Asia Analytica: Malaysians’ 5G cost could be half of current 4G prices under DNB’s single shared infrastructure

KUALA LUMPUR, Dec 11 — A single wholesale network (SWN) for 5G in Malaysia will allow consumers to pay RM1 per gigabyte of data versus the RM2 they were paying for 4G bandwidth, research and institutional services Asia Analytica has said.

In a cover story published by The Edge Weekly, the research outfit noted that it is generally accepted that Malaysians wanted faster connectivity, wider coverage, and lower prices as quickly as possible.

This desire applied as much to rural areas as it did in urban centres, said the firm when noting that those outside towns and cities were “so often left behind because rural areas are not profitable for telcos”.

“The loudest objections came, unsurprisingly, from the major telcos — where the loss of prospective 5G spectrum ownership is perhaps seen as a threat to their existing business models and future profitability.

“Quite frankly, the telcos have not done a very good job with the current 4G network. 

“This fact is quite well documented from the many quality-of-service surveys undertaken by multiple, independent sources,” they wrote.

Under the SWN approach, the government-owned Digital Nasional Bhd (DNB) will deploy Malaysia’s 5G network with equal access to mobile network operators (MNOs).

“We estimate the selling price per GB can be reduced by as much as 50 per cent for Malaysian consumers. 

“We have zero doubt that prices will fall — unless the telcos decide to keep all the cost savings for themselves, which we do not think will be the case, especially given that an SWN will result in greater competition among telcos,” they further said. 

They further noted that Malaysia has always had three to four main MNOs in the past, running parallel to each other but competition however has not led to lower costs or better quality of services for Malaysian consumers.

Citing data provided by the Malaysian Communications and Multimedia Commission, they said the agency received 433 per cent more complaints on cellular services in 2020 as compared with the previous year of which about 90 per cent involved network quality.

As for the objections raised by various quarters including MNOs such as poorer service quality and higher 5G service prices for end-users in the absence of competition, Asia Analytica contended that DNB has addressed these all publicly and with full transparency.

“DNB is led by a management team that has extensive experience within the industry and, indeed, many were hired from the local and global telco companies. 

“Why would we presume that they would fail to deliver? In addition, DNB will only be operating the wholesale network. The consumer-facing service providers will still be Maxis, Digi.com, Celcom, U Mobile, Telekom, Yes and others. 

“In other words, they said, the present circumstances were neither a completely new setup nor creating a monopoly. 

“A SWN is about sharing of the wholesale network, to avoid duplication of costs and maximise efficiency,” they added.

Explaining further, they said the MOCN (multi-operator core network) sharing technology used by an SWN is a well-proven technology, used in dozens of other countries for both 4G and 5G networks. 

Most importantly, this sharing proposition will lead to lower prices for Malaysians, the research outfit contended.

Using mathematics to prove their claim of cheaper mobile data packages, Asia Analytica said since DNB will sell 5G capacity to the telcos at a wholesale price of around 15 sen per GB, this will offset existing network and related expenses of about RM1 per GB for MNOs. 

“Let us assume all the other expenses remain unchanged, including a profit of 45 sen per GB for the telcos. Adding up all of the costs plus telco profits, the end-selling price to consumers will be little more than RM1 per GB, or some 50 per cent cheaper.

“Consumers should expect 50 per cent cheaper mobile data packages, for 5G that is 100 times the speed of 4G,” they said.

Malaysia will see 5G go live in Putrajaya, Cyberjaya and parts of Kuala Lumpur on December 15, the first step towards having 40 per cent 5G coverage by end-2022, 73 per cent by end-2023 and above 86 per cent by end-2024.

So far, only Telekom Malaysia has confirmed that it will be taking advantage of DNB’s offer to conduct 5G trials.

Intended 5G rollout can be achieve without hurting existing MNOs profit

As a matter of fact, Asia Analytica said the targeted 5G rollout can be achieved without even hurting existing telco profits. 

“In fact, the lower wholesale costs gained from sharing an SWN would lead to lower prices for Malaysians. And lower prices will lead to higher volume demand. This is economics. Higher demand, in turn, will result in higher profits for the existing telcos.

“As far as market valuations for telcos go, the collective wisdom of the market has spoken. 

“The market does not expect telco valuations to be hurt by an SWN. The share prices of Maxis Bhd, Digi.com Bhd and Axiata Group Bhd (parent company of Celcom) have outperformed the FBM KLCI since February 19, 2021, when the 5G SWN structure was announced,” they said.

Asia Analytica said Malaysia cannot afford to wait for sufficient demand before building up the infrastructure as MNOs did for their 4G rollout, which they claimed took eight years to achieve 92 per cent population coverage.

“Even after eight long years to reach 92 per cent total population coverage, 4G availability was extremely lop-sided, heavily favouring major urban cities at the expense of more rural areas.

“Profit-driven telcos will not spend in less densely populated areas because they are not financially feasible,” they said.

They further Insisted that the country must roll out the infrastructure in anticipation of demand for the purpose of attracting new investments and incentivising local companies, including small and medium enterprises, to digitalise quickly.

“The rapid rollout promised by DNB — the timetable that telecommunications vendor Ericsson has committed to — is critical. It will vault Malaysia from being a laggard country in terms of 5G to among the fastest in the region, second only to Singapore,” Asia Analytica said.

With equal access to the network infrastructure, they said a SWN will actually foster greater competition in the telecommunication sector as MNOs will now compete on offering better services and more innovative packages instead of competing on infrastructure.

“Currently, the three to four major telco players dominate the market, as oligopolies. 

“Make no mistake, the telcos dictate the selling prices — because they own the network infrastructure, including spectrum. No new entrant can compete effectively, without access to these networks,” they said.