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Recently DiGi Telecommunications, has been lobbying the Malaysian telecoms regulator, the Malaysian Communications and Multimedia Commission (MCMC), in regard to the potential acquisition of 900 MHz spectrum. This is because there is an expectation that the national regulator may announce the refarming of the 2G 900 MHz spectrum band in early 2015. Even if the MCMC decides to refarm the spectrum, it has to determine the method of sale first, whether via spectrum auction, beauty contest, government allocation, or a combination of these.

Spectrum refarming is the process of spectrum reallocation among operators in an effort to satisfy the market needs more efficiently and equitably. Through refarming, the regulator is able to rebalance the spectrum allocation and bridge the gap between the larger and smaller carriers.

At the moment, the 900 MHz spectrum is held by the top three mobile carriers, which are Celcom, Maxis, and DiGi. Redeployment of the spectrum will bring an opportunity for the smaller mobile carriers like U Mobile, YTL, and P1, which are potential threats to the top three. Currently, Malaysia has 70 MHz in the 900 MHz band, of which Celcom and Maxis holds 32 MHz and 34 MHz respectively, while DiGi only has 4 MHz. Thus, DiGi would be the least affected by the loss of the 900 MHz spectrum compared to the other two larger rivals. However, DiGi wishes to be bold and is eager to acquire the 900 MHz spectrum to compete with Celcom and Maxis.

DiGi, 49% owned by the Norwegian operator Telenor, is the third-largest mobile carrier in Malaysia in terms of mobile subscriptions; Celcom and Maxis are the other two major mobile carriers. By the end of 2Q 2014, DiGi had 10.9 million mobile subscriptions, while Celcom and Maxis had 13.4 million and 12.4 million mobile subscribers respectively. (For more information, please refer to the latest ABI Research market data Mobile Subscribers (MD-SUB-124).) DiGi has accumulated substantial mobile subscriptions through the competitive pricing of its prepaid plans. However, as more and more MVNOs were introduced in Malaysia, the lower pricing policies of the MVNOs have exerted pressure on DiGi, which compelled DiGi to adjust its strategies toward improving its service quality and enhancing network coverage, etc.

From the prospect of financing, DiGi should be ready to fund the potential spectrum auction cost because the net debt/EBITDA of Telenor Group is 1.1X at the end of 2Q 2014. In contrast, the ratio of Celcom's parent company Axiata Group is 1.4X, and 1.7X for Maxis by 2Q 2014. While the Malaysian government has never had a spectrum auction, DiGi spent MYR650 million (US$195 million) purchasing 30 MHz of the 3G 2100 MHz spectrum in 2007. That price could be a good reference for the possible 900 MHz spectrum auction. However, it is uncertain whether the MCMC will refarm the 900 MHz spectrum, and it is uncertain whether DiGi will succeed in securing the spectrum. DiGi is arguing that assigning the spectrum to it would help to level the playing field between the top three mobile operators. However, the more recent entrants, (U Mobile, YTL, and P1), may also feel entitled to the 900 MHz spectrum.


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