The Malaysian government is on a collision course with domestic mobile operators over its 5G wholesale network plan.

Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz has rejected an appeal by the telcos to allow them to take a controlling stake in the new network, the Malay Mail reported Monday.

He has told them that he will not extend the June 30 deadline for investors to sign up for the scheme.

Figure 1: The impasse threatens to further delay Malaysia's path to commercial 5G.
(Source: Davidovich Mikhail/Alamy Stock Photo)

The operators – Digi Telecom, Celcom Axiata, Maxis and U Mobile – have told the government that a "passive minority" stake in the project would not allow them to safeguard their investment.

The Ministry of Finance has offered nine Malaysian telcos a combined 70% stake in the newly-formed state-backed wholesaler, Digital Nasional Berhad (DNB).

So far, only two smaller operators, Telekom Malaysia and YTL Communications, have accepted.

In a letter to the minister earlier this month, the four incumbents asked that they be allowed to acquire 51% of DNB, Reuters revealed last week.

"The MoF-proposed role as minority shareholders does not appear to make it feasible for any of us to add value as shareholders and is not commensurate to our contribution to the industry, or our duty to our shareholders and customers," they said.

Repeated roadblocks

The impasse threatens to further delay Malaysia's path to commercial 5G, which has hit repeated roadblocks as the government has attempted to shoehorn the industry into its single wholesale network plan.

Alternatively, if Aziz is genuinely set on calling the telcos' bluff, Malaysia will be trying to implement 5G without the support of the existing network operators. That is an approach even more radical than the wholesale network concept.

Reportedly, if the operators don't take a stake in the DNB network, Aziz is willing to allow investment from private equity firms.

His refusal to allow the four incumbents isn't his first rebuff. Last December, he rejected their call for the issue of a second wholesale license (see Malaysia 5G network boss blames 'posturing' MNOs for delays).

Besides the ownership structure of DNB, the four telcos are also unhappy with the proposed interconnection terms for access to the wholesale network.

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They have called for a review of the reference access offer (RAO), saying that the terms are "not commercially viable" and would lead to higher end-user prices.

They also condemned the absence of full transparency over DNB's rate of return, which would have a material impact on the affordability of network access, the letter said.

While the government has declared that 5G will transform its digital economy and help propel it to regional leadership in digital services, the reality is it is falling further behind neighboring countries such as Singapore, Thailand and the Philippines, who have all launched commercial 5G.

Currently, only YTL is offering service over the DNB wholesale network, which has limited coverage.

The delay is taking its economic toll on the telcos. Listed operators Maxis, Celcom and Telekom Malaysia have between them lost 26 billion ringgit ($5.9 billion) in market cap this year, a local business news site has calculated.

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— Robert Clark, contributing editor, special to Light Reading