Making history or repeating it?

THE upcoming announcement of the consortium members and, more importantly, the spectrum holder for the second 5G consortium, will be closely watched if history is any indication of concession awards.

The award of 3G and 4G spectrum in the past has often left the market wondering how some companies made the cut.

When the 3G network was conceptualised, Telekom Malaysia Bhd (TM) and Maxis Communications were assigned the first two of three 3G spectrum licences. Along the way, the other spectrum and licence ended up with Time dotCom, a company more involved in broadband communications rather than cellular operations.

In May 2008, DiGi got a 3G spectrum licence with all of its rights and benefits via a transfer from Time dotCom for 27.5 million new DiGi shares.

In the subsequent years, Time dotCom gradually sold down its holding of high priced DiGi shares for a considerable profit.

As for the 4G spectrum, the usual mobile operators that offer services to consumers were granted spectrum. U Mobile and Altel Communications were among them. U Mobile was a small cellular operator then while Altel did not provide mobile services.

Some of the 4G spectrum recipients have been leasing out their bandwidth to the larger mobile operators, making money from the lease agreements, instead of from telephony services.

With the government set to announce details of the second consortium that will get the 5G licence and bandwidth, will history repeat itself with a dark horse winning the licence and coveted spectrum, and potentially jeopardising the delivery of Malaysia’s second 5G network?

The government has pledged fairness.

“The Malaysian Communications and Multimedia Commission will act as a regulator to ensure no dominance by one particular entity or mobile network operator. We will also ensure a level playing field. Issues of conflict of interest will not arise,” says minister Fahmi Fadzil.

His comment indicates an equal split between members of the first and second network to ensure a balance of service, competition and customers. If the pledge is fulfilled, the two largest cellular companies – CelcomDiGi and Maxis – will be kept apart.

In striking the right balance, CelcomDigi might be paired with YTL and TM. Maxis will then partner U Mobile.

There could be permutations but the basis should be maximum parity.

With Digital Nasional Bhd (DNB) the owner of the first 5G network, who will then handle the rollout of the second consortium? According to a report last week, Maxis Bhd is seen as the frontrunner.

RHB Research, in a note last Wednesday, mentions the government previous statement that a mobile network operator (MNO) can only participate in the second 5G network if it is already a shareholder in DNB.

TM could be disqualified from participating as its share subscription agreement (SSA) for DNB was terminated.

The successful MNO that had bid for the second network will then divest its stake in DNB to establish the rival network.

“(TM’s) management believes it can still play a significant role in the nation’s 5G ecosystem by being a 5G access seeker.

“Its non-participation in DNB’s equity and/or the second 5G network is not a concern, as it would be better off providing wholesale 5G fibre backhaul access to 5G network owners,” says RHB Research.

There are also whispers that U Mobile will win the right to kick off the second 5G network, a windfall for a company with a smaller reach than CelcomDiGi and Maxis.

It will be a coup for U Mobile and its shareholders, ensuring that its planned initial public offering will be much better received.

The second 5G network is also a critical and strategic national infrastructure. Therefore, careful consideration should be given to building the second 5G network, which is vital for Malaysia’s future. Consideration should also be given to companies with large foreign interest, wondering if companies with an overwhelming foreign interest be given the right to control a valuable national infrastructure.

To ensure fairness, the spectrum rights winner must be compelled to ensure transparency of access to others that want to participate.

The government must ensure there is no repeat of rent-seeking episodes as it will hamper efforts to populate and provide wider 5G access in the country. Given there is only one spectrum package for the second 5G network, it is imperative the government awards it to the most credible mobile operator with a proven track record so Malaysians fully benefit from 5G.