Public-private partnership can cut 5G rollout cost

Malaysia — A week before the Pakatan Harapan Government was replaced, on Feb 17 last year,  it announced plans to develop 5G infrastructure. The estimated cost of RM21.6 billion would be paid over a five-year period, it said.

On Feb 24 last year, Prime Minister Tun Dr Mahathir Mohamad resigned and the 5G development plan was not heard again for a long time. Finally, last week, the current government revived 5G plans by setting up a special purpose vehicle, Digital Nasional Berhad.

For the benefit of the nation, a public-private telco partnership should be encouraged in the 5G rollout. This will reduce the burden on taxpayer’s money by engaging foreign players. Most crucial is the transfer of technology to Malaysians.

Under the former Government’s proposal, Malaysia would have issued 5G spectrum tenders by April last year. At that time, China’s Huawei had already signed preliminary 5G agreements with a few Malaysian mobile network operators, namely Maxis, Axiata Group’s Celcom and Telekom Malaysia.

Besides Huawei, there were other suitors eyeing a piece of Malaysia’s 5G rollout. They included Nokia from Finland.

According to Nikkei Asia, Singapore’s three biggest telecommunication companies announced that they have chosen Sweden’s Ericsson and Finland’s Nokia as the main equipment suppliers for their 5G networks. This has left China’s Huawei out in the cold. Was this done to protect Singapore’s data from getting into the wrong hands?

Therefore, Malaysia must rethink and review whether a consortium of leading local telcos can lead us into the 5G era.

The new government under Pakatan Nasional led by Bersatu will now have to consider the eight main issues which are crucial for the award. 

1 Safety and security

Will Malaysia’s own data security standards be compromised in the 5G rollout?

As we know, Huawei, the world’s largest telecommunications equipment maker, has been at the centre of a US-led campaign to stop infiltration of Chinese technology into America.

The US expressed concern that the equipment could be used by Beijing for spying.

The United States placed Huawei on a trade blacklist. US prosecutors accused it of stealing trade secrets and helping Iran to track protesters. The company denies the charges.

2 Malaysian 5G standards

A year ago, Communications Minister Gobind Singh Deo noted Malaysia was aware of the “concerns that have been expressed around the world” about Huawei. When questioned by the media, he replied: “We will be governed by our own security standards in choosing partners for the nationwide 5G rollout planned for the third quarter.” 

“My position is very clear, we have our own safety standards, we have own safety requirements,” he said in an interview with Reuters. “So, whoever deals with us, whoever comes up with proposals, we have to be certain and we have to be sure they meet the security standards that we have.”

3 Healthy competition

Malaysia must be fair and transparent in the award of the tender. The government must invite as many qualified companies to encourage healthy competition for the efficient rollout of 5G.

The sum involved is large by any standards and there needs to be proper scrutiny to ensure that national security is not compromised. And only the best should be selected for the award.

4 Employment and transfer of technology

The 5G national connectivity plan hopefully will create 20,000 job opportunities in five years. Malaysia already has graduates qualified in artificial intelligence and data analytics,  It is crucial to have transfer of technology built into the contract and agreement with the successful bidder.

The job opportunities for 5G will be in construction activities, maintenance and operation of the digital infrastructure. How can Malaysia leverage the new expertise to provide such services to other countries after our 5G rollout is completed?

Our experience in the rollout is minimal. In April 2019, 5G demonstrations were launched in Putrajaya and Cyberjaya and execution was mostly by Malaysians. Other 5G testbed demonstrations involved five states – Selangor, Perak, Terengganu, Kuala Lumpur and Kedah. The authorities must announce the results and be transparent. What were the expectations and what are the outcomes?

 

5G Cost cut by almost RM7 billion

The new SPV, Digital Nasional Bhd (DNB), will accelerate investments in its 10-year journey to establish Malaysia’s RM15 billion high-speed 5G infrastructure. The previous government estimated the cost to be RM21.6 billion.

DNB’s CEO Augustus Ralph Marshall told StarBizthat the SPV is expected to front-load the investments, possibly investing 25% of the RM15bil in the first two years.

Following that, about 15% to 20% will be spent in the next few years and the percentage will gradually drop in the following years. This is because once the the infrastructure is built in the urban areas, the pressure to build the rest becomes less intense.

Marshall’s experience and expertise in initiating and spearheading digital applications in Maxis and Astro speaks well for his leadership and contribution to the SPV.

6 Compensation: Don’t go there

Malaysia got into the trap of paying millions in compensation to a company for the planned crooked bridge linking Johor Baru and Singapore when Dr Mahathir stepped down and a new Government took over.

Now, Malaysia will have pay again millions in compensation with termination of the  High Speed Rail  System from KLIA to Singapore.

When the East Coast Rail Link (ECRL) was initially terminated, the potential compensation was very high and ran into millions again. Fortunately, the contract was renewed with the forced reduction in cost by almost half the amount by a China construction company.  

Hopefully, we will not continue the culture of cancelling projects and contracts and end up paying billions that we can ill afford when our public finances are under great stress in the Covid pandemic.

This can be avoided when the merits of the projects and decision-making rationale are shared with a high degree of transparency.

 

7 Private/public collaboration

In fact, to save costs the local telco industry would have preferred the 5G rollout be a joint private-public collaboration quite similar to that of Singapore. This would further cut the cost of RM15 billion dramatically.

According to plans, the Government will build, own and implement the 5G infrastructure and spectrum.

Voices of dissent state that Parliament had not approved the RM15 billion in the last budget and where is the allocation coming from? Perhaps, in this year’s new budget.

The Government should be transparent with the business model. It should state how the capital expenditure is likely to be recovered and what is the expected social output cost benefit analysis.

8 Telco’s role

With Digital Nasional preparing to kick-start the rollout of 5G network end-2021, telcos must collaborate and foot part of the cost because in the final analysis sales, revenues will be reflected in telcos’ balance sheets.

In addition to the customers benefiting, telcos would be allowed to access the 5G infrastructure built by Digital Nasional. The SPV model removes a significant burden on the telco operators’ balance sheets and puts it in the hands of the government. The duplication of networks and resources should be reduced.

Another crucial question: Was there sufficient consultative process carried out with all the stakeholders? Eventually, it has to be a win-win and a favourable buy-in from all stakeholders, customers, taxpayers, Government and private sector players

 

 

After being an experienced full-time journalist for 35 years, M.Krishnamoorthy was a freelance journalist, coordinator/fixer for CNN, BBC, German, Australian TV networks, TIME magazine, New York Times and newspapers in Malaysia. In the past four years, he taught Journalism at two international universities as an Associate Professor. In 2019, his sixth book, May 9: PEOPLE POWER SAVES MALAYSIA was voted as Malaysia’s top Reader’s Choice. His 5th book was another bestseller titled: MH 370: Flying Through Crisis.