THERE is high likelihood that the dual wholesale network (DWN) model will be favoured over the single wholesale network (SWN) championed by state-owned entity Digital Nasional Bhd (DNB) in the deployment of Malaysia’s 5G infrastructure.
In PublicInvest Research’s view, this is necessary to garner support from the incumbents and to avoid further delays to 5G roll-out as the availability of high-speed and reliable internet connection is critical for digital transformation in driving Malaysia’s future economic growth.
“However, given limited avenues to monetise on 5G services in the early years of deployment, we retain our ‘neutral’ rating on the sector,” opined analyst Eltricia Foong in a telco sector update.
“Telekom Malaysia Bhd remains our top pick as we believe it should benefit from the growing demand for fibre leasing and data centre solutions in Malaysia.”
Last month, four MNOs – Celcom Axiata Bhd, DiGi.Com Bhd, Maxis Bhd and U Mobile Sdn Bhd – have recommended that the Government allows a DWN model that comprises DNB and a consortium of MNOs.
To re-cap, the commercial launching of 5G which was scheduled to take place in December 2021 was delayed, primarily because the mobile network operators (MNOs) were unwilling to sign long-term wholesale agreements with DNB over concerns of potential loss of control, spectrum ownership and lower profitability.
Above all else, the MNOs are pushing for a DWN model as it creates a more competitive business model to ensure continuous investment and innovation of products and services.
“Arguably, the MNOs should see an increase in free cash flow under the SWN model in the immediate term as they are not required to spend on 5G-related capex but this benefit may possibly be offset by the potential downside risks in the medium to long-term,” PublicInvest Research pointed out.
“This is due to lack of economies of scope, absence of competition leading to higher wholesale prices, reduced innovation and ability to provide services to cater for end-user needs.”
Based on the Finance Ministry’s (MOF) estimates, Malaysia’s 5G infrastructure and equipment cost would amount to RM12.5 bil if it is done via DNB alone. Including financing, spectrum and other costs, the total deployment cost (over 10-year period) is estimated at RM17 bil.
A DWN model would mean doubling of the country’s 5G deployment costs to RM30-35 bil. Although the DWN model comes with a costlier 5G deployment, a more competitive landscape should lead to lower cost in the long run. – March 15, 2022
