Opinion: Is the government making a mistake over the second 5G network?

By P Gunasegaram

The extra capital costs of RM15-20 bil could drive 5G fees higher

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 the 5G network coverage reached 80.2% on Dec 31, exceeding the 80% 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 DNB now comes under him. Fahmi had in May 2023 announced that the government will allow the setting up of a second 5G network once DNB’s coverage hits 80%.

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

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

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

The government retained the other 30% 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 will be the only 5G operator in Malaysia, then its entire capital expenditure, budgets, capacity planning and execution will 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% 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 round.

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.

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, and achieving 80% 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 media statement in Dec 2022: “... 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 15th 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.”

It's been speculated that there are other tie-ups and arrangements which 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% stake and a golden share, it makes eminent good sense to stay with this and draw upon the entire industry and the government for impartial expertise into 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.

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 to 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 which can be listed on the stock market. The government can sell its 30% stake, hopefully for a good profit and retain its golden share.

The telcos can sell down their stakes to 10% each - they will own 50% collectively while the public will hold 50%. We will have a strong, viable utility which 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.

(P Gunasegaram says it's time the government stopped shooting down their own investments and companies in favour of selected private parties - remember Tenaga Nasional?)

P Gunasegaram is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!

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