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KUALA LUMPUR (The Straits Times/Asia News Network): Malaysia's top telecommunications companies (telcos) have agreed on terms to share ownership of Digital Nasional Bhd (DNB), the state-controlled company that will deploy the country's much-delayed 5G mobile network.

Industry sources told The Straits Times that a non-binding term sheet had been agreed upon by six telcos ahead of a June 30 deadline and a shareholders agreement for a stake in DNB is set to be inked in early July.

"We are just doing due diligence, which should be completed within a fortnight," a source said on condition of anonymity due to non-disclosure agreements signed when negotiations began earlier this month.

This comes after Kuala Lumpur played hardball with the "Big Four" mobile network operators (MNO) who were dragging their feet and insisting on favourable terms, with a view at maintaining control of an industry crucial to the national economy in post- pandemic recovery.

Finance Minister Tengku Zafrul Aziz had told The Straits Times in an exclusive interview on June 16 that an extension to "early July, but no later than that" was possible, if required to tie up loose ends.

But a term sheet laying out "the main terms of governance and the equity issues" will be ready in June in line with "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", he added.

"Indeed, the interests of Malaysia and its people must take precedence over the telcos' narrow commercial interests," Datuk Seri Zafrul said, claiming the implementation of the super fast next generation network will provide an RM650 billion boost to the economy and create 750,000 high-value jobs by 2030.

Celcom, DiGi, Maxis and U Mobile, collectively known as CDMU, have close to 90 per cent of the market share. They have insisted on holding a controlling 51 per cent stake in DNB, as well as extending the deadline beyond this month.

The negotiations have been closely watched as they could have a huge impact on the future of mobile connectivity in the country, with Communications and Multimedia Minister Annuar Musa threatening to open the door to other players if existing telcos - some of which complained of unfair terms - did not sign up to what will be Malaysia's only 5G wholesale provider.

5G is already widely available in Singapore and Thailand, with the Philippines, Indonesia and Vietnam ahead of Malaysia in their deployment timelines.

The government's readiness to forge ahead with 5G was also underlined after Prime Minister Ismail Sabri Yaakob agreed on Tuesday (June 28) with Malaysia's 13 chief ministers to form a committee on standardising communications infrastructure fees to "encourage service providers to increase investment" in such assets.

Observers noted that this move was geared towards 5G and fixed fibre cables as there would would be no major investment into older mobile technology.

Kuala Lumpur had set up DNB to build a "single wholesale network" (SWN) over a year ago, in hopes of catching up with others but faced both political and commercial pushback towards the end of last year.

Only two mobile operators and state-controlled Telekom Malaysia have so far supported the SWN model and signed up to trials as well as equity stakes in DNB.

Others, especially CDMU, want a dual wholesale network (DWN) model on the basis of better optimising availability and pricing of 5G.

They claim that DNB's wholesale offering - RM30,000 monthly for each gigabit per second (Gbps) of capacity, with a volume discount rate of RM22,000 beyond the first 1,2000 Gbps - is expensive, especially when agreements are to be locked in for 10 years, when 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 what is currently being incurred by MNOs.

The Straits Times has also learnt that the agreement will include a price review that will be overseen by the Malaysian Communications and Multimedia Commission every three years.

Further, wholesale pricing will be discounted until DNB achieves nationwide coverage of 80 per cent which is scheduled to happen only by 2024, with about a quarter of the country currently 5G-ready.

CDMU's resistance led to further delays before the government eventually compromised in March by offering telco firms a 70 per cent stake in DNB to ensure they have a say in the 5G rollout - it also hedges against being overcharged for wholesale capacity.

But out of nine telcos, only six, including CDMU, will take up equal shares in DNB, sources told The Straits Times.

Based on a planned injection of RM500 million by the finance ministry for the government's 30 per cent stake, it implies each of the six telcos will cough up around RM200 million for a 12 per cent share.

Source: https://www.thestar.com.my/aseanplus/aseanplus-news/2022/06/29/malaysia-set-to-finalise-deal-with-telcos-for-much-delayed-5g-rollout