Ahead of the 30th June deadline for telcos to finalise the 5G wholesale access and equity deal with Digital Nasional Berhad (DNB), a report from Singapore’s The Straits Times revealed that a non-binding term sheet had been agreed upon by six telcos. It is also said that the six telcos would sign a shareholders agreement for a stake in DNB early next month.
While the six telcos were not named by the report, it is likely to include the big four telcos – Celcom, Digi, Maxis and U Mobile, along with Telekom Malaysia and YTL Communications.
An anonymous industry source told The Straits Times that they are currently doing their due diligence which is expected to be completed within a fortnight. The same report also mentions that the agreement will come with a price review that will be overseen by the Malaysian Communications and Multimedia Commission every three years. In addition, the same report also said that the wholesale pricing will be discounted until DNB achieves nationwide coverage of 80% which is targetted for the end of 2024. At the moment, DNB is charging RM30,000 per Gbps per month for 5G access for the first 1,200Gbps in capacity, and a discounted rate of RM22,000 per month for subsequent capacity.
To add pressure on telcos that refuse to sign up with DNB, Communications and Multimedia Minister Tan Sri Annuar Musa said he wants to issue licences to new players if there aren’t enough telcos participating in DNB. Meanwhile, Finance Minister Datuk Seri Tengku Zafrul Aziz told The Straits Times in an interview that the interest of Malaysia and Malaysians should take precedence over the narrow commercial interest of telcos. He believes the Single Wholesale Network (SWN) approach will benefit the telcos in long term as no heavy capital expenditure investments will be required, but instead will be shouldered by DNB.
The big four telcos have been reluctant to sign up with DNB and have raised concerns that the current reference access offer (RAO) will not enable affordable and quality 5G services to the rakyat. Other concerns include transparency, regulatory framework and the total cost to “rent” access from DNB which could potentially cost more than building their own 5G network. According to a CGS-CIMB report, DNB forecasts that Maxis, Celcom and Digi would have to pay DNB between RM7.4 to RM8.4 billion each between 2022 to 2030.
If the DNB’s wholesale pricing is to be reviewed every three years, this would require a revision to its RAO which currently locks the pricing to a service term of 10 years. Alternatively, the MCMC should also revise its Mandatory Standard on Access Pricing (MSAP) to include 5G.
Although The Straits Times report indicates that telcos will enjoy discounted rates for DNB’s wholesale pricing until 80% 5G coverage is achieved, it raises the question if consumers would have to pay more for 5G once there’s extensive nationwide coverage. In most cases, the cost of data should decline gradually over time as data consumption increases on an annual basis. For example, 4G data used to cost about RM30 per GB in 2013 and today, 1GB of 4G data costs RM1 or less.
Following the government’s decision to retain the SWN model for 5G and allowing telcos to take a 70% stake, the big four telcos have said that they are open to the proposal but it has to be done through a Mergers and Acquisition process. The big four recommended to setup up project teams to align on the processes such as due diligence, transaction timelines, and other administrative matters.
Despite earlier reports that TM and YTL Communications have agreed to own an equity stake in DNB, Telekom Malaysia has confirmed to us recently that they are still accessing and working on concluding their negotiations with DNB to meet the deadline. Meanwhile, a YTL Communications representative told us that they are still on track.
At the moment, YTL Communications’ Yes 5G remains the first and only telco to offer commercial 5G services in the country. DNB has extended its free 5G network access to all telcos until 30th June, while Yes 5G announced earlier that it will continue to provide free unlimited 5G data until further notice.
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