motivations.

It must not be forgotten that the Pakatan Harapan proposal which was in substance reiterated in the National 5G Task Force Report and the Malaysian Communications and Multimedia Commission’s (MCMC) “Final Report on Allocation of Spectrum Bands for Mobile Broadband Service in Malaysia” published at end-2019 was inordinately delayed in its implementation as a result of posturing by the proposed consortium members. There was no urgency in the MNOs to implement 5G as they were content to further sweat the 4G network that they owned and were making substantial returns from. Malaysia continued to slip behind its ASEAN neighbours in 5G rollout with its attendant adverse consequences to FDI that relies on telecommunication infrastructure and gross domestic product (GDP) growth in Malaysia.

In much the same way that Malaysia’s petroleum and gas reserves (a limited and national resource) were not sold off to the highest bidder but vested in Petronas to exploit for the benefit of the nation and the Rakyat, 5G spectrum is a limited national resource that must be utilised in the most efficient manner for the benefit of the nation and the Rakyat.

The 5G network requires more spectrum and in broader bands than 4G, and that is only going to increase over time. It is undisputed that the Multi Operator Core Network (MOCN) model adopted by Digital Nasional Berhad (DNB) is the most efficient way to use the spectrum allocated for the 5G network. It is important to also note that the Government did not ever auction spectrum for use by MNOs for 2G, 3G and 4G, and many of the MNOs were given spectrum assignments for nominal payments which benefit was not passed through to the consumers, as is apparent by the charges for these services when compared with charges by operators in countries where spectrum was bought by operators in government auctions.

Much has been said about the SWN being a monopoly and not conducive for competition. This comes from a misunderstanding of how the SWN works. The radio access network (RAN) which comprises the radio equipment for the 5G network is used by DNB to deliver wholesale capacity and coverage to all MNOs, MVNOs and other wholesale operators. These parties can then package the 5G services in any way they choose and there can therefore be intense competition in the provision of 5G services to end users. The ability to have network slicing in the 5G network further enhances the ability of MNOs and MVNOs to provide bespoke solutions to enterprises, again enhancing competition. For example, in the UK, the best innovations in 5G have consistently come from new players and not the incumbent telco operators.

DNB is also said to have the risk of single point of failure as an SWN. In this regard, DNB has adopted a “no single point of failure design” where there are redundancies built in, in accordance with global standards. DNB has designed and is implementing a fit-for-purpose 5G network with a modular and flexible architecture, end-to-end security and resilience, and the network is monitored round the clock. In addition, as DNB’s 5G network is integrated to existing MNO’s 4G networks, where customers would immediately and automatically fall back to the existing 4G network, as they do when they are not in the 5G coverage area. As such, there would be no loss of connectivity.

Lastly, DNB is totally transparent in its pricing for the provision of 5G capacity and coverage. The detailed business plan for DNB utilising a cost recovery model is scrutinised by MCMC and the pricing must be approved by MCMC. DNB must publish its standard pricing and non-price terms for the provision of 5G services to any access seeker. It is absolutely incorrect to allege that DNB has the opportunity to make monopolistic profits.

The case for an SWN is very strong. Whether it should be owned by the Government or a consortium of MNOs is secondary. The Government’s preference was for a neutral party to implement the SWN so that there will be no conflict of interest that will affect the timing and extent of the rollout of the 5G network as the consortium members also own the retail network.

Certain quarters have suggested that the Government should consider a second wholesale infrastructure provider, which consists of MNOs. DNB would like to emphasise that there will be enormous implications should the Government decide on having a dual wholesale network (DWN). It is highly unlikely that DNB in its current form will survive should there be another wholesale network provider. With the failure of DNB, the second wholesale provider will then eventually become a private SWN monopoly. There are also financial, legal and reputational implications for the country and the Government should DNB be discontinued. Firstly, the Government will be subjected to pay substantial amounts of claims and compensation, including early termination penalties of various types of contracts, for the entire operations of DNB. Furthermore, the reversal of the SWN decision will have a serious impact on the credibility of the Government and the inflow of FDI, especially investments in the high-impact technology sector.

