By P. Gunasegaram
This article has been updated for new information. – 11:20am, Nov 5, 2024
Forget for a moment the folly of a second 5G network for Malaysia, why compound the mistake by awarding that solely to one royalty-linked operator U Mobile who can decide whether to use the others? Were there political considerations?
It’s already raised some hackles within the industry with questions as to why the two main mobile operators – CelcomDigi and Maxis were not chosen when they have much higher coverage, infrastructure and subscribers.
This is reflected in the revenue shares of the three – roughly, 50% for CelcomDigi, 37% for Maxis and only 13% for U Mobile. Based on these figures alone, U Mobile has to be the least likely candidate for the award and CelcomDigi the most likely.
Besides, CelcomDigi and Maxis have far more financial resources, capability and track record with their decades of experience in the field compared to a relatively late entrant, U Mobile.
So why did the Malaysian Communications and Multimedia Commission or MCMC pick U Mobile against all odds? MCMC merely said it had “rigorously undertaken processes encompassing detailed deliberations on technical and commercial aspects, among others” without saying what they were.
Both CelcomDigi and Maxis, while being guarded with their responses because they are after all dealing with their regulator, were clearly disappointed with the choice and maintained they had superior capabilities.
When there is not a ready and valid explanation for the selection, political factors often provide some insight. U Mobile is spearheaded by tycoon Vincent Tan who probably controls the company through a Singaporean company called Straits Mobile Investments Pte Ltd which owns 48.3% of U Mobile.
(I have received fresh information that the 48.3% in U Mobile is owned eventually by ST Telemedia, which is a Singaporean government-owned company with investments in telecommunications and technology. This was built up from 30% some twenty years ago. ST Telemedia has management control of U Mobile. This is another negative for the deal.)
Other Tan-linked companies such as Singer (Malaysia), U Telemedia, and Berjaya Infrastructure own a combined stake of around 14.7%, meaning he could be controlling as much as 60%. Interestingly, Sultan Ibrahim Sultan Iskandar – the current Yang di-Pertuan Agong – is the second largest shareholder with 22.3%.
Sultan Ibrahim has close business ties with Tan, going back at least a decade. The Sultan acquired a 15% stake in Tan’s MOL AccessPortal Sdn Bhd for US$120 million in Feb 2014.
In December of the previous year, Sultan Ibrahim bought a 20% stake in Berjaya Times Square Sdn Bhd from Berjaya Assets Bhd for RM250 million. The Berjaya group is Tan’s flagship.
In March last year, Tan relinquished his position as non-executive chairman of Berjaya Corporation to Sultan Ibrahim’s daughter, Tunku Tun Aminah.
In April this year, Berjaya Corp lodged police reports on allegedly “false” reporting “made with malicious intent, aimed to cause political upheaval” regarding the purported opening up of a new casino in Forest City, Johor, Malaysia Reserve reported.
The conglomerate controlled by Tan and Genting Bhd chairman Lim Kok Tay was allegedly in talks with Anwar Ibrahim to open a casino in Johor, it added.
In the statement, Berjaya Corp said the article titled “Malaysia in talks with tycoons on casino to revive US$100 billion Forest City” had included inaccurate information that misrepresents its supposed involvement in discussions with Anwar regarding the Forest City project.
The Bloomberg report released on April 25, quoting unnamed “people familiar with the matter”, had said that Malaysia was in “early discussions with tycoons” on opening a casino in Forest City, Malaysia Reserve said.
The report said that Anwar had met with Tan and Lim the week before, at the development on the southern coast of Malaysia near Singapore, adding that “King Ibrahim Iskandar was also represented”.
Tan is also said to be close to Prime Minister Anwar Ibrahim. One of Anwar’s former aides, Farhash Wafa Salvador is the chairman of the 7-Eleven chain of convenience stores in Malaysia.
Reports now say that U Mobile is going for an initial public offer sometime soon. That would effectively give them a way to cash in their licence as the second 5G operator, even before any progress has been made to decide on and implement the network, bringing possible enormous profits to its shareholders.
But there is considerable uncertainty ahead. Remember that the current 5G operator, Digital Nasional Bhd or DNB, was given the sole right to provide 5G services until the new government reversed it.
All its plans were based on a single network operator who would provide 5G access to all telecommunications companies (telcos) at a price which is affordable based on a larger scale of operations. That model is dead now with a second operator.
Who will compensate DNB for the loss in business now? What will the compensation be? Will any of the telcos take a stake in DNB now given that its projections were based on a larger market?
The plan under which DNB was set up envisaged that all telcos will have equal access to the 5G pipeline and all of them will be shareholders in DNB. The competition among the telcos will be at the front end.
There are other unanswered questions. Will U Mobile have the financial muscle to compete? If rates drop in the face of competition, will either DNB or U Mobile be able to make money? If not, will there be a collapse of 5G services?
It is still not too late to change tack. Sticking to the DNB model is a far better alternative because it’s already operating. If all telcos take a stake in DNB, their interests are aligned in the same direction and there is no need to duplicate expensive infrastructure which will come up to billions.
Politics cannot be the final determinant of how infrastructure is built. Surely we must have learnt our lesson by now.
Even if there is insistence that a second 5G operator is needed, U Mobile is clearly the wrong choice – two bad politically determined decisions one after another by the Madani government.
P Gunasegaram says that politicians must have enough sense to keep politics and patronage out of some decisions at least.
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