Category Archives: DiGi

Malaysian minister wants to issue licences to new players if telcos refuse to sign up for DNB’s 5G access

With 9 days remaining until the 30th June 2022 deadline, Communications and Multimedia Minister Tan Sri Annuar Musa (Pic) said he will issue new licences to new players if the number of companies participating in the 5G rollout is not enough. The government has issued an ultimatum to the big four telcos such as Celcom, Digi, Maxis and U Mobile to take up Digital Nasional Berhad’s (DNB) 5G wholesale offer or risk being left behind. 

As reported by Bernama during the 2021 K-KOMM Excellence Service Awards (APC) ceremony held yesterday, Annuar said negotiations on a service agreement between the telcos and DNB for the implementation of the country’s 5G Network were still ongoing. He said, “I have high confidence that all telco companies do not want to be left behind in providing 5G, which is why we take the policy of inviting everyone to come on board, but we cannot force them to join.

“Any company that participates to roll out 5G, we will continue. If the number of companies is not enough, I will issue licences to new players. I’m not going to wait for anybody. I did say, please think about the importance of the national interest.”

The Minister added, “We want to roll out 5G according to plan and the government has given space for existing players to come on board. Hence, we have set a deadline that we feel is more than enough. Let them complete the negotiation.”

At the moment, only YTL Communications and Telekom Malaysia have apparently agreed to sign up and take an equity stake with DNB’s 5G wholesale access offer but YTL’s Yes 5G remains the first and only telco to provide commercial 5G services in Malaysia. DNB’s 5G network currently covers select areas of Kuala Lumpur, Cyberjaya and Putrajaya, and they are expanding into more states including Johor and Penang. 

The big four telcos have been reluctant to sign up with DNB highlighting concerns that the current reference access offer (RAO) does not enable affordable and quality 5G services to consumers. Some of the pressing issues include wholesale pricing that’s locked to a 10-year period and the overall cost to “rent” from DNB is higher than building their own 5G network. It was also reported that the government will consider opening equity stakes for DNB to private equity both private and foreign if the big four telcos are not interested in taking up the offer.

The suggestion to increase the number of telcos doesn’t seem to address the current 5G stalemate as the big four telcos currently command over 90% of total mobile subscriptions and collectively offer 95.5% 4G population coverage throughout the country. Malaysia already has a vibrant and competitive mobile landscape with a total of 9 companies being allocated spectrum to run mobile services. This includes Celcom, Digi, Maxis, U Mobile Asiaspace, Altel, Redtone, YTL Communications and TM. On top of that, there are dozens more mobile network virtual operators (MVNO) that tap on existing networks to offer retail mobile services. 

If there’s a new player in town, it will be tough to sway consumers from the big four telcos if they don’t provide coverage improvements. Even with YTL and TM having access to 4G spectrum and 5G via DNB, they are still considered small players in the field as their mobile coverage especially for indoors and rural areas is limited compared to Celcom, Digi, Maxis and U Mobile. Since the government has announced the single wholesale network approach, there’s no opportunity for new players to compete in network coverage and they would have to rely on DNB’s network which will take years for it to achieve a substantial 5G footprint nationwide.

Axiata and Digi need more time to complete proposed merger, extend longstop date to Dec 31, 2022

KUALA LUMPUR (June 20): Axiata Group Bhd and Digi.com Bhd need more time to fulfil conditions that have been set out in the conditional share purchase agreement (SPA) signed on June 21, 2021 to merge their local mobile service operations.

The two telcos announced to the stock exchange that the duo have agreed to extend the current longstop date on June 21 under the proposed merger of Celcom Axiata and Digi.com’s mobile telecommunication network operations to Dec 31 this year.

The filings with Bursa Malaysia said that the duo have agreed to extend the date by which the conditions precedent as set out in the SPA are to be satisfied or waived in accordance with the terms and conditions of the SPA.

The extension came ahead of the June 30 deadline set by the government to conclude talks for telcos to sign up for 5G network contracts and to take up shares in Digital Nasional Bhd (DNB), the special purpose vehicle set up by the government to undertake the 5G roll-out.