We also acknowledge that a 100% Government-owned entity may be less efficient in the long term. As such, DNB has always proposed, which is known to senior officials and management of MNOs, that the Government is open to reducing its stake in 3 years, after 5G is rolled out, so that MNOs can become shareholders of DNB. It is not practical to open the ownership now as DNB has adopted a cost recovery and supply-led approach to accelerate the implementation of 5G network at lower cost, with specific focus on narrowing the urban-rural digital divide as intended by the Government.

We have dealt with the main issues as we perceive it above but enclose herein a detailed response to all the questions raised by YB Dr Ong Kian Ming:

1) The initial proposal when Pakatan Harapan (PH) was in government was a consortium-led model where telco companies would own the majority stake in a single entity responsible for the 5G rollout with the government holding only a minority stake in this entity. Why did the Perikatan Nasional (PN) and now Keluarga Malaysia (KM) government change this model to one where the government owns 100% of the entity responsible for the 5G rollout? Wouldn’t the existing telco players in Malaysia, with their many years of managing capital expenditure for the rollout of telco infrastructure and services, including the rollout of 4G, be in a better position to be responsible for the 5G rollout compared to DNB?

1. The rationale for adopting an SWN for 5G rollout

  • Discussions around Malaysia’s 5G infrastructure first began as far back as 2018 with the establishment of the National 5G Task Force. A year later in December 2019, its “National 5G Task Force Report” was published. This was followed up by the Malaysian Communications and Multimedia Commission’s (MCMC) December 2019 “Final Report on Allocation of Spectrum Bands for Mobile Broadband Service in Malaysia”, where the idea of a “single entity for 5G network” was first mooted.
  • The MCMC Report clearly pointed to the need to prepare for 5G deployment, to ensure the right foundation for 5G is set as early as possible. The MCMC proposed for the 5G spectrum bands to be allocated to a single entity consortium, formed by multiple telecommunications operators, rather than allocating these bands to individual licensees.
  • Additionally, spectrum is a scarce and valuable national resource. Due to scarcity of spectrum, and the fact that a 5G network typically requires at least 100MHz of spectrum per operator, it would have been very challenging to carve out sufficient spectrum to develop individual 5G networks in Malaysia.
  • However, given the conflicting interests of the telcos, attempts to share the network, save costs, and launch 5G did not come about.
  • As for existing telco operators rolling out the network, if the country had waited for the telcos, the 5G network would likely have been delayed to 2023 or 2024. And certainly not as early as 15 December 2021, which saw 5G being made available for the first time in Malaysia (in Kuala Lumpur, Putrajaya and Cyberjaya to begin with) just nine months after the establishment of DNB in March 2021.
  • Telcos would prefer to extract maximum benefit from (or “sweat”) their 4G assets for as long as possible before making the transition to 5G. This would have delayed the country’s rollout, putting Malaysia even further behind regional neighbours like Singapore, Vietnam, the Philippines, Thailand and Indonesia — all of which introduced 5G as early as 2019.
  • DNB was established from its first day to be staffed and managed by industry veterans with representation at board and senior management level with proven track records.


2) Some have argued that the government of Malaysia can potentially raise billions of ringgit if it were to auction off the 5G spectrum to the highest bidders among the telco industry and interested new players. Why was the public auction model not explored by the government? What are some of the financial implications to the government, to the telco players as well as to the consumer if the 5G spectrum was allocated via public auction?

2. The relevance of spectrum auctions in Malaysia

  • Spectrum auction may provide higher temporary value to the Government, but high spectrum cost will make the 5G rollout slower, more expensive and 5G less affordable. It is also important to point out that spectrum auction is a one time event, vs overall growth to the economy. We would refer to the German government’s decision to allocate 5G spectrum for private enterprise based on administrative costs rather than auctions. Germany elected not to auction the spectrum but rather focused on the overall benefits to the general German economy.
  • MCMC has never employed an auction approach to spectrum allocation. A bidding war would result in increased spectrum prices, which telcos would then have to recoup in the form of high charges to end users.
  • Research has also shown that high spectrum costs, besides resulting in higher charges for customers, delays capital investment for the rollout of telecommunications services as well as gives rise to lower investments in network quality, resulting in poor wireless services for customers.
  • Instead, Malaysia has adopted a tender approach (i.e. “beauty contest”) when allocating spectrum. This was the case for the 2100MHz frequency for 3G (which has now been shut off). This was also the case for 2300MHz frequency, which at the time was used for WiMAX services. For 3G, the rate for spectrum charges was set at just RM50 million per spectrum assignee.


