THE global body representing mobile network operators (MNOs) does not seem convinced that Malaysia’s single wholesale network (SWN) model for 5G would work.

       This is despite the recent “compromise” reached between the government and the MNOs, which allows MNOs to become shareholders of Digital Nasional Bhd (DNB), the state-owned entity to deploy 5G infrastructure nationwide.

       Contrary to what the government has promised, GSM Association (GSMA) – representing MNOs’ interests worldwide – argues that SWNs have not delivered “better and cheaper” services in other countries such as in the rollout of 4G.

       The big question is, if the model did not work for other countries, why is it expected to be successful in Malaysia?

       What would be Malaysia’s “secret formula” that other countries have overlooked?

       DNB has repeatedly said that the SWN model removes infrastructure duplication, ensures faster rollout across Malaysia to even less profitable locations and offers cheaper 5G access to end-users – all of which profit-motivated MNOs would not be able to accomplish.

       If DNB delivers on its promises, Malaysia’s SWN experience is surely the first successful case study for the world.

       Nevertheless, in the event the SWN model fails, Malaysia could be looking at massive losses, considering that up to RM20bil is expected to be invested for the 5G infrastructure by 2030.

       In an interview with StarBizWeek, GSMA head of Asia Pacific Julian Gorman says competition has been the most effective driver of deployment and innovation, as proven over the years.

       With DNB as the single provider for 5G infrastructure, there is no room for MNOs to compete at the infrastructure rollout level.

       However, to be fair, SWN is not entirely anti-competition. MNOs would still be able to compete and innovate, particularly in terms of their value offerings to the end-users.

       The concerns about lack of competition within the SWN model is possibly a reason why all countries, except Malaysia, have avoided the model.

       Out of the over 70 countries that have launched 5G networks globally, Gorman says none have adopted a 5G SWN. The model, however, was used by some countries such as Mexico, Rwanda and Belarus for the rollout of 4G networks.

       “Each faces distinct challenges including rollout speed, service quality and profitability. Three other major projects in Russia, Kenya and South Africa were abandoned, impacting digitalisation efforts in these countries,” according to Gorman.

       Looking ahead, 5G is not likely to be the dominant technology for some time, although GSMA forecasts that 25% of non-Internet of Things global connections will be 5G-based by 2025.

       In view of this, Gorman says countries need to develop and maintain a flexible regulatory framework capable of adapting as the digital economy continues to innovate and grow.

       This will be critical to mitigating the risks and being able to compete with leading 5G markets.

       “We have already seen Singapore adjust their 5G licence strategy to increase competition and innovation to support their 5G vision,” he says.

       When asked whether the government should allow separate networks to be formed parallel to DNB, Gorman says that additional competition is likely to incentivise the DNB to build its network faster and provide a better network or service.

       “However, the following additional issues would need to be carefully considered. If the MNO-owned network is allowed to roll-out a 5G network in competition to DNB – how will DNB ensure its financial resilience?

       “Will the scope of DNB need to be reviewed? For example, will DNB be required to offer retail services in competition to the consortium to ensure level playing field between the two national networks?

       “Also, how will national coverage be ensured? Will both DNB and the MNO-owned networks have a requirement to build a national 5G network as part of their spectrum rights?” he asks.

       An industry veteran tells StarBizWeek that the Big Four MNOs – Maxis Bhd, Celcom Axiata Bhd, Digi.com Bhd and U-Mobile Sdn Bhd – are still concerned about how the 5G rollout would take place, despite MNOs’ ownership in the entity.

       In the worst-case scenario, the MNOs are hoping to be able to form a joint-5G network of their own through collaborations.

       This is different from the dual wholesale network (DWN) model proposed earlier by the Big Four MNOs. “For example, maybe Digi and Celcom could form a network of their own, while U-Mobile and Maxis can collaborate similarly.

       “The concern is that with all MNOs holding a stake in DNB, it may be difficult to reach agreements on certain areas as everyone will be fighting for their interests,” he says.

       It is noteworthy that a network run entirely by a consortium of MNOs was considered during the Pakatan Harapan administration.

       However, industry insiders said that the MNOs had faced difficulties in finding common ground on a number of issues.

       On March 16, in order to solve the stalemate between DNB and the Big Four MNOs, the government announced it will be disposing of up to a 70% stake in DNB to the telcos and that the controversial SWN model will be maintained.

       The Finance Ministry will hold a “golden share” and the remaining 30% stake in DNB.

       The MNOs have also welcomed the decision, although their proposal for DWN was rejected.

       In a joint-statement on March 24, the Big Four MNOs expressed their interest to further understand and explore the equity stake offer in DNB and the process moving forward.

       “As part of the expression of interest, the MNOs would like to discuss and seek input from the government on the details of the proposed equity stake offer.

       “The MNOs are keen to collaborate with the Finance Ministry and the Communications and Multimedia Ministry and look forward to an approach that is typical of any major mergers and acquisitions process.

       “The MNOs have recommended setting up project teams to align on processes such as due diligence, transaction timelines and other administrative matters,” it said.

       Commenting on the proposed equity stake sale in DNB, Gorman says there are too few SWNs to assess the impact of MNO or government ownership as a risk mitigation strategy.

       “However, evidence shows that SWNs have not been successful in delivering the ‘better and cheaper’ services they promise,” he adds.