Telcos, 5G, Dnb, Rollout, Economy, Users, Benefit

Telcos, 5G

DNB gets Malaysia ready for 5G

Malaysia’s journey in rolling out 5G telecommunication services has been one peppered with controversy.

16/10/2021 2:48:00 PM

The country’s 5G network is set to kick off by the end of this year through an ambitious single-owner model to accelerate deployment and lower costs.

Malaysia’s journey in rolling out 5G telecommunication services has been one peppered with controversy.

It was the followed by an uproar when a few months later, the highly sought-after 5G spectrum was awarded without an open tender by the Perikatan Nasional administration to five companies, but after that massive public backlash, the decision was quickly revoked.

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Then came the controversial decision to roll out 5G via a government-owned entity, under a single wholesale network.The decision to entrust the 5G rollout to Digital Nasional Bhd (DNB) drew the inevitable criticism from many parties, and it was a decision that had not been carried out elsewhere with any degree of success as concerns centred over the effectiveness of the model, which was never tested elsewhere in the world as far as 5G is concerned.

DNB was only formed in March 2021, but by December this year, the company has been cobbling plans to commercially launch its service by covering 500 sites in Putrajaya, Cyberjaya and Kuala Lumpur.Our mission is to accelerate the development and growth of high speed, affordable, reliable 5G connectivity and coverage for Malaysia’s economy and society. - Ralph Marshall headtopics.com

With Bukit Tunku now the first area in the country that has 5G access, Ralph Marshall, chief executive officer of DNB, claims this is the first of an accelerated rollout for 5G coverage in Malaysia.Getting the network off the ground fast is a necessity. Because of the stop-start rollout at the beginning of the 5G journey, Malaysia is now lagging behind key rival countries for investments in South-East Asia through the unveiling of a commercial 5G network.

In playing not only catch-up, DNB is hoping that its unique approach in rolling out the 5G network will not only benefit the industry players in the cellular field, but also pip most countries in this region by 2024 when it expects to have 20% population penetration of 5G, second only to Singapore.

By 2024, DNB aims to achieve 80% coverage in populated areas, faster than the time taken to roll out the 4G network.In fact, in the attempt to narrow the digital divide, DNB will also begin covering parts of Sabah and Sarawak beginning 2022.Speaking with StarBizWeek, Marshall says the rollout will save the industry money in capital expenditure as it would require RM30bil to RM35bil as an industry to roll out 5G, if the mobile network operators (MNOs) build their own infrastructure.

But through DNB, he says the total cost is expected to be just about RM16.5bil, although it may swell to RM20bil between 2021 and 2030.The network cost is forecast to be RM12.5bil, of which RM4bil is for network equipment and RM12.5bil is for network infrastructure. headtopics.com

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Some RM4bil is for corporate costs, which Marshall explains include startup costs, consultant fees as well as RM2.5bil for staff compensation for over 600 workers.“And the RM4bil is over a 10-year period, which makes sense,” he says.As a wholly-owned company of the Finance Ministry, DNB is not profit motivated and instead, will focus on cost recovery.

This, as opposed to the retail minus method which caters to high margins, will also allow DNB to lower 5G rollout costs.Marshall says the company can offer 5G access to MNOs at one-third of the cost it would take the MNOs to deploy 5G services themselves. And with the Multi-Operator Core Network deployment approach employed, that will lead to greater efficiency in the 5G network among the MNOs.

The need for DNBIn justifying the need for DNB, Marshall points out that Malaysia is already seeing high network penetration.At the same time, he says the MNOs’ cost of satisfying customers is increasing every year, while the margins of the operators are narrowing. Malaysia, which had one of the highest earnings before interest, tax, depreciation and amortisation or Ebitda margins in the world, has been experiencing a margin compression in recent years.

“How much more can you expect in terms of MNOs’ revenue in the context of the investments they need to make? The risk is that the investment (on telcos’ infrastructure) would either be delayed or slow or not done, in the context of the economy.“Which is why DNB needs to step in for an accelerated 5G deployment. Our mission is to accelerate the development and growth of high speed, affordable, reliable 5G connectivity and coverage for Malaysia’s economy and society,” according to him. headtopics.com

With the financing burden of the 5G network lifted off the books on telco companies, DNB’s approach to financing of the network would be entirely by the private sector.Vendor financing through deferred payment schemes with suppliers would cover a huge portion of the initial rollout cost with Ericsson committed to arranging for deferred payment arrangements for up to five years.

Apart from the vendor financing, Marshall says DNB will secure working capital facilities of up to RM3bil from banks in Malaysia to meet its short-term funding requirements.In addition, a 10-year sukuk programme would also provide DNB with necessary capital. The RM5bil sukuk will be launched next year and will provide long-term funding between 2025 and 2028.