3) The only other country in the world that is using the SWN model for 5G rollout is Mexico, through a 100%-owned government entity called Altan Redes, which was given the responsibility of deploying a 4.5G network infrastructure as a path towards full 5G rollout. In July 2021, this company filed for bankruptcy because it was not able to meet its rollout targets and secure enough customers. Why is the government confident that DNB will not suffer the same fate as Mexico’s 100% government-owned SWN entity?

3. Altan is not an SWN, nor government-owned

  • Altan Redes is a private company, not at all owned by the Mexican government. This is an important issue as the initial question makes a critical mistake in that Altan Redes has never been a government entity. The question in itself reveals a significant misunderstanding of facts.
  • Moreover, Red Compartida in Mexico is not an SWN model. EY, which researched the Mexico experience to ensure that we avoid their mistakes, learned the following:
    • Altan is owned by a consortium with a complex structure consisting of network operators, retirement funds and investment financial institutions. Therefore, Altan is driven by the objective to achieve maximum profits and returns, hence its business model is also demand-led;
    • Altan competes in offering 4G network services with existing telcos that have been operating in the market for some time. Among the new markets that Altan is encouraged to enter includes the mobile virtual network operator (MVNO) market;
    • Altan developed new infrastructure instead of using existing infrastructure, which resulted in uneconomical costs offered compared to existing telecommunications companies; and
    • Existing telcos have the option to deploy their respective networks or the Altan network.
  • In a nutshell, Altan’s telco model is different from the Malaysian SWN model, which is a single wholesale network that supplies 5G capacity and does not compete with other telcos. Thus, the failure of Altan telecommunications company cannot be used to measure the feasibility of SWN.
  • On the other hand, Brunei has established a Single Wholesale Network, consolidating all existing telecommunications network assets in a single network company called Unified National Networks (UNN).
  • UNN has been established to take ownership and operate the entire national network, which includes all mobile technologies, the fixed broadband network, the national transport network and all submarine cable assets of the country at the end of August 2019. UNN is subject to strict regulatory oversight by the Authority for Info-communications Technology Industry of Brunei Darussalam (AITI) and is wholly owned by Darussalam Assets under the Minister for Finance Corporation (MOFC).
  • UNN as the SWN provider, provides wholesale network access to the retail telco operators on cost-oriented, transparent and non-discriminatory terms. This promotes more intense competition in the retail segment for more innovative and faster services to customers. UNN has increased the coverage, the penetration rate and affordability of the broadband services. With the introduction of UNN, the telcos have reduced their tariffs and are providing higher speed and data plans. UNN also targets to roll out 5G by mid-2022.


4) What is the basis of the government’s strong confidence that the SWN model can deliver lowest 5G rollout and operational costs compared to a model with multiple telco players owning the 5G spectrum with the responsibility of deploying their own 5G infrastructure? If the government wants the existing telco players to share the costs of 5G infrastructure, why is it not willing to sit down to negotiate with the telco players to come up with a cost-sharing model among the existing telco players in the country?

