PETALING JAYA: The government’s decision to go ahead with the single wholesale network (SWN) model paves the way for 5G deployment in the country.

       Nonetheless, the move to dispose of up to 70% stake in Digital Nasional Bhd (DNB) to mobile network operators (MNOs) does raise the question on how much stake would each telecommunication companies (telcos) get.

       This would, of course, depend on discussions with DNB. But going on an even distribution model of the 70% stake – hypothetically – could mean that the big four mobile players (Celcom Axiata Bhd, Digi.com Bhd, Maxis Bhd and U Mobile Sdn Bhd) would each get a 17.5% equity stake.

       If Telekom Malaysia Bhd decides to join the bandwagon, the equity for each player will drop to 14%.

       This does not include other potential parties, including the mobile network virtual players (MVNOs) that may also be keen to take up stake in the entity, further reducing other players’ stake.

       The question is, would the MNOs be content with just about 10% each in DNB, given that their capital outlay could run into billions of ringgit be it for the stake and future capital expenditure?

       Going on an even distribution model of the 70% stake – hypothetically – could mean that the big four mobile players (Celcom Axiata Bhd, Digi.Com Bhd, Maxis Bhd and U Mobile Sdn Bhd) would each get a 17.5% equity stake. If Telekom Malaysia Bhd decides to join the bandwagon, the equity for each player will drop to 14%.

       Discussions between DNB and the telcos will be held on the details of ownership and equity valuation, with an agreement expected to be finalised by the end of June this year, according to AmInvestment Bank Research.

       The research house, in a report yesterday, viewed the telcos’ equity participation in DNB as potentially improving corporate governance oversight for DNB.

       “The decision supports a strong public-private partnership model as well as an established private sector financing ecosystem, which will help to boost investor confidence in Malaysia,” it said.

       RHB Research opined that discussions between DNB and the MNOs “could be protracted”.

       It believes the disagreements over shareholding structure was one of the stumbling blocks of the previous 5G network consortium mooted by the Pakatan Harapan government, with each MNO having their own vested interest.

       It said the telcos’ ownership of DNB creates a conflict of interest situation, as the underlying principle of an independent access network calls for structural separation from retail activities.

       RHB also believes that concerns over punitive wholesale rates levied by DNB should be allayed with the MNOs having a greater say on actual terms and the firm being partly equity funded.

       Overall, MIDF Research said MNOs would need to continue providing attractive service-value propositions to retain their respective market share given the confirmation of the SWN model for 5G rollout.

       “There could be dilution in profit margin due to the model, hence offering an effective cost-management strategy in place is essential to defend the profit margin,” it said.

       Still, TA Research believes the MNOs would be keen on 5G rollout via the SWN model as the opportunity to become shareholders of DNB, which has been deemed monopolistic by certain quarters, would provide them comfort over its governance and transparency.

       With a 70% stake, CGS-CIMB Research said the MNOs may be able to better steer DNB’s 5G network rollout, such that it lowers the current total cost of RM16.5bil (inclusive of RM4bil corporate cost) and raise the proportion of leasing from MNO-owned sites.

       However, in the worst-case scenario, CGS-CIMB views that pricey valuation for the equity stake in DNB may result in big cash outflow for the MNOs, or no changes to the total network rollout costs, nor the proportion of sites leased from the MNOs, and no change to the wholesale rate and fee structure.

       It added that while the latter would result in DNB being more profitable (same revenue but less finance cost given the lower debt), the MNOs do not fully own DNB.

       Individually, the MNOs are also likely unable to reflect their share of DNB’s earnings unless the latter pays dividends to partly offset the wholesale cost.