This article appeared in The Straits Times on 8 August 2022.

KUALA LUMPUR - The government is putting a hard stop to protracted negotiations over the national roll-out of the much-delayed superfast 5G next-generation wireless network by setting a Monday (Aug 8) deadline.

This could see two of Malaysia's top four mobile network operators (MNOs) lose out on a stake in the state-controlled sole wholesale provider, Digital Nasional Berhad (DNB).

Shareholders agreements for six telecommunications firms to own a collective 70 per cent of DNB will be finalised this week, according to several industry sources as well as documents sighted by The Straits Times.

Although non-binding term sheets were signed at the end of June, ST has learnt that Maxis and U Mobile - together holding more than 40 per cent of market share - continue to have outstanding concerns over governance of DNB as the sole vehicle to roll out 5G.

But the government has informed the two MNOs that it will not entertain any further delays or changes.

"If they want to participate, they have to confirm today (Monday). No ifs and buts and conditions," a well-placed official told ST.

Communications and Multimedia Minister Annuar Musa had earlier said terms would be finalised by July 8, and the delay has set back Malaysia's hopes of narrowing the gap with regional competitors such as Singapore and Thailand, which have already deployed the super-fast next-generation mobile network.

"DNB said on July 1, it will take two months to finalise the stake sale and the government intends to stick to end-August," a source said.

Malaysia believes 5G technology will create RM650 billion (S$200.2 billion) in economic value and 750,000 jobs by 2030.

DNB will deploy 5G infrastructure and has a target of 80 per cent coverage in the country by 2024.

Finance Minister Tengku Zafrul Aziz had told ST in June that haste was needed to achieve "our primary goal of providing 5G services to as many users and businesses as possible in the shortest amount of time, allowing Malaysia to catch up with its regional peers".

The six telcos would have had to cough up RM200 million each for an equal 11.7 per cent share of DNB, based on the Finance Ministry's injection of RM500 million for its 30 per cent stake.

Should any player drop out, then the investment could rise to RM233 million for 14 per cent, or even RM300 million for 17.5 per cent. However, the government could opt to open the door to a clutch of foreign investors who have informally expressed interest in DNB.

Analysts believe that with liabilities of nearly RM8 billion as of 2020, U Mobile would have been hard pressed to convince creditors that it can further extend itself, especially as a passive investor in DNB.

Malaysia's fourth-largest MNO, U Mobile, counts influential personalities such as Berjaya Corp chairman Vincent Tan and the Sultan of Johor as co-owners. It is 49 per cent owned by Singapore's investment company Temasek's ST Telemedia.

Since June, reports have indicated that U Mobile has sought to offload assets, with industry sources telling ST that the telco is seeking mergers with bigger players such as Maxis and state-controlled Telekom Malaysia at a valuation of RM9 billion.

The company had explored a public listing in 2020, with a valuation upwards of RM10 billion, but shelved the plan then.

Given U Mobile's financial constraints, Maxis is the likelier of the two to confirm participation on the same terms as other telcos.

Neither firm had responded to requests for comment as at press time.

Kuala Lumpur had set up DNB to build a single wholesale network early last year but faced both political and commercial pushback towards the end of 2021.

Some telcos, especially Maxis and U Mobile, had wanted a dual wholesale network model to better optimise availability and pricing of 5G.

They claim that DNB's offer of RM30,000 monthly for each gigabit per second (Gbps) of capacity, with a discounted rate of RM22,000 beyond the first 1,200 Gbps, is expensive.

This is especially when agreements are locked in for 10 years as the cost of mobile data has shrunk by 97 per cent since 4G was launched in 2013.

The government has insisted the cost per gigabyte of data will come up to just 20 sen, less than half of that currently being incurred by MNOs.

The telcos' resistance led to further delays before the government eventually compromised in March by offering them a 70 per cent stake in DNB to ensure they have a say in the 5G roll-out.

It also hedges against being overcharged for wholesale capacity.