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“DNB has received strong interest from domestic financial institutions to participate in any debt offering of DNB.“To this extent, we have already received firm commitments for approximately RM1.5bil in short-and-medium-term facilities.“Our model is 100% debt-financed and is based on securitisation of cash flow and contracts,” according to Marshall.

Marshall, who had played a key role in the rollout of the Maxis andAstronetwork, says DNB’s business model satisfies the funding requirements from the private sector.“First, our model is going to be supply-led, and second, the element of competition will be greatly mitigated because no one else can offer a 5G network in Malaysia.

“Third, the demand for data is exponentially growing. What was 1.5GB per user in 2015 is currently 23GB.“Our own internal estimate is this can grow to 60GB in 10 years,” he says. The MCO itself has seen data usage grow from 15GB to 23GB in one year.Marshall insists DNB is here to partner with the MNOs and the mobile virtual network operators (MVNOs), and not to compete against them.

Any licensee can tap onto its network for accessibility. This also allows private networks to be introduced, which is a big feature of 5G networks in the years ahead.Given the DNB model, Marshall does not discount the emergence of new MVNOs, adding on to the existing players like XOX, Redtone and Tune Talk.

“We are obliged to provide access to all licensees, and that’s why people like Sunway Hospital and MAS could become licensees for particular areas where they need a separate network.“A licensee is anybody who has a NFP, NSC, ASP licence under the MCMC,” he says.

Top speed: A telco tower is seen in the Klang Valley in this file picture. Getting the 5G network off the ground fast is a necessity for Malaysia.Network Facility Provider (NFP) licences are for network infrastructure such as cables, towers, telecommunications lines and exchanges. Meanwhile, a Network Service Provider (NSP) licence is for a business that sells bandwidth or network access.

The Application Service Provider (ASP) licence, on the other hand, is for a business entity to provide particular functions such as voice services, data services, content-based services, electronic commerce and transmission services.Marshall says that DNB’s rollout will accelerate and support traffic growth at lower costs.

Industry traffic is expected to accelerate faster under the DNB rollout as MNOs will not “sweat their assets” for longer.The traffic could reach three times the level seen in 2020 by 2025.“A similar traffic would not be able to be supported without MNOs either investing more into 4G or offering 5G services.

“MNOs are also able to access a 5G network and offer services to customers at lower blended unit costs under the DNB model.“While revenues may fall in absolute terms due to falling data yields, contribution profit margins should be better than a self-built network due to lower costs and DNB’s higher economies of scale,” according to Marshall.

Benefit to usersWith about two more months to go to meet its December deadline, DNB is positive that it is on track to achieve 500 5G-enabled sites this year. When more than 90% of the country has 5G coverage, the network is projected to have 10,167 sites.

It also pledges to deliver 100Mbps speed at cell edge, which means a user at the weakest point of the coverage would enjoy at least 100Mbps as compared to 18Mbps currently.DNB can face a penalty if it fails to deliver the 100Mbps speed.However, a key concern is whether the MNOs and MVNOs would totally transfer the speed to the end-users without being throttled down.

“We do not want to disrupt the system, so we are integrating our network into the telcos’ core. This is the best way to serve the 33 million population in a relatively short time.“The telcos would have control over the product, services and the customers. If they want to minimise their operating expenditure, they could cap the speed levels at the core.

“So, although we transfer 100Mbps at cell edge, the end-user may not enjoy the same speed,” he says.Nevertheless, DNB is working towards stopping this potential problem.The company is in talks with MCMC to mandate all access seekers or those who tap into DNB’s network to agree to a “complete pass-through of the speed”.

Marshall recognises the scepticism among some quarters on DNB’s ability to pull off the ambitious 5G rollout.Hence, he insists that the company will practise transparency and quality governance in delivering an uncompromised service.DNB will be publishing its Reference Access Offer (RAO) on its website, which will highlight key information about its offering, particularly on pricing which will be disclosed publicly.

“The access seekers will see all the terms including, key performance indicators, pricing, how we manage and others...before they sign on to seek access from us.“After that, we have a negotiated wholesale agreement based on the terms stipulated in the RAO,” Marshall says.

Currently, the discussion on the RAO is still ongoing.Marshall also expressed his confidence in Ericsson to undertake the network infrastructure deployment in time.“Ericsson is an end-to-end provider. It has been winning a significant number of 5G contracts globally in the past 12 to 18 months.

“In fact, Singapore’s 5G contract also went to Ericsson,” he says. Read more: The Star »

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