The End of the 5G Deployment Row? Malaysia Decides to Adopt a Dual Network Model for 5G Rollout in the Country

As covered in a previous ABI Insight, “Malaysia’s Single Wholesale Network Approach to Rolling Out 5G Calls for CSPs to Consider the Road Ahead,” the previous Malaysian government had announced plans to deploy 5G through a Single Wholesale Network (SWN) for the country operated by state-run 5G entity, Digital Nasional Berhad (DNB). By implementing an SWN for Malaysia, the hope is to significantly reduce costs required for each Communication Service Provider (CSP) to build its own 5G infrastructure, and consequently allow for low-cost consumer and prosumer 5G packages. However, this plan has been met with strong pushback from the CSPs, in particular Maxis and U Mobile, due to concerns about pricing, transparency, and a single infrastructure-based 5G carrier monopoly.

Since then, the country held its general election in late 2022, which saw the formation of a new government. The new government then promised to conduct a full review of the nation’s 5G rollout plans and recently announced in May 2023 that it will adopt a dual infrastructure-based 5G carrier model, allowing a second 5G infrastructure entity to enter the market after DNB’s 5G network coverage reaches 80% of the population. Based on the current rate of 5G deployment by DNB, the second 5G network is expected to start rolling out next year.

This announcement by the government has been met with mixed responses from both local and overseas players. Generally, the response from the local industry is positive as the move promotes transparency and competition in the 5G industry. On the other hand, the announcement has also sparked concerns from the United States and its Western allies over the country’s willingness to consider Huawei as a potential vendor to build the nation’s second 5G network. Furthermore, it is still unclear how this announcement will affect DNB’s original agreement with Ericsson, which was appointed as the sole prime contractor for the rollout of DNB’s 5G network. Below, ABI Research delves deeper into the key stakeholders affected by this announcement:

• Malaysian Consumers and CSPs: Malaysian CSPs appear to benefit the most from this decision as it promotes a competitive ecosystem where 5G wholesale prices cannot be controlled by a single entity. Regardless of which vendor is selected to build the second network, increased competition is expected to drive down the cost of 5G connectivity, with the CSPs being able to pass along these cost savings to consumers as well.
• International Players: The Financial Times reported that the United States and the European Union (EU) have expressed concerns over potential threats to national security and foreign investments should Huawei be selected as the networking equipment vendor for its second 5G network. However, the Malaysian government has responded that there needs to be a diversity of choice and that the second 5G network equipment vendor will be selected based on the merits of its equipment and technology.
• Ericsson: Ericsson was earlier selected by DNB to be the sole prime contractor for the rollout of Malaysia’s 5G network. However, with the country expected to introduce another 5G network with a second equipment vendor, this will introduce competition in the market that could impact Ericsson’s profitability in the country.

Regardless of the vendor selection decision, CSPs should continue to focus on building strategic local partnerships and developing service-based competitive advantages for 5G applications in the country. While various collaborative initiatives have been launched, such as the Maxis 5G Alliance (M5GA), which aims to showcase 5G solutions and promote 5G adoption across industries, and the launch of the Malaysian Research Accelerator for Technology and Innovation (MRANTI) 5G Experience Center, which provides visitors with an immersive experience with regard to 5G use cases, initial uptake of 5G services in the country remains low at an underwhelming estimated 1%. Many more collaborative efforts and 5G promotion activities should be conducted to boost enterprise 5G adoption in the country.

In the consumer domain, CSPs should also focus on building valued and localized consumer content, and encourage the introduction of novel 5G-based applications. For example, South Korean CSPs have developed consumer-centric content that leverages their 5G networks—SK Telecom has launched its metaverse platform, ifland, which primarily functions as a virtual social networking service using 5G and Extended Reality (XR) technologies, while LG U+ has also been developing Korean pop (K-pop) XR content for both local and overseas markets through its content platform, Idol Plus, which allows users to have access to real-time streaming of K-pop performances and other related XR content. Similarly, Japanese CSP KDDI Corporation has also partnered with Netflix and the Shibuya ward of Tokyo to launch Virtual Shibuya, a virtual/digital replica of the ward, aiming to demonstrate the capability of 5G technology. With consumers being a key target market for 5G applications, the development of unique 5G solutions for consumer applications will be a key priority for CSPs.

Malaysian CSPs need to start building a strong local 5G ecosystem that can thrive on domestic demand. Doing so will make the country much more resilient to geopolitical challenges and global headwinds, which will, in turn, benefit Malaysian consumers and enterprises.