SWN model, equity participation create win-win situation to resolve 5G rollout - Investment bank

KUALA LUMPUR: The government's decision to maintain the implementation of the 5G network as a single wholesale network (SWN) with the option for mobile network operators (MNOs) to buy an up to 70 per cent stake in Digital Nasional Bhd (DNB) is a win-win situation to resolve the issues in the 5G rollout, Public Investment Bank Bhd said.

In a research note today, it said this is seen as a midpoint between the SWN and the Dual Wholesale Network (DWN) model which the MNOs were proposing.

"However, there may be issues involving such arrangement, (for example) what's the scope of involvement of each of the MNO and will any disagreement or differences in opinion result in a potential delay in 5G rollout," it said.

The investment bank will maintain the view that regardless which model the government chooses, monetising 5G services would be a challenge in the initial years for the telco players due to a slow rate of adoption and the lack of required eco-system.

Besides, AmInvestment Bank Bhd is positive on this development and not surprised by the government's SWN option, which has been promoted over the past two years and provides project clarity on Malaysia's 5G rollout structure.

"On telcos' equity participation in DNB, we view this as potentially improving corporate governance oversight for DNB with its own wholesale subscribers representing the majority of its board of directors," it said.

It also maintains 'neutral' outlook on the sector as the higher operating expenses from DNB's fixed 5G annual wholesale capacity charge on telcos could more than offset escalated data demand and easing competition from the consolidation of two major cellular operators amid a stagflation outlook which could depress subscriber affordability.

Meanwhile, CGS-CIMB Securities Sdn Bhd (CGS-CIMB) said the latest 5G plan is potentially positive for MNOs.

As for a 70 per cent stake option, it said MNOs may be able to better steer DNB's 5G network rollout, such that it lowers the current total cost of RM16.5 billion (inclusive of RM4 billion corporate cost) and raise the proportion of leasing from MNO-owned sites.

"With this, coupled with a lower reliance on debt, DNB may be able to cut the 5G wholesale fees and change the charging structure to be more traffic-based," it said.

Pending the final outcome from the government's negotiations with the MNOs, CGS CIMB maintains 'underweight' on the telco sector with Telekom Malaysia (TM) remain the top Malaysian telco pick.

-- BERNAMA