Malaysian government shocks by handing second 5G network to U Mobile

Malaysia's 5G saga has taken another twist with the awarding of the second network contract to the country's smallest operator, U Mobile.

Regulator MCMC announced its decision Friday in a four-paragraph statement, declaring it had chosen the privately held firm after "rigorously undertaken processes."

Maxis, one of the two big local operators and one of the losing bidders, said it would seek talks with the MCMC over the decision.

"We will engage with MCMC to understand the rationale for their decision and we will consider our options after discussions with all stakeholders," it said in a statement Sunday.

Maxis is certainly not the only one mystified by the move, although no one is questioning the decision publicly.

The MCMC offered no details in its announcement – a remarkable omission given its high-profile nature and the importance government leaders have placed on 5G and the digital economy.

U Mobile has only a 13% share of the Malaysian mobile market by revenue, compared to 50% and 37% held by CelcomDigi and Maxis respectively, according to a Macquarie Research analysis.

Slashing foreign ownership

U Mobile also has deployed just 9,000 4G basestations, compared to 25,000 by CelcomDigi and 11,000 by Maxis.

U Mobile said it looked forward to working with telcos CelcomDigi and Telekom Malaysia, adding that it had been "engaging with leading global technology providers including Huawei."

It also said it would reduce its foreign ownership to 20%. Its 48% controlling shareholder, Straits Mobile Investments Ltd., is a subsidiary of ST Telemedia, a private company that is owned by Singapore government investment arm Temasek Holdings and that also owns telco Starhub and data center operator STT GDC.

U Mobile's chairman is local billionaire Vincent Tan, the head of listed conglomerate Berjaya Corp and best known abroad as the owner of Cardiff City FC.

The Malaysian government committed to building a second 5G wholesale network a year ago after some strong lobbying by the telcos, which were unhappy at the constraints of the single network structure as well as the interconnection costs.

The DNB network passed the 80% population coverage threshold – the trigger point for pressing ahead with the second network – in January, but the MCMC did not issue tender documents until July. It received bids from CelcomDigi, Maxis, Telekom Malaysia and U Mobile.

Maxis said that with its network infrastructure and know-how, "our 5G network would have taken far less time and resources to cover the same percentage of populated areas that the first 5G network covered. We would also have provided in-building 5G coverage in those areas." CelcomDigi expressed a similar view.

That said, these two industry leaders and their three rivals, including U Mobile, have already committed to buying 5G wholesale capacity from DNB for ten years.

So whatever the reasons for U Mobile's successful bid, the commercial outlook for its new network, and the terms on which it works with the industry, are still highly uncertain.