5G uncertainty

5G rollout model under review

The Ministry surprised the market last month with a willingness to review its 5G rollout model (having previously decided on a single government-owned wholesale network). The outcome of the review could have material longer-term implications to mobile telcos. In the near term however, the policy uncertainty would likely weigh on sentiment. Our sector picks remain TM (T MK, BUY, CP: MYR5.49, TP: MYR7.40) and Axiata (AXIATA MK, BUY, CP: MYR3.90, TP: MYR4.50).

Awaiting further clarity

Just when we thought the move to a single government-owned 5G wholesale network was inevitable, the Ministry surprised the market last month with a willingness to review its 5G position, with a decision to be
made in Jan 2022. Note that the 5G incumbent Digital Nasional (DNB) is already trialing 5G services with Yes and TM in Putrajaya, Cyberjaya and selected areas of Kuala Lumpur. Such policy flip-flop invariably paints the country’s policy-making in a bad light. With the government still dealing with floods, we do not rule out a delay in the review outcome.

DNB out in the press more

Since the Minister’s announcement, we have observed an increase in proDNB reports in the media in the past month, mostly advocating potential savings to consumers from a lack of resource duplication and better rural deployment. We are not taking sides, but this to us is not like-for-like comparison. The pertinent question (before redundancy considerations via a second network) should be who can better roll out and manage a single 5G network – a government shell (staffing up and thus cost loading) or a consortium of telcos (albeit profit-oriented). Rural deployment either way could be supplemented by USP funds.

Longer term consideration

Thinking aloud, under the current DNB-led model, when 4G eventually becomes obsolete in the next decade, incumbent mobile telcos would morph into MVNOs or retailers, inevitably losing market value. DNB meanwhile should theoretically gain in value, presenting the government an opportunity to monetize via a listing. Value is thus indirectly transferred from the incumbent mobile telcos (substantially-owned by government-linked investment funds) to DNB.