Digital Nasional Bhd should open up 5G rollout to more players


“The design, build and maintenance of the nation’s 5G network managed by Ericsson is estimated to cost RM11bil, around RM700mil lower than the total cost of ownership of the next closest bid, ’’ DNB said in the statement.

MALAYSIANS deserve more answers when a massive billion-dollar contract is awarded to a single vendor for a crucial network infrastructure.

This is, after all, the biggest project that has been given out to the private sector in a long time.

The award has raised many eyebrows but managed to avoid becoming a national controversy because public attention is on the raging Covid-19 pandemic and our plotting politicians.

The short of it is that it is very rare for any telecoms player or government body to pick just one vendor.

But Digital Nasional Bhd (DNB) has awarded Ericsson Malaysia, a Swedish company, with contracts amounting RM11bil to roll out the 5G network in Malaysia.

Aware of the potential controversy, DNB pointed out Ericsson's bid was RM700mil lower than the next bidder.

But critics argue the whole 5G network development should not be limited to DNB alone, it should not be given all the 5G spectrum for the roll out, and it should also avoid giving out a huge contract to one vendor.

A better way would have been to award the 5G roll-out contract to more than one vendor, and at the same time have a second 5G network run alongside DNB's. That is the norm globally for even the smallest of countries, to have two players for a 5G roll out.

Then have a spectrum auction instead like other countries such as South Korea, Germany, Thailand and Bangladesh. Opening the market to more players to roll out 5G allows for competition and redundancies, and gives jobs to more than one vendor.

Spectrum auction would be a more effective way to generate income for Malaysia, especially now when our economy is at a critical stage, where Covid-19 has wrecked us.

Yes, it is true that our Malaysian spectrum pricing is much lower than other countries but an auction would still be vital.

There must be good reasons why this is not applied in Malaysia. Unfortunately Malaysians, including the media, have little information despite the huge amount of money involved.

DNB, the government-owned special purpose vehicle, has issued a detailed explanation but there has been little engagement with the media and other stakeholders.

That’s the problem with such a top-down approach – giving the impression that the authorities owe no one an explanation.

In a lengthy statement recently, DNB said the financing of network equipment for the 5G network will be sourced from foreign and domestic financial institutions.

It reiterated Ericsson (Malaysia) Sdn Bhd has undertaken to arrange the financing as part of the agreement to supply, deliver and manage the entire 5G network.

DNB will securitise future cash flow from its wholesale business with mobile network operators, via sukuk programmes to finance its other network operating expenditure and meet its obligations to repay financiers when they become due.

"Accordingly, there will be no government funding required for the 5G network roll-out, " it said.

DNB announced it had appointed Ericsson to design and build the National 5G Network at a total cost of RM11bil.

DNB further said that the design, build and maintenance of the Malaysian 5G network managed by Ericsson is estimated to cost RM11bil and that is "around RM700mil lower than the total cost of ownership of the next closest bid."

"Ericsson's network equipment, deployment services, and ongoing maintenance and network management cost of RM4bil was the lowest.

“The balance of approximately RM7bil will cover network infrastructure costs from other parties comprising primarily tower rental and fibre leasing over a 10-year period, " it said.

DNB also says that Ericsson’s bid was RM700mil lower than the next bidder. But as The Star pointed out – is the lower cost of RM700mil over a 10-year period that significant as it will only work out to RM70mil a year?

DNB also said its tender process was structured by an independent professional services firm, Ernst & Young Consulting Sdn Bhd (EY Consulting), which it said was done according to global standards and involved four panels, comprising some 50 local and international experts from across 10 countries with current 5G network roll-out experience.

The process began with the initial evaluation of 14 Network Equipment Providers (NEPs), after which, eight were shortlisted and invited to bid for the tender, DNB added.

DNB has said the criteria evaluated when shortlisting the NEPs were:

a. Proven credentials in successful 5G deployment and execution of end-to-end technology solutions;

b. Availability of enhanced security to safeguard users and platforms;

c. Established Malaysian presence and ecosystem and a sound understanding of the business environment, including existing network of vendors;

d. Locally based resources for immediate deployment; and

e. Effective plan for the transfer of knowledge to be acquired by domestic affiliates.

Of the eight invited, only four submitted their bids, DNB said.

It also noted the tender evaluation team comprised internal and external independent industry experts and experienced professionals, and the tender results were then deliberated extensively by the board tender committee and the board of DNB.

"The strictest standards of governance were adopted throughout the tender process as advised and facilitated by EY Consulting, " it said.

The tender requirements were based on criteria identified and refined through a rigorous process with industry feedback on the requirements of the 5G network and shared with all invited NEPs, it added.

DNB shared that Ericsson was ranked top in all three key components of the tender evaluation criteria, which were the following:

a. Technical: covering overall 5G technology capabilities, 5G deployment capabilities, integration approach, cyber and network security, and operations and maintenance

b. Commercial: covering financing proposal and total cost of ownership

c. Socio-economic: covering local development and socio-economic impact.

But the statement has not explained why many other vendors have been left out although they had been operating in Malaysia, employing many Malaysians.

Yes, Ericsson is reputed for its expertise and experience in rolling out 5G in many countries but it has also run into many legal controversies. In fact, far too many, just google.

But to be fair, Singapore has also picked Ericsson over other competitors but it has StarHub too, as a partner. In almost every country, there are always two or three players, and that includes the Philippines, Indonesia and Thailand.

By cutting off the other telco vendors/players in Malaysia, there are bound to be many questions and it would even affect big vendors/players from wanting to put money in Malaysia.

We do not care what the other competitors who have lost out feel as in any tender bid, there will always be winners and losers.

There is always the security issue, why would we want to be dependent on just a foreign vendor, and of course this raises questions about the regulatory framework.

Even the GSMA or Global System Mobile Communications Association, which represents the interest of mobile operators worldwide, uniting over 750 operators with nearly 400 companies, have raised questions over this deal.

GSMA has also highlighted concerns over the surrounding governance of DNB.

But for those following this development, issuing one press statement isn’t good enough when many questions need answers.

Wong Chun Wai began his career as a journalist in Penang, and has served The Star for over 35 years in various capacities and roles. He is now group editorial and corporate affairs adviser to the group, after having served as group managing director/chief executive officer.

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