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No govt guarantees for 5G financing, says DNB

Funding for digital rollout borne by private sector, loans

05 November 2021

No govt guarantees for 5G financing, says DNB

This article appeared in The Vibes on 05 November 2021.

KUALA LUMPUR – Putrajaya will not be guaranteeing loans or other financial facilities used for the nationwide 5G rollout, said Finance Ministry-owned Digital Nasional Bhd (DNB).

DNB chief financial officer Nik Azlan Aziz told The Vibes that the risk is in the business model, “just like any infrastructure or utility-type business model”, and financing will be borne by the private sector.

DNB is estimating that the total cost of the 5G rollout is around RM16.5 billion, but may increase to RM20 billion between 2025 and 2030, after factoring another RM3.5 billion of additional investments to add sites or densify the network to satisfy demand for additional capacity.

The RM3.5 billion, DNB said, is purely an estimation of potential future costs that will only be committed based on possible increases in the demand for 5G.

DNB will also work with telecommunication companies (telcos) and infrastructure providers to develop the 5G network and utilise existing infrastructure as far as possible, thereby avoiding duplication and reducing costs.

The network cost was forecast to be RM12.5 billion, of which RM4 billion is for network equipment and RM8.5 billion for network infrastructure.

Of the RM12.5 billion 5G coverage network equipment and infrastructure cost, only RM1.8 billion will benefit foreign interests; RM10.7 billion will be expanded into the domestic telco ecosystem through tenders, with primary beneficiaries being telcos, and fibre, infrastructure, and power providers – including an estimated RM1 billion for Tenaga Nasional Bhd and the Malaysian Communications and Multimedia Commission each, the latter for spectrum apparatus assignment fees.

The cost of the 5G coverage network equipment and infrastructure was initially estimated at RM11 billion, as announced on July 1.

Digital Nasional Bhd says it has since become clear that a further RM1.5 billion is required for fibre of higher specification and faster throughput. – ALIF OMAR/The Vibes pic, November 5, 2021

Digital Nasional Bhd says it has since become clear that a further RM1.5 billion is required for fibre of higher specification and faster throughput. – ALIF OMAR/The Vibes pic, November 5, 2021

DNB said it has since become clear that a further RM1.5 billion is required for fibre of higher specification and faster throughput over 10 years from Telekom Malaysia Bhd, to upgrade the existing fibre infrastructure in the country to support the higher throughput required and provide a better quality 5G experience.

On October 28, UOB Malaysia provided the first tranche of financing in the form of an RM800 million receivables purchase agreement (RPA) to Ericsson Malaysia for the 5G rollout.

Critics such as Muar MP Syed Saddiq Syed Abdul Rahman have been calling for greater transparency over the rollout, especially on financing.

“The question here is the scrutiny behind the additional RM7 billion for DNB, as if it is a monopoly.

“The total RM11 billion is the rakyat’s money, and MPs have no opportunity to ask questions to DNB,” he told the Dewan Rakyat on Tuesday.

Sukuk programme expected next year

But DNB asserts public money is not involved, as the cost will be borne by the private sector.

Aside from the RM800 million, another RM2.3 billion of syndicated loans of the same RPA is being raised, said Nik Azlan.

“DNB is targeting to cover 80% of the population by 2024 – hence, to satisfy this, we are raising RM5 billion. So, all we need is RM5 billion to carry us into 2024.

“Because from 2025 onwards, the revenue we will be generating will carry us until 2031.”

Aside from the RPA, he added that DNB is working with a number of banks to secure working capital facilities of RM2 billion.

“We are finalising a deal very soon and the balance is being negotiated. We will make the necessary announcements as we go along.”

DNB also plans to launch its 10-year sukuk programme next year.

“The interest we have received from potential lenders has been very good,” Nik Azlan said.

“The sukuk programme is intended to replace the working capital facilities that we are arranging for the RM2 billion, and to repay the RM3 billion RPA we are raising now.”

He added that the RPA or deferred payments will only need to be paid from 2025 onwards.

“So, that helps with our cash flow.” – The Vibes, November 5, 2021

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