Delays and cost-inefficient roll-out are key risks to MyDIGITAL initiative

SOMETIMES the rhetorics behind what is thought to be a grand initiative is too overwhelming that it clouds the challenges involved in the implementation stage.

For example, the Malaysian Communications and Multimedia Commission (MCMC) hosted an analyst briefing yesterday to provide more clarity on the Government’s MyDIGITAL initiative.

Among others, the MCMC clarified that the special purpose vehicle (SPV) that will roll out the much awaited 5G infrastructure will be 100% government-owned over a 10-year duration.

The projected RM15 bil investment (which covers the purchase of radio equipment and infrastructure leasing) will be front-loaded and funded by the private sector; not by the universal service provision (USP) fund or via new taxes imposed on telcos.

The SPV will lease 5G wholesale capacity (not spectrum) in a transparent, affordable and equal basis to telcos which in turn will offer 5G services to their end-users.

But that can be easier said than done. Two concerns raised by CGS-CIMB Research are (i) difficulties in striking infrastructure leasing agreements with telcos may delay the 5G roll-out, and (ii) the SPV’s cost efficiency.

With regard to the first concern, MCMC is said to have new guidelines which mandate that commercial discussions on network elements under the Access List must be concluded in less than 10 days.

“To ensure timely rollout, MCMC says KPIs (key performance indicators) will be jointly agreed with the SPV and after interaction with service providers,” CGS-CIMB Research analysts Foong Choong Chen and Sherman Lam Hsien Jin pointed out in a telco sector update.

“Penalties will be meted on the SPV if it is unable to meet the KPIs though MCMC did not elaborate on the sort of actions that can be taken to discourage this potential outcome.”

Deliberating on the second concern which is related to the cost of rolling out the 5G network, the research house noted that this partly depends on how much is paid to lease the existing infrastructure and from whom.

“Costly roll-outs may lead to higher wholesale access fees and reduce the cost saving benefits for telcos (which on the other hand, may have to contend with lower retail prices due to lack of network differentiation),” reckoned Foong and Lam.

In totality, the research house maintained a “neutral” rating on the telco sector, believing that the MyDIGITAL initiative will largely have a neutral impact on mobile operators with the exception of Telekom Malaysia Bhd (TM).

“TM (“add” rating; target price: RM7) should stand to benefit from leasing its fibre to the SPV for the 5G roll-out as well as see stronger demand for its data centres as the Government migrates 80% of public data to the hybrid cloud by end-2022,” added CGS-CIMB Research. – Feb 23, 2021

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