KUALA LUMPUR (April 1): The Malaysian Communications and Multimedia Commission (MCMC) has laid out the regulatory framework for the upcoming 5G Single Wholesale Network (SWN) in Malaysia in an industry briefing, according to a research note by CGS-CIMB analysts on Friday (April 1).

CGS-CIMB analysts Foong Choong Chen and Sherman Lam Hsien Jin wrote that the MCMC had highlighted the reference access offer (RAO), which will be issued by 5G SWN infrastructure operator Digital Nasional Bhd (DNB) as part of the latter’s licensing condition and which must require the MCMC’s approval.

“DNB would also need to serve all access seekers equally and can only offer wholesale services. It is not allowed to suspend wholesale services to access seekers due to contractual reasons — as it will affect end users — but must instead resolve any operational disputes via other means.

“Furthermore, DNB must adhere to its approved business and network roll-out plans, which will be closely monitored by the MCMC,” the research note read.

DNB is also obligated to ensure continuity of services and operations, have sufficient redundancies and security built into the network, and periodic reporting, according to CGS-CIMB. 

The research note added that penalties for non-compliance by DNB may lead to prosecution, compounds or drawdowns from its RM150 million bank guarantee.

On pricing, DNB’s 5G wholesale fees will be regulated under the MCMC’s Mandatory Standard on Access Pricing, which will be reviewed every three years. 

“The regulator will not enforce the mandatory signing of 5G wholesale access agreements between telcos and DNB, but with the government deciding to proceed with the SWN model and mobile network operators (MNOs) being offered equity stakes in DNB by end-June 2022, the MCMC believes that the industry may now be able to move forward with 5G,” said CGS-CIMB. 

Meanwhile, CGS-CIMB expects the RAO to be published by DNB on Friday after being approved by the MCMC and the resolution of 17 issues that arose at the start of negotiations between DNB and the MNOs in March.

“The RAO contains 10 parameters that have been mutually agreed upon between DNB and the MNOs. Thereafter, negotiations on the terms of the access agreement between DNB and potential access seekers, the scope of which will be within the parameters of the RAO, will take place in April to July 2022,” the research note highlighted. 

CGS-CIMB also reiterated its “underweight” rating of the Malaysian telecommunications sector with its top pick being Telekom Malaysia Bhd (TM), which was trading at RM4.87 at the time of writing, with a target price of RM7.50. 

“Pending the outcome of the government’s negotiations on the DNB stake sale to the MNOs, we keep our sector 'underweight' rating. 

“We prefer the fixed to mobile segment due to better revenue growth prospects, more benign competition and less regulatory risk. TM is our top Malaysian telco pick. 

“Upside risks: The MNOs take equity stakes in DNB at fair valuations and are able to lower total 5G roll-out costs and reduce 5G wholesale fees,” CGS-CIMB concluded.