Rozanna Letiff, Liz Lee

KUALA LUMPUR, (Reuters) – None of Malaysia’s top mobile operators have yet agreed to use 5G networks of the government. This is due to pricing and transparency issues. The rollout of the network will take place next month according to industry leaders and state agencies.

However, Digital Nasional Berhad (state-owned network wholesaler) said to Reuters it still hoped that 5G services would be launched in three major urban centers, while talks are ongoing with mobile operators.

This plan was revealed by the Southeast Asian country in February. The shared network is a strategy to accelerate national infrastructure development. Similar state-led initiatives have been attempted in Mexico and elsewhere, but were mostly rejected.

The Malaysian government’s lack of support underscores the concerns that corporates have about state interference and transparency in Malaysia. This is a country still recovering from multibillion-dollar corruption scandal at 1Malaysia Development Berhad (1MDB).

Malaysia is experiencing a decline in foreign investor confidence due to political instability. The third government in three years came into office in August. A former prime minister was implicated in the 1MDB scandal.

DNB acknowledged that there has not been an agreement reached with carriers and admitted its original timeline of negotiations was “too optimistic”.

The agency plans to seek long-term formal agreements in the early part of next year. They also continue talks for 5G deployments in three major areas next month, which includes Kuala Lumpur.

Ken Tan, Chief Technology Officer, stated that the goal is now to establish a network covering 500 locations by December 31, with operators available to offer a 5G network for end-users. DNB didn’t say exactly what would happen to operators who refuse to join the deployment.

Six industry experts and seven former sources claim that the plan to nationalize 5G networks would harm carriers who have already made investments in infrastructure to support them.

Due to the sensitive nature of the subject, they declined to identify themselves.

According to three sources, the government plan would result in a loss of market value for all mobile operators (Axiata Group and DiGi.com), totaling 45 billion Ringgit ($10.8 Billion).

It was not stated by the sources how long these losses could be sustained.

One source said that “by 2030 the majority of network traffic will use 5G. Then there are restrictions on existing assets (non-5G)”.

The “Valuations” (of our businesses) will decline over time. This will impact our shareholders.

DNB would own all 5G spectrum rights, as well as the building and maintenance of the entire network. Mobile service providers will use the infrastructure as part of the DNB plan.

Axiata, DiGi and others declined to comment.

Maxis claimed in a statement it was ready for 5G rollout in the country.

It stated that it will remain focused on its purpose of serving the Malaysian people and businesses and play a crucial role in supporting the country’s digital ambitions.

STABLE SHARE PRICES

According to company sources, the pricing proposal could result in telcos paying higher prices than if 5G was rolled out by them on their own. They claimed that the plan didn’t take into consideration additional traffic volume and contingency cost requirements, as well as other concerns.

According to internal documents examined by Reuters the carriers requested “extensive modifications” to DNB’s pricing proposal. They claimed that it didn’t demonstrate cost efficiencies as promised.

Sources said that the price of a network depends on how certain they can be about its quality.

Sources said that the firms had sought assurances DNB would be solely a wholesale provider, not have 5G capacity reserved for them or pursue any retail goals.

Investor concerns about Malaysian influence on corporate affairs are highlighted by these worries. Most large-cap public companies of Malaysia have state-linked investments firms at the top.

DNB claimed that the share prices of top telcos remain stable eight months after announcement.

According to the report, a quick rollout will result in increased data traffic which will boost operator revenue. The wholesale plan on the other hand will save carriers billions of dollars.

Dushyan Vaithiyanathan, chief operating officer of DNB, stated that the plan will likely be around 16.5 billion Ringgit. This is approximately half the amount that carriers would need to invest to create the 5G network.

Dushyan stated that “the government isn’t trying to take away (telcos’) rice bowl…We want the best quality service at the most affordable price, so that we have more certainty regarding recovery costs when we kickstart 5G rollout.”

DNB acknowledged that its transparency was questioned and said the country’s communication regulator would set out strict guidelines for public access to make sure fair pricing is achieved.

We are working with the regulators. Dushyan explained that they want to see the details so that no one can change the fundamentals of 5G.

($1 = 4.1580 ringgit)