Wan Fayhsal claims conflict of interest to allow telcos to build second 5G network

KUALA LUMPUR, June 28 — Opposition MP Wan Ahmad Fayhsal Wan Ahmad Kamal has alleged that the government’s plan to establish a second 5G network is flawed, claiming a conflict of interest among the applicants.

As announced by Communications Minister Fahmi Fadzil recently, Malaysia has started the process of transitioning from a 5G single wholesale network to a Dual Network model, and the Malaysian Communications and Multimedia Commission (MCMC) has been instructed to start the tender process for the second network on July 1, 2024.

According to Wan Fayhsal, the government may be creating a conflict of interest by appointing a telco, currently participating in DNB, to build a competing 5G network. He shared that telcos participating in Digital Nasional Berhad (via share subscription agreement) would have access to inside information of all technical, financial and legal due diligence carried out on DNB. As a result, this gives the telcos an unfair advantage over DNB.

The Machang MP added that with Maxis, CelcomDigi, and U Mobile representatives on DNB’s board of directors, they would have a say in the management of DNB, which they could use to their advantage when building and operating the second 5G network. He also said that given CelcomDigi, Maxis and U Mobile collectively control 90 per cent market share of the mobile telco subscriptions, the successful applicant would be bound to channel their subscribers to the second 5G network, creating a disadvantage to DNB.

He urged the government to rethink the second 5G network process and reminded them of their role in protecting businesses and consumers by regulating fair competition and ensuring price competitiveness. He claimed that the government’s action plan to set up the second 5G network has all the hallmarks of doom and failure.

Full participation was required to transition to Dual 5G Network

Malaysia’s 5G dual network model. — SoyaCincau pic

As announced by Fahmi Fadzil back in May 2023, the Cabinet has decided that Malaysia will transition from a Single Wholesale Network to a Dual Network model to avoid a single point of failure and to establish redundancy for 5G. He added that the move will also dismantle DNB’s monopoly for 5G infrastructure, as it opens up opportunity for other players to rollout 5G using their existing infrastructure.

Besides requiring DNB to achieve 80 per cent 5G population coverage, the transition also requires all telcos to participate in DNB and to optimise their existing infrastructure and resources. At the time, the plan to establish the second 5G network was expected to start as early as January 2024.

When the shift to dual networks takes place, some telcos will remain in DNB (Entity A), while the remaining telcos will move to the second 5G network (Entity B) and divest their equity in DNB.

At the end of last year, CelcomDigi, Maxis, U Mobile, TM and YTL Communications signed a Share Subscription Agreement to collectively acquire a 70 per cent stake in DNB. — SoyaCincau pic

Before 2023 came to a close, 5 telcos namely CelcomDigi, Maxis, U Mobile, TM and YTL Communications have signed a Share Subscription Agreement to collectively acquire a 70 per cent stake in DNB. Each telco will have to inject RM233 million to get a 14 per cent stake each. Meanwhile, the Malaysian government via the Ministry of Finance will continue to retain a 30 per cent stake and a golden share.

This was the second attempt to get telcos to take a stake in DNB, as the previous SSA signed during the previous administration had failed. This was due to the long stop date to fulfil all the conditions precedent under the SSA has lapsed.

Last week, Digital Nasional Berhad announced an important milestone had been reached as all the conditions precedent under the SSAs signed on December 1, 2023. The four telcos – CelcomDigi, Maxis, U Mobile and YTL Communications are expected to complete the equity deal process this month. Meanwhile, TM requires more time to obtain its shareholders’ approval under its governance requirements.

Fahmi assures no-worse-off situation with two 5G networks

Fahmi has assured that DNB will continue to manage and expand its 5G operations while the second 5G network is being developed. He added that all telcos have agreed to a no-worse-off situation for consumers when it comes to quality of service and cost.

At the moment, DNB has a claimed 5G population coverage of 81.5 per cent. However, there are still no details of the network’s plan under the new management structure, and what’s the next milestone for 5G coverage expansion including indoor coverage.

On June 21, Fahmi issued a Ministerial Direction (MD) to instruct MCMC to conduct the tender process of the second carriers of the 700MHz and 3.5GHz frequency bands for the implementation of the 5G Dual Network model. However, the previous MD issued by Saifuddin Abdullah in 2021 to appoint DNB as the sole 5G provider has not yet been revoked.

According to Fahmi, he will issue a new Ministerial Direction to cancel the 2021 MD at a later time once the telco responsible for the second 5G network has been identified. At the moment, there are no clear indications about the government’s plan to divest its remaining 30 per cent stake in DNB and it still retains special rights with its golden share.

The three big telcos – CelcomDigi, Maxis and U Mobile, have publicly announced that they are ready to build the second 5G network. — SoyaCincau