5G deployment to boost demand for fibre networks
23 Feb 2021
KUALA LUMPUR, Feb 23 — The Fifth Generation (5G) network deployment will likely boost demand for fibre networks, benefiting the national connectivity and digital infrastructure provider, Telekom Malaysia Bhd (TM), as well as fixed-line players, research houses said.
Last week, the government unveiled its 5G rollout plan under the Malaysia Digital Economy Blueprint, in conjunction with the launch of the MyDIGITAL agenda.
To spearhead the initiative, the government had established the Government of Malaysia Special Purpose Vehicle (GOMSPV) to oversee the deployment of 5G infrastructure and network nationwide over a period of 10 years, involving an investment of RM15 billion.
“We believe the government’s MyDIGITAL initiative will largely have a neutral impact on mobile operators, while TM should stand to benet from leasing its fibre to the GOMSPV for the 5G rollout.
“We also see stronger demand for TM’s data centres as the government migrates 80 per cent of public data to hybrid cloud by end-2022,” CGS-CIMB Securities Sdn Bhd (CGS-CIMB) said in a note today.
While it maintained a “neutral” call on the sector, CGS-CIMB cautioned that a key uncertainty would be in terms of cost efficiency in rolling out the 5G network.
“This partly depends on how much the GOMSPV pays to lease the existing infrastructure and from whom.
“Costly rollouts may lead to higher wholesale access fees and reduce the cost-saving benefits for telcos, which, on the other hand, may have to contend with lower retail prices due to lack of network differentiation,” it said.
Sharing the same “neutral” call on the sector, Maybank Investment Bank (Maybank IB) said that the main risk revolves around the SPV’s ability to execute the 5G rollout.
“The GOMSPV’s source of funds is presently unclear, with the regulator ruling out the use of Universal Service Provision funds, new taxes, and direct injection from government coffers.
“In our view, fundraising through the capital market would require the GOMSPV to be profit-oriented, which could lead to elevated access fees, which goes against the data inclusion and nation-building objectives behind this deployment model,” it noted.
However, Maybank IB said overall, the GOMSPV’s wholesale model — where telcos would be allowed to access the network with rates and terms being regulated — would absolve telcos from the 5G capital expenditure, thus alleviating near-term pressure on returns.