4. The rationale for SWN rollout by a neutral party

  • SWN is the only model mooted (and since executed upon) based on the MCMC’s December 2019 “Final Report on Allocation of Spectrum Bands for Mobile Broadband Service in Malaysia”. It has long been identified as Malaysia’s preferred model of 5G network ownership.
  • The issue raised here is with the ownership of the said SWN; as a general rule, neither DNB nor the government is opposed to the private sector taking a more active role in DNB. However, in the early years of the 5G rollout, it would not be advisable for the private sector to do so given their conflicting interest as to the rollout of 5G.
  • Given the heavy investments made by the telco industry into the existing 4G network in recent years, there is a reasonable expectation of their wanting to maximise use of 4G network — to “sweat” their assets.
  • Having said that, DNB will always be guided by decisions made by the Government of Malaysia.
  • As to the question on being able “to deliver the lowest 5G rollout and operational costs compared to a model with multiple telco players owning the 5G spectrum with the responsibility of deploying their own 5G infrastructure”:
  • As a general point, the December 2019 National 5G Task Force Report had already analysed the cost of telcos deploying their own 5G infrastructure i.e. RM7.5 billion estimated cost to upgrade “a single large, mature 4G network in Malaysia to achieve 90% population coverage...” This estimate only accounts for a coverage network, and does not consider ongoing investments in capacity. It could have cost over ~RM30 billion if telcos developed their own 5G infrastructure.
  • By contrast, DNB is committed to rolling out the 5G network and infrastructure at a cost of RM16.5 billion over 10 years, with no government funding or guarantees. The Government will only inject up to RM500 million as equity to capitalise DNB.
  • In the case of DNB, we have delivered cheaper and quicker 5G than if the rollout had been undertaken by the telcos. This has to do with the underlying network architecture of Malaysia’s 5G network i.e. the Multi Operator Core Network (MOCN).
  • The MOCN model is a global telecommunications standard defined by the 3GPP, that allows a single network infrastructure or “Radio Access Network” (RAN) (which is the case with DNB) to be shared and connected to multiple MNO Core Networks. In the past, each MNO would deploy its own individual infrastructure based on a certain allocation of available spectrum by the MCMC.  To use an analogy, the government in the past had allocated individual lanes (spectrum) to each MNO. Based on the lanes provisioned by the government, the MNOs would then build their own separate highways (network and infrastructure) for their users.
  • However, with vastly increased data demands within the country in recent years, these individual highways can be prone to congestion. Meanwhile, users on one highway are unable to get onto another, less congested highway.
  • In the case of 5G, the MCMC has provided all the available lanes (5G spectrum) to DNB allowing DNB to build a single, seamless “superhighway” that is both secured and adaptable as the peak can be managed across all of DNB’s customers.
  • This 5G superhighway entails the rollout of a single seamless infrastructure — comprising the radio unit, power, and fibre connectivity — which will serve all MNOs equally, on a wholesale basis. Thanks to this pooling of 5G spectrum with DNB, as well as the much-reduced need for duplicate sites and infrastructure, DNB successfully deployed the 5G network on 15 December 2021, just five months after the appointment of Ericsson on 1 July 2021.


5) There have been accusations that the eventual winner of the 5G contract awarded by DNB was not the “best” bid among the list of bidders. Is DNB willing and able to release the full details of all the bids which it received and explain the cost and technology advantages of choosing the eventual winner?

5. Adoption of best-in-class procurement process

  • The assumption that the eventual winner (Ericsson) was “not the best bid” is plainly wrong.
  • Ericsson is a longstanding global leader in the radio access network (RAN) space and recently became the leading global RAN provider by market share.
  • Malaysia chose the best possible RAN vendor and eventually negotiated for a highly competitive price. Ericsson’s RM4 billion network equipment cost was the lowest among all the companies that submitted bids.
  • DNB instituted a rigorous 4-stage evaluation process, with Ericsson scoring the highest across all prerequisites.
  • DNB has taken steps to implement best procurement governance practices and ensure transparency in the evaluation, proposal and the overall tender process.
  • The tender process was structured by an independent professional services firm, Ernst & Young Consulting Sdn Bhd (EY Consulting), according to global standards and involved four (4) panels, comprising some 50 local and international experts from across 10 countries with current 5G network rollout experience.
  • The process began with the initial evaluation of fourteen (14) Network Equipment Providers (NEPs), after which eight (8) were shortlisted and invited to bid for the tender. The criteria evaluated when shortlisting the NEPs were:
    • Proven credentials in successful 5G deployment and execution of end-to-end technology solutions;
    • Availability of enhanced security to safeguard users and platforms;
    • Established Malaysian presence and ecosystem and a sound understanding of the business environment, including existing network of vendors;
    • Locally based resources for immediate deployment; and
    • Effective plan for the transfer of knowledge to be acquired by domestic affiliates.
  • Of the eight (8) invited, only four (4) submitted their bids.
  • The tender evaluation team comprised internal and external independent industry experts and experienced professionals. The tender results were then deliberated extensively by the Board Tender Committee and the Board of DNB. The strictest standards of governance were adopted throughout the tender process as advised and facilitated by EY Consulting.
  • The tender requirements were based on criteria identified and refined through a rigorous process with industry feedback on the requirements of the 5G network and shared with all invited NEPs.
  • Ericsson was ranked top in all three key components of the tender evaluation criteria which were the following:
    • Technical: covering overall 5G technology capabilities, 5G deployment capabilities, integration approach, cyber and network security, and operations and maintenance;
    • Commercial: covering financing proposal and total cost of ownership;
    • Socioeconomic: covering local development and socioeconomic impact.


