MUCH of the scope and technical details of the MyDIGITAL project remains unknown with the telcos themselves currently none the wiser as to the direction or challenges that lie ahead for the initiative to bear fruit.
As such, it can be expected that the special purpose vehicle (SPV) which is now known as Digital Nasional (DNB) will be holding discussions with the telcos in the coming weeks, according to Maybank IB Research.
“For now, we assume a stand-alone 5G network (instead of non-standalone rides on existing 4G networks) would be built,” opined analyst Tan Chi Wei in a telco sector review.
“Meanwhile, DNB’s source of funds remains unclear with the regulator previously ruling out the use of universal service provision (USP) funds, new taxes, and direct injection from government coffers.”
As such, the likely scenario in Maybank IB Research’s view is a combo of bond-raising and vendor-financing.
“This in turn, would require DNB to be somewhat profit-oriented in line with (its CEO Ralph) Marshall’s expectation of a profit margin,” suggested the research house.
“However, the revenue opportunity from 5G to telcos remains rather subjective for now in our view.”
For this exercise, Maybank IB Research has attempted to quantify the impact of 5G (under this chosen deployment model) to telcos’ opex.
As details are scant for now, the numerical simulation requires a number of wide-ranging assumptions.
“We begin by deriving DNB’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) over the 10-year tenure at various project internal rate of return (IRR) assumptions using the (i) stated RM15 bil investment cost; (ii) guided capex-opex split; and (iii) guided capex profile as starting points,” suggested the research house.
It then derive DNB’s revenue under a range of EBITDA margin assumptions. For example, Maybank IB Research assumed an upward trending revenue profile since 5G adoption will likely take time.
“As an example, assuming a 5% project IRR (since DNB expects to make a return), we estimate DNB would require revenue of RM1.4 bil-RM2.7 bil in 2025, and RM2.1 bil-RM3.9 bil in 2030,” projected the research house.
To re-cap, the Government had announced that the 100% government-owned SPV would be given the necessary spectrum (700MHz, 3500MHz and 28GHz) to own, implement and manage the sole nationwide 5G infrastructure for 10 years.
A sum of RM15 bil would be invested over 10 years with telcos being allowed to access the network through regulated wholesale arrangements. – March 23, 2021