To recap, Axiata and Digi.Com announced the proposed merger of Celcom Axiata and Digi.Com’s mobile telecommunications network operations on April 8 last year. This is the second merger between the two companies but it only involves the local operations this time round.

Under the proposed merger, Axiata and Telenor will each hold equal stakes of 33.1% respectively in the merged entity named Celcom Digi Bhd (CDB), which will continue to be listed on the local bourse, and will have a combined pre-synergy equity value of close to RM50 billion.

Axiata would receive cash consideration of approximately RM2 billion, of which RM1.7 billion would be from Digi.Com and the remaining RM300 million from Digi.Com’s parent company, Norwegian telecommunications giant Telenor ASA.

In November last year, the Malaysian Communications and Multimedia Commission said that it had formally received Digi.Com subsidiary Digi Telecommunications Sdn Bhd’s application involving the proposed merger of Celcom Axiata and Digi.Com’s mobile telecommunications network operations.

Share prices of Digi.Com and Axiata have been on a downward slope. Year to date, Digi has dropped 27% or RM1.18 to close at RM3.18 on Friday (June 17), valuing the telco at RM24.73 billion.

Axiata, whose president and group chief executive officer Datuk Izzaddin Idris stepped down from his role on May 31, has slid 34%, or RM1.41, since the start of the year to RM2.75. Axiata’s market capitalisation was at RM25.24 billion.

Axiata expects Celcom-DiGi merger to be done in 2H22

THE proposed merger between Celcom Axiata Bhd and DiGi.com Bhd to form a new entity known as MergeCo is expected to be completed in the second half of 2022 (2H22), said Axiata Group Bhd.

In a stock exchange filing to Bursa Malaysia yesterday, Axiata said the completion of the transaction will be subject to the approval of the shareholders of both the company and DiGi, as well as regulatory approvals and other terms and conditions.

Axiata and Telenor Group had previously announced on April 8, 2021, that they were in advanced discussions to undertake a merger of the telco operations of Celcom and DiGi.

On Nov 24, 2021, Axiata also announced that MergeCo had initiated engagement with the Malaysian Communications and Multimedia Commission for the merger assessment process in relation to the proposed merger.

“Our board also announced that Axiata has been informed by DiGi that an application to the Securities Commission of Malaysia to seek its approval for the proposed merger has been submitted by Digi on Jan 28, 2022,” it said.

Delay in Celcom-Digi merger not good for industry, analysts say

THE Malaysian Communications and Multimedia Commission’s (MCMC) statement of issues (SOIs) against Celcom Axiata Bhd and DiGi.Com Bhd could negatively impact the sector as merger and acquisition (M&A) will be significant to attain stronger growth in the telecommunications industry. 

Rakuten Trade Research VP (equity research) Thong Pak Leng said the absence of meaningful M&A activities in the market will only further depress the telecommunications sector. 

“M&A is imminent in the telco sector due to stiff competition. We have not seen any significant growth in the sector for many years. 

“We believe the industry consolidation will make our telecommunication companies more competitive with better efficiencies and reducing costs,” he said.

He added that this is also in line with the rollout and adoption of the 5G network in the country which is expected to play a major role in the country’s telecommunications industry moving forward. 

An analyst with a local brokerage firm does not foresee a major red flag for the proposed merger of the telecommunications operations of Celcom and Digi at this juncture. 

He added that, however, if the proposed merger is called off due to any circumstances, then it will definitely not be good for the overall industry. 

“We do believe the merged entity will be able to streamline and offer complementary and more competitive services in both the retail and wholesale markets. 

“This may partially help address some of the concerns on revenue growth,” the analyst, speaking on condition of anonymity, told 5GTalkAsia.

In a note yesterday, RHB Investment Bank Bhd analyst Jeffrey Tan stated the SOIs could potentially delay the timeline for completion of the merger, which was initially set for the end of the second quarter of 2022. 

He noted that the regulator may issue a notice of no objection if it is satisfied that the merger does not have or is not likely to have the effect of substantially lessening competition in the market or result in a dominant position. 