6) In a zoom briefing with selected MPs conducted by DNB in July 2021, the total costs of the 5G rollout were RM18.9 billion. In a briefing given to all backbenchers in December 2021, the total costs had been reduced to RM16.5 billion but with a different breakdown (RM12.0 billion in infrastructure costs and RM4.5 billion in corporate costs). Can DNB explain the changes in these cost estimations and provide a more detailed breakdown of the estimated infrastructure as well as corporate costs in the interest of transparency?

6. DNB’s rollout costs and engagement of bumiputera and Malaysian firms

  • DNB commenced rollout on a highly accelerated schedule, gained greater visibility on rollout costs over time and saw opportunities for cost optimisation and reduction for DNB’s corporate costs.
  • The initial estimated cost of RM11 billion over the next 10 years as announced on 1 July 2021, envisaged that RM4 billion would go towards the purchase of network equipment. The other RM7 billion was cost for network infrastructure (fibre, site and infracos, power and MCMC Apparatus Assignment Fees).
  • It has since become clear however, that a further RM1.5 billion would be required for additional fibre over the next decade, pushing network infrastructure costs up to RM8.5 billion. This brought the overall cost of the coverage network equipment and infrastructure to RM12.5 billion over the next 10 years. Of this, the vast majority (RM10.7 billion) will be expended into the domestic telco ecosystem, with the primary beneficiaries being telcos, fibre, infrastructure and power providers, including the estimated RM1 billion for each of TNB and MCMC.
  • In addition to the RM12.5 billion investment, the corporate and operating expenditure to run the 5G Network over the 10 years is estimated at RM4 billion, including employee costs of RM2.1 billion for up to 750 staff, of which more than half will be bumiputera employees.


7) One of the issues which DNB highlighted in their presentations to the MPs is the uneven rollout of 4G coverage in the urban areas and also many rural areas. How will the SWN model ensure that there will be proper 5G coverage in the urban areas in the fastest time possible and how will the 5G deployment be rolled out to the rural areas in a manner that significantly improves on the current 4G deployment?

7. DNB’s approach to narrowing the urban-rural digital divide

  • Having followed a “demand-led” rollout of the 4G network, telcos took 8 years to reach the present 94% coverage. Coverage focused on profitable areas first, with outlying and rural areas enjoying service availability much later. This was to the detriment of the Rakyat and enterprises in those areas.
  • DNB was established to deploy the 5G network and infrastructure on an accelerated schedule, with a specific focus on bridging the urban-rural digital divide. DNB will roll out to more than 80% of populated areas by 2024.
  • DNB has functioned as the 5G SWN operator based on a cost recovery and supply-led model. This model is adopted to accelerate the implementation of 5G network at low cost as intended by the Government.
  • With the supply-led rollout of 5G by DNB, telcos will get to introduce 5G services earlier than they would have been able to had they attempted the 5G rollout themselves, and at no increased capital costs. This would bring substantial benefits to the Rakyat, enterprises and the Government.
  • A single wholesale network can be operated viably in rural areas where three or four traditional networks would all lose money, for a simple reason: It costs less to build one network than three or four, but the amount of traffic in rural areas is limited by the population density.


8) Since there will be a concurrent expansion of 4G coverage under the JENDELA programme as well as the 5G rollout under DNB, what are the steps currently being undertaken by the government to ensure seamless coordination between 4G expansion and 5G rollout in both the urban as well as the rural areas?

8. 4G and 5G will complement each other

  • Both 4G and 5G complement each other. 4G will replace 3G, which has been decommissioned.
  • In urban areas with rapid expansion of data consumption by customers (from the current approximately 25GB per customer to 60GB per customer and beyond), the 4G infrastructure will require significant additional capital expenditure to satisfy the anticipated growth in demand for data. 5G can assist and mitigate the effects of such rapid data growth.


9) The existing telco players are concerned that because access to the 5G SWN is solely under the control of DNB that they will be charged “unfairly” for access to this network so that DNB can earn excessive profits, including the use of some of these profits for 5G deployment to less densely populated rural areas. What is DNB’s response to this specific concern expressed by the telcos?

