PETALING JAYA: The twists and turns related to the allocation of the 700MHz spectrum associated with the 5G implementation, has left analysts wondering what the government’s next move will be, as the approach shifted from an open tender, to a collaborative consortium approach, and finally to an award via ministerial orders which was subsequently revoked.
On Wednesday, the communication and multimedia minister Datuk Saifuddin Abdullah decided to revoke the previous award of the 700MHz spectrum allocation on May 15. He cited technical issues, the law and the need to follow a clear process as the reason behind the cancellation.
In regard to the cancellation, Affin Hwang Capital stated that it is unsure how the government will proceed with the 5G spectrum awards.
Either it could go back to the Malaysian Communications and Multimedia Commission’s (MCMC) previous plan to award the spectrum to a single entity compromising a consortium formed by multiple licensees, or to award the spectrums via beauty contests or open tenders.
“Broadly, we prefer the single consortium allocation strategy. The approach should lead to faster rollout of 5G network with better cost efficiencies, reduce the upfront spectrum fees and lower the total industry capex for the 5G rollout,” it said in a report.
However, it acknowledged the key challenge with the approach is to convince telcos to work together as a consortium.
On the other hand, a beauty contest or open tender approach will give the winners a competitive edge over their competitors, as the propagation characteristics of the spectrum enable them to expand their coverage of 4G-LTE or roll out the 5G network at a relatively lower capex and opex.
“However, the telcos should be mindful to not overpay for the spectrum. Also, the industry’s total capex outlay should be higher than the single consortium approach,” said Affin Hwang.
Meanwhile, AmInvestment Research stated it is neutral on the regulatory U-turn, which saw the cancellation of the 2 x 5MHz block of 700MHz spectrum to Altel Communications, alongside the blocks of the 700 MHz spectrum awarded to TM, Maxis, Axiata’s Celcom and Digi.
It pointed out that besides the recently awarded 10MHz block for the 900MHz and 10MHz block for the 700MHz, Altel also has a 20MHz block for the 2600MHz band.
“As the cancellation order by the minister also includes the 900MHz and 2600MHz, we opine that the government may be reviewing the overall spectrum allocation process to enable a more efficient utilisation and integration to the usage of scarce spectrum resources in the race of developing high speed broadband capability for the country.
“At this stage, we are uncertain if the MCMC has discontinued its pragmatic approach to encourage collaboration amongst 5G operators. Being negative on the earlier direct ministerial award without tender, we are neutral for now on this turn of events pending further clarification from the MCMC,” it said.
AmResearch is maintaining its neutral outlook on the sector given the unmitigated mobile competition amid escalating capex requirements against the backdrop of the National Fiberisation and Connectivity Plan agenda to improve national connectivity and affordability.
Its only buy recommendation is Axiata Group Bhd.
