This article first appeared in The Edge Malaysia Weekly on December 30, 2024 - January 12, 2025

FROM the public’s standpoint, the need to make sure no taxpayer money is lost is the most important point to keep in mind following Putrajaya’s decision to transition to the hands-off dual 5G network situation, which largely preserves the status quo for telecoms operators, versus an all-powerful position for the government that comes with the heavy responsibility of maintaining the country’s non-profit-driven 5G single wholesale network (SWN) under Digital Nasional Bhd (DNB).

Digital Minister Gobind Singh Deo provided some assurance that there is awareness on this in Putrajaya by saying the second 5G network will receive its final go-ahead when the government gets back the RM950 million initial funding and releases itself of guarantees on loans to kick-start DNB.

Just to be clear, the question of some RM16 billion in taxpayers’ money being lost under the SWN structure does not arise, given that the seed funding would have been fully covered back from wholesale payments from telecoms operators that would have no choice but to lease 5G capacity from the government-controlled “monopoly” SWN network under DNB.

Anyone who understands the SWN structure, and how a government-controlled non-profit-driven “monopoly” works, would have no doubt on this and only insist on proper checks and balances. Gobind recently told parliament that a due diligence on DNB, which also involved the Malaysian Anti-Corruption Commission (MACC), found processes to be in order.

Given that U Mobile Sdn Bhd had been named on Nov 1 as the player leading the second 5G network, it is now more important to discuss what needs to be done to best serve the public and ensure proper execution than dwell on what could have been under an SWN structure.

Apart from making sure the government does not lose any taxpayer money in awarding a second 5G network, policymakers and regulators need to ensure that the quality of 5G services is not compromised in the transition to two 5G networks. This involves the manner and timing at which DNB needs to surrender half of its 5G spectrum allocation to the new second 5G network. Imagine the user experience havoc if there is a sudden insistence to close half the number of highway lanes when traffic flow is constantly growing.

Spectrum falls under the purview of the Malaysian Communications and Multimedia Commission (MCMC), which announced the selection of U Mobile, and reports to the Minister of Communications Fahmi Fadzil. When asked about the selection of U Mobile, Fahmi told reporters that the MCMC had made the award independently after a tender process and that he accepted the decision.

Gobind was only given oversight of DNB following a cabinet reshuffle in December 2023, without powers over the MCMC.

Questions publicly raised by former deputy minister for international trade and industry and Bangi member of parliament, Ong Kian Ming, seeking clarity on the scoring method in the selection of U Mobile also included whether MCMC would confirm if copies of the tender document and specifications required were given to the Digital Ministry as well as the Ministry of Finance, under which DNB is incorporated. Noting that DNB had hired an independent consultancy — Ernst & Young — to evaluate the 5G tender by DNB that Ericsson AG won, Ong had also asked the MCMC to disclose processes put in place to ensure that the award of the network provision contract for the second network will be done transparently.

A week after announcing the winner for the second 5G network, MCMC had only said U Mobile was chosen based on various factors, including the business and technical proposals submitted.

Without providing specific statistical comparison with larger rivals CelcomDigi Bhd (KL:CDB) and Maxis Bhd (KL:MAXIS) or details on how rigorous its selection process was, the MCMC also noted U Mobile’s history of customer satisfaction and complaint rates plus past performance in executing infrastructure projects, including those under Jendela Phase 1 and the Universal Service Provision (USP) fund, as well as 4G upgrading projects.

All that is perhaps also moot at this point, if commensurate penalties will be imposed in the event of any non-compliance.

When announcing that U Mobile is allowed to collaborate with other ecosystem partners, subject to its approval, the MCMC has said it will “continuously assess these collaborations to ensure that the benefits can be enjoyed by all Malaysians”. The MCMC has also said the establishment of a second 5G network “encourages competition and strengthens the industry’s resilience, allowing Malaysians to enjoy high-speed connectivity at affordable prices” and that it would “continue to monitor the quality of standards among all service providers to ensure a strong and reliable telecommunications landscape for the country’s future”.

At press time, it is still not known if the MCMC was aware that Singapore’s sovereign wealth fund Temasek Holdings Pte Ltd-backed Singapore Technologies Telemedia Pte Ltd (STT) had “a majority stake” in U Mobile due to “certain financial instruments” prior to its recent agreement to dispose of everything above a 20% stake to a 70:30 entity controlled by Berjaya Group founder Tan Sri Vincent Tan Chee Yioun and Johor princess Tunku Tun Aminah Sultan Ibrahim, the only daughter of Malaysia’s King, who public records show has a 22.3% stake in U Mobile.

The MCMC had yet to reply to questions from The Edge seeking clarity on whether the award of the second 5G spectrum block is conditional upon STT paring down its stake in U Mobile to 20%. Apart from providing clarity, it is important that any loopholes on Malaysia’s 49% foreign shareholding cap in telecommunications entities are properly addressed.

For industry observers, the biggest disappointment in 2024 on the 5G front is the fact that there remain many unanswered questions and moving parts despite the naming of a winner for the second 5G network — some 18 months after Putrajaya’s decision to abandon the SWN structure and transition to a dual 5G network model in May 2023.

Moving into 2025, regulators will need to work closely with mobile network operators (MNOs) to ensure the government gets its money back and that there is a level playing field between the two 5G spectrum holders — one that has invested in building up a network covering 82% of the population and will be losing half its spectrum with the new 5G spectrum block holder allowed to take on partners to build the second 5G network.

How much money is needed from the respective MNOs to achieve this balance will be of close interest to analysts and investors watching the Malaysian telecommunications sector. Whether the MCMC’s selection of U Mobile results in another telecoms merger or large initial public offering would also be of interest going into 2025. 

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