9. DNB’s pricing to MNOs based on cost recovery model approved by MCMC

  • The 5G wholesale price will be set and approved by MCMC after negotiations with DNB and telcos are completed.
  • Our “Reference Access Offer” (RAO) has the pricing, terms and conditions as well as catalogue of services.
  • It is currently with MCMC for approval, while the draft has been shared with telcos.
  • The RAO will be made available to the public once we have the approval. DNB will be very transparent.


10) If the 5G network is controlled and operated by DNB, would this mean that it would be more difficult for telcos to compete based on the speed and quality of data delivery over the 5G spectrum since DNB promises fair and equal access to all telco players?

10. SWN in fact enhances competition for the benefit of end users

  • DNB will work with telcos and infrastructure providers to develop the 5G network and utilise existing infrastructure as far as possible, thereby avoiding duplication and reducing costs.
  • Far from reducing competition in the industry, DNB’s position as the single neutral party for the provision of wholesale 5G services will encourage more service-based competition in the long run.  
  • With DNB responsible for deploying the 5G network (to be financed by the private sector), the industry will in turn be free to invest and compete on the provision of innovative, high-value-added 5G services for the benefit of their end users. This will allow for new revenue streams and opportunities for industry growth.


11) Some have asked for another network infrastructure provider to partner with the current provider to reduce the risk of deployment failure and to increase the speed of 5G expansion. Is this proposal something which DNB and the government of Malaysia is willing to consider?

11. Tweaking the SWN model now will result in another demand-led MNO provider

  • It would not be appropriate for the industry to have another infrastructure provider at this juncture, as the industry has no reason to promote the accelerated 5G rollout.
  • This proposal would also add significant unclarity to the marketplace and in turn create additional unneeded confusion.
  • Doing so would effectively turn the 5G rollout into a demand-led model, resulting in further delays to the rollout and hamper efforts to close the digital divide as only profitable areas will be prioritised for 5G service availability.


12) DNB has set certain 5G rollout targets for itself and the selected network infrastructure provider including for the end of 2021. Will DNB report its 5G rollout progress publicly, on a monthly or quarterly basis like what is doing via its quarterly reports?

12. DNB’s performance and rollout progress constantly monitored by MCMC

  • DNB publishes the progress of the 5G rollout on its website. Users can visit the coverage map, which is updated regularly as and when coverage expands throughout the country.
  • As a company wholly-owned by the Ministry of Finance, DNB reports to the ministry on its operations and financial performance.
  • As it is licensed under the Communications and Multimedia Act 1998, DNB is regulated by MCMC. DNB is providing bi-weekly updates to MCMC.


13) If the Government of Malaysia were to change the current SWN model with 100% government ownership of DNB to another model (whether it is a single consortium model or a model with multiple licence holders rolling out 5G on their own), what will happen to the existing contract signed with the network infrastructure provider already selected? Will this have any impact on foreign investor confidence especially vis-à-vis the sanctity of contracts signed by the Government with the private sector, especially those involving multinational corporations (MNCs)?

13. Abandoning the SWN midstream will be at great cost to the nation

  • The cancellation of the 5G network deployment by DNB through the SWN model will result in significant financial obligations and liabilities on behalf of DNB. Apart from the financial and legal implications and the adverse effect on the country’s reputation, this cancellation will further delay the implementation of 5G nationwide and will affect the Rakyat and private enterprise.
  • In addition, the cancellation will jeopardise the country’s competitiveness status and domestic businesses, as well as impacting the selection of Malaysia as a preferred destination for foreign investment — in areas beyond 5G. In fact, if the implementation of 5G is delayed, we run the risk of failing to achieve the targets set in the 12th Malaysia Plan and the MyDIGITAL blueprint.
  • The following are among the financial, legal and reputational implications for the country and the Government should the implementation of the 5G coverage network by the DNB be revoked:
    • DNB will be subject to pay a substantial amount of claims and compensation, including early termination penalties of various types of contracts (more than 100 contracts are already signed), for the entire operation of DNB. The bulk of the payment will be for the Phase 1 execution contract with Ericsson;
    • Total financing from local banks and Ericsson deferred payments amounting to RM1.2 billion for Phase 1 implementation costs will need to be settled;
    • Loss of employment for 257 DNB employees;
    • Termination costs of lease agreements for the lease of DNB office buildings and network infrastructure (site location, fibre and utilities); and
    • Legal implications due to premature termination of contract (termination penalty), and so on.
  • Overall, the premature termination decision will have a serious impact on the country, could affect the credibility of the Government and the inflow of FDI, especially investments in the high-impact technology sector.
  • Additionally, the introduction of a DWN model, as proposed by the mobile operators, will result in the following:

