Consolidation is inevitable

“We have not looked at the business plan yet. (But) does Malaysia need so many operators given that we only have 30 million users... (and when) compared to China, they only have three operators (to serve) a huge market, ’’ MCMC chairman Dr Fadhlullah Suhaimi Abdul Malek (pic) said.

PETALING JAYA: The telecoms industry regulator has yet to receive the business plan for the proposed Celcom-Digi merger but it believes in a free market that should be seen alongside healthy competition to benefit consumers.

The market is also forced to consolidate as it would be a challenge for a single entity to pour in huge investments to cater to rising demand for high quality services and speed with finite spectrum.

“We have not looked at the business plan yet. (But) does Malaysia need so many operators given that we only have 30 million users... (and when) compared to China, they only have three operators (to serve) a huge market, ’’ Malaysian Communications and Multimedia Commission (MCMC) chairman Dr Fadhlullah Suhaimi Abdul Malek said when asked if a market with two to three players was sufficient to create healthy competition.

On Monday, Axiata Group Bhd and Norway’s Telenor ASA inked a deal to merge their respective mobile units – Celcom Axiata Bhd and Bhd – to create Celcom-Digi Bhd (CDB).

Currently, the mobile market has four major players, with Maxis Bhd leading with a 28% market share of subscribers, followed by Digi (26%), Celcom (22%) and U Mobile (19%). The rest is held by the eight mobile virtual network operators.

Post-merger, CDB would end up controlling nearly 50% of the mobile market share, raising concerns of a single entity having a dominant position that could influence market pricing, quality and other factors.

“Yes, we agree there could be a dominant player (post-merger) but we have rules in the (market) place to ensure dominance does not have a negative impact on competition, ’’ Fadhlullah said.

“This is a free market and as a regulator, we have to temper with market dynamics so that the market remains competitive, healthy and the consumer benefits, ’’ he told a briefing with select media yesterday.

For the Celcom-Digi deal to go through, the blessings of the regulator are critical. So are approvals from Bursa Malaysia and the Securities Commission, as Axiata needs to seek a waiver from having to make a mandatory general offer.

Post-merger, both Axiata and Telenor will each end up with a 33.1% stake in CDB.

Fadhlullah said the commission is already conducting its own study on the impact of the merger and consolidation and the findings will be made public.

“On a global level, the longest approval (for mergers) took 22 months. We don’t think Malaysia is so inefficient. Realistically, it will take six to eight months, ’’ he said.

He believes that Malaysia does not have the right amount of investments to match the quality of services and customer demand, thus the market is forced to go into consolidation.

“When we talk about South Korea, it is about the Internet speeds and quality, not ebitda (earnings before interest, taxation, depreciation and amortisation). Ebitda margins in Malaysia are frankly sinful.

“If we want to go down the path of high quality services, we will have go into higher investment or consolidation, ’’ he added.

On whether Celcom and Digi, which have their own spectrum allocation, be allowed to keep the spectrum or has to surrender it to MCMC post-merger, he said: “It will form part of the remedies (for healthy competition). Don’t forget the spectrum is supporting a larger number of players in the mobile market, so it is not a simple situation.’’

On a separate issue, when asked if all the 5G spectrums identified in the various bands will be allotted to the Digital National Bhd solely as it is undertaking the network rollout for 5G, Fadhlullah said: “Yes.’’

Asked if there is room for a second player and enough spectrum to roll out 5G, he said: “That can come in later.’’

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Telecom , consolidation , MCMC , Fadhlullah Suhaimi , Axiata , Digi , Celcom ,


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