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EXCLUSIVE Malaysia’s biggest telcos seek majority stake in 5G agency – document

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People use their mobile phones at a university in Semenyih, outside Kuala Lumpur, Malaysia November 3, 2017. REUTERS/Lai Seng Sin/File Photo

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  • Four telecom operators seek at least 51% of 5G agency DNB – letter to government
  • Telecom operators say majority ownership is ‘most viable’ for deal
  • Telecom operators want to review the government’s 5G access offer
  • Telecom operators cite prices and transparency risks for 5G access offer

KUALA LUMPUR, May 19 (Reuters) – Malaysia’s four biggest telecoms companies are seeking a majority stake in a state-owned 5G agency, thwarting a government proposal to offer them a minority stake, according to a letter sent by the companies to the Ministry of Finance.

The four dominant providers – Celcom Axiata Bhd (AXIA.KL), DiGi Telecommunications (DSOM.KL), Maxis Bhd (MXSC.KL) and U Mobile – also want to review the pricing model and network access plan offered by the agency, according to the May 9 letter seen by Reuters.

Their objections to the government’s proposal, which offered up to 70% of the country’s only 5G network operator split among a wider group of companies, increases the risk of delays as the government aims to wrap up sales talks. of participations by the end of June.

“We would not be able to justify a passive minority investment in this business without being able to exercise influence and control to protect our investment,” the letter said.

Two people with direct knowledge of the letter confirmed its contents to Reuters. They declined to be identified, citing the sensitivity of the issue.

The companies and the finance ministry did not immediately respond to Reuters requests for comment. The Communications Ministry, which received a copy of the letter, and state-run 5G agency Digital Nasional Berhad (DNB) also did not comment.

In March, the government offered all telecommunications companies in the country a combined stake of up to 70% in DNB, which is responsible for rolling out 5G, after mobile operators complained about its plan for a network managed by the state that will charge telecommunications operators for access to 5G. rather than allocating spectrum to them.

They said the plan would hurt competition and called for a second 5G network, but in March said they would be open to the government’s alternative proposal to take stakes in DNB. Read more

The May 9 letter made no mention of how the government’s proposed stake of up to 70% was to be split, although one of the sources with direct knowledge of the matter said nine companies had been invited to participate, leaving the big four players with only a combined minority stake.

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“MOST SUSTAINABLE” MODEL

The companies said they were still willing to explore the government’s proposal, but at least a 51% stake would be “the most viable way to reach an agreement”.

“The role proposed by the MoF as a minority shareholder does not appear to allow any of us to add shareholder value and is not commensurate with our contribution to the industry, or to our duty to our shareholders and customers,” the letter reads.

Only two small operators – Telekom Malaysia (TLMM.KL) and YTL Communications, a unit of YTL Corporation (YTLS.KL) – have joined the government’s 5G plan.

A standoff between DNB and the four major players over pricing and transparency is also complicating Malaysia’s 5G plans, including fears that a single state-run network could lead to a nationalized monopoly, Reuters reported. Read more

The letter from the four carriers called for a review of DNB’s “Reference Access Offer” (RAO) – a document released last month setting out prices, service commitments and other details of the 5G wholesale model. .

The companies say the current model proposed in the RAO was “not commercially viable” and could lead to higher costs for customers and slower adoption rates.

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“The lack of full transparency on DNB’s rate of return and the link to pricing agreements in the ROE raises governance issues…which will materially impact the affordability of 5G access,” the letter states. .

The RAO agreement is a crucial step before telecom operators can sign long-term agreements with DNB to deploy 5G.

DNB said it would charge carriers less to access its 5G network than their costs for 4G and also offered free 5G trial services to carriers until June 30, when it begins rolling out the network. .

It also acknowledged questions about its transparency, telling Reuters last year that the country’s communications regulator would adopt strict public guidelines to ensure fair pricing and a smooth rollout.

The agency began an initial 5G network rollout in December last year. Since then, YTL is the only company to have started offering 5G services to its customers.

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Reporting by Rozanna Latiff; Additional reporting by Liz Lee; Editing by A. Ananthalakshmi and Edmund Klamann

Our standards: The Thomson Reuters Trust Principles.

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