i) Delay in 5G network rollout

  • Lower traffic (for one of the consortium) resulting in lower revenue, impacting financial sustainability and funding by banks, and risking future national rollout and affecting the rollout in an accelerated and inclusive manner;
  • Spectrum to be reallocated leading to a delay in rollout due to lengthy process of reallocation (tender/‘beauty contest’);
  • Review of the fibre contract will also slow down the national fiberisation agenda;
  • Complexity in consortium set up and decisions for alignment, entailing more time leading to up to 12-18 months to deploy the network, and increases the execution risk.

ii) Widening of the digital urban-rural divide

  • Differences in the provision of services and treatment of consumers in urban and rural areas, further widening the digital divide.

iii) Increase in cost to serve

  • Lower economies of scale, thereby increasing the cost per GB, and resulting in higher costs to the consumers.

iv) Less effective and efficient use of resources

  • Less spectral efficiency with the split of the 5G spectrum to 2 consortiums (as opposed to an SWN).

v) Lower competition

  • The consortium may not have a clear separation between the wholesale and retail operators, which would lead to reduced competition.

vi) Negative impact on national interest and financial benefit for the Government:

  • Review of contracts committed amounting to more than RM6 billion to date, requiring significant time to renegotiate, loss of favourable deal terms with Ericsson and country reputation risk, and potentially less emphasis on the bumiputera agenda.


14) If the SWN model were to be replaced with a model where the telcos will be primarily responsible for the rollout of the 5G infrastructure, how will the ownership of the 5G spectrum be allocated among the telco players?

14. Spectrum allocation to be determined by the Government

  • This will be the Government of Malaysia’s decision, not for DNB to decide.


15) Finally, if the SWN model were to be changed and different/additional infrastructure providers are selected for the 5G rollout, how will existing security concerns on the 5G infrastructure be addressed, especially from a network hacking and slicing perspective for standalone and non-standalone 5G systems?

15. Security and network resilience is embedded in DNB’s design philosophy

  • There needs to be a clearly defined KPI and governance structure in managing and reporting on network security health in a mixed mode environment (NSA and SA) across multiple vendors and providers.
  • This starts with having an information security framework that follows industry standards and cadence in reporting back on its compliance.
  • GSMA and 3GPP have defined the standards for 5G security and compliance to it is a MUST along with compliance with general ISO27001 controls for operational functionality (detection and response).
    • Should 5G be multi-vendor and connected to a multi-vendor 5G core, the security landscape will become complex, and integration will be a key point to contend with. (This was demonstrated when integration was done to successfully encrypt the control plane data from 6 MNOs to our environment as part of launch readiness to protect security on a single wholesale network as part of 3GPP standards.)
    • Reporting and openly sharing information around risks and threats needs to be operationally available for a central technical governance body to impartially recommend on.
  • The industry will have to be guided by multiple risk profiles that impact multiple vendors and providers. This will lead to complexity in detecting, assessing and addressing threats effectively.

To address this, there needs to be a single authority that will impartially look at the threats and the risks plus make decisions on necessary actions immediately with the nation’s requirements as a priority.

  • There must be a common risk register where all parties acknowledge and evolve with over time.
  • Effective security response is needed to be able to thwart potential threats. (5G infrastructure is critical to the nation to operate and maintain the future digital economy). As such, the following steps need to be in place to create a cyber-savvy authority to manage a mixed mode environment.
    • Cybersecurity MUST be mandated as a core delivery component of the overall service and report independently to an executive.
    • MUST adopt key design principles:

a) Secure by design

b) Locally hosted, monitored and actioned on with global support

c) Zero Trust or least privileged access first

d) Make compromise difficult

e) Make disruption difficult

f) Easing compromise detection

g) Cushioning the impact if compromised


Ralph Marshall

Chief Executive Officer

Digital Nasional Berhad

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