“While there is a possibility that a dissenting view may be issued (notice of objection), we think the risk is low, as the regulator had previously maintained an accommodative stance on market consolidation and the merger construct,” he wrote. 

Commenting further, Tan added that the uncertainty as a near-term overhang on both stocks and the key risk would be an unfavourable decision by the regulator.

RHB foresees a knee-jerk selldown on Axiata Group’s and Digi’s shares following the SOI raised by the regulator on the proposed merger.

“The ball is now in the telecommunications courts to address concerns presented within 30 days. The risk of a dissenting view is low in our view, as the regulator previously maintained an accommodative stance on market consolidations and the merger construct,” he said. 

Both Axiata and Digi have been served with the SOIs on April 1 by MCMC on preliminary concerns over market competition that could arise from their proposed merger. 

Both were also requested to submit additional comments and information on the national retail market for mobile and lowspeed fixed broadband and data services, national retail market for mobile voice and person-to-person (P2P) messaging services (including the related local distribution channel market or markets), national wholesale market for mobile voice and P2P messaging services (including network sharing arrangements), and national wholesale market for mobile broadband services (including network sharing arrangements). 

Tan believes the SOIs may have triggered renewed concerns over merger execution. 

He said the development has also caught the market off guard, as Axiata’s and Digi’s management teams had earlier indicated — during their results call and briefings — that the integration process is progressing as planned. 

RHB has maintained its ‘Neutral’ call on the telecommunication sector. 

Celcom, Digi, Maxis and U Mobile welcome govt decision to rollout 5G via Single Wholesale Network

After failing to convince the government to adopt a Dual Wholesale Network (DWN), the big four telcos  —  Celcom, Digi, Maxis and U Mobile, have jointly announced that they welcome the Cabinet’s decision to continue with the Single Wholesale Network (SWN) model for 5G deployment as well as the offer to take up an equity stake in Digital Nasional Berhad (DNB).

The telcos said they will engage with the Ministry of Finance, Ministry of Communications and Multimedia, MCMC and key industry players on further details on the implementation of 5G via the SWN including the proposed shareholding offer and transaction process.

The big four also said that it believes that a successful 5G deployment in Malaysia will be built on the principles of transparency, sustainability, and security.

As announced last Wednesday, the government had offered to reduce its stake in DNB from 100 per cent to 30 per cent, allowing telcos to acquire equity of 70 per cent. Details of ownership and equity valuation are subject to discussions between DNB and the telcos.

DNB has also announced that it welcomes the government’s decision to retain the SWN model and it is extending the free 5G network access to telcos until 30th June 2022 to facilitate a seamless transition. At the moment, DNB covers select areas in Kuala Lumpur, Cyberjaya, and Putrajaya, and they are currently expanding to other states including Johor. It aims to achieve 80 per cent 5G population coverage by 2024.

DNB is a state-owned special purpose vehicle under the Ministry of Finance that is given the mandate to roll out 5G on cost recovery and supply-led model. It currently holds a 40MHz block of the 700MHz spectrum, a 200MHz block of the 3.5GHz spectrum, and a 1600MHz block of the 26/28GHz (mmWave) spectrum. Within four months after DNB is established, it appointed Ericsson as their technology vendor out of a total of 4 vendors to build the national 5G network.

Ericsson recently announced that DNB will be the first 5G commercial network in the world to use Dynamic Radio Resource Partitioning (DRP). The 5G RAN slicing aspect of the network will allow telcos on the network to have differentiation and guaranteed performance needed to monetise 5G investments with diverse use cases. While multiple telcos can tap onto the same network, RAN slicing will dynamically optimise allocation and prioritisation of resources for guaranteed fulfilment of SLAs required.

At the moment, the big four telcos have not revealed any timeline of when they will offer 5G services via DNB’s network. If implemented successfully, Malaysia’s SWN model would be an example for the world as other existing SWN projects have failed or struggled. Recently, South Africa has decided to scrap their plans to launch its SWN while Mexico regulators have given their struggling SWN, Red Compartida, a further four-year extension to deliver its 92.5 per cent population coverage target.