With the deadline for telcos to sign 5G wholesale agreements with or acquire stakes in Digital Nasional Bhd (DNB) fast approaching, there is still no certainty that Malaysia’s big four telcos – Celcom, Maxis, Digi and U-Mobile – will do so.
None of the four telcos have been particularly happy about the arrangement of state-owned DNB building a single wholesale network (SWN) for 5G, which they can either buy a stake in or lease capacity from. Telcos have until the end of the month to decide which option to choose, but neither option has much appeal.
Research by RHB Investment Bank shows that telcos are specifically unhappy about the wholesale pricing structure and the 10-year agreement they must sign, their ability to “influence” decision-making, and having to justify an investment in DNB that will be limited to a minority stake.
Meanwhile, the dithering over DNB is impacting Malaysia’s telco sector overall, RHB says.
“The stalemate on the SWN continues to be a key sector overhang, with Malaysian telcos being the worst performers among the Asean-4 telcos YTD,” RHB analysts noted. Specifically, telcos were down 23% YTD, largely because of 5G uncertainty.
For the first quarter of 2022, RHB observed that results were seasonally driven but generally tracked in line. Telcos’ industry revenue growth was underpinned by the economic reopening even as they focused on regaining wallet share amidst inflation.
“We see the continued focus on wallet share by the telcos, on the back of inflationary pressure and consumers tightening their belts. Strong cost discipline should mitigate earnings pressure and the impact from Cukai Makmur. We see fixed line operators sustaining their earnings momentum on structural demand and policy initiatives,” analysts added.
In late May, new mobile network operator Yes announced its full commercial 5G launch, the first and so far only telco in Malaysia to do so using DNB’s wholesale 5G network.
Prior to Yes’ announcement, Malaysia’s big four telcos sent a letter to the country’s finance ministry, seeking a review of the 5G pricing model and network access plan offered by DNB. The telcos were reportedly unhappy with the government’s proposal to offer them minority ownership in DNB, and wanted a majority stake instead.
“The MoF-proposed role as minority shareholders does not appear to make it feasible for any of us to add value as shareholders and is not commensurate to our contribution to the industry, or our duty to our shareholders and customers,” the letter said.