Thursday 28 Mar 2024
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KUALA LUMPUR (Jan 25): Digital Nasional Bhd (DNB) contends that a dual wholesale network (DWN) model, while not inconceivable, would invoke more challenges, delay 5G execution, and contribute to excess capacity in the long run, according to RHB Investment Bank on Monday.

After meeting with DNB, RHB Investment Bank analyst Jeffrey Tan said in a note that DWN would also negate DNB’s strategic supply-driven model/mandate, resulting in potentially higher cost to serve as traffic and revenue will be shared.

He also said DNB believes that a consortium wholesale network would also contravene the current regulatory framework as mobile network operators (MNOs) will also offer 5G retail services.

“The government had previously stated that it would make a decision on the single wholesale network (SWN) this month,” Tan noted.

He also said DNB asserted that the consortium model proposed is not new and previously mooted under the Pakatan Harapan government with MNOs unable to agree on the operating model and strategic objectives.

Tan noted that under a cost recovery model, the wholesale pricing would see MNOs committing to a minimum coverage capacity (1,200Gbps) as a pre-requisite.

Additional capacity demand (beyond the coverage commitment) would be on a pay-per-use (PPU) basis at a lower price, he added.

“DNB contends that the initial coverage capacity (7,509 sites) would translate into a steady state outlay of RM36 million per month per telco (RM432 million per annum or RM3.4 billion over 10 years).

“This works out to a blended price/cost per GB of 13 sen (based on RM30,000 per Gbps per month). The outlay would be significantly lower than the cumulative RM7 billion to RM9 billion capex that the MNOs would need to invest on their own, individually (without the SWN) into FY30 as per DNB’s estimates,” he said.

Tan said DNB is hopeful that the four MNOs will ink 5G wholesale agreements.

This follows numerous engagements and adjustments made to commercial terms within the reference access offer (RAO) — to be published by February.

Aside from earlier pushbacks on pricing and the duration of the wholesale contract (10 years), he said DNB is of the view that the “decision” ultimately boils down to MNOs having to come to terms with the need to relinquish control over their networks, with the focus turning to innovative products, services and solutions.

“MNOs now have the option to sign on a five-year agreement with the option for another five-year renewal. With MNOs granted the flexibility to invest in their own core network via MCMC’s new access list (published on Dec 15, 2021), we believe they can still look to roll out unique and differentiated offerings (more so within the enterprise segment) with the application of network slicing (a feature within a 5G core network) and control their customer journey and relationships,” he said.

Tan maintained "neutral" on the sector with Telekom Malaysia Bhd, Axiata Group Bhd and OCK Group Bhd as his top picks.

Key risks, according to him, are competition, weaker-than-expected results, and regulatory setbacks.

Edited ByJoyce Goh
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