Jendela: Strengthening Malaysia’s digital roadmap
13 Sep 2020
The Coronavirus Disease 2019 (Covid-19) pandemic has brought to light many unforeseen vulnerabilities faced by countless industries and global supply chains, including exposing the wide gap between staying connected to ensure industries and economies continue to function.
In a bid to contain the pandemic, lockdowns have forced many to stay home, leading to a new reliance on digital connectivity as well as pushing the need to transform operations to include the now, necessary digital infrastructure.
Digital connectivity has also become an imperative agenda that needs to be addressed as soon as possible if Malaysia wishes to keep up with a world that is rapidly pushing its digital transformation as it navigates through the current pandemic crisis.
As millions of people go online for entertainment and more, total global internet usage have surged by between 50 and 70, according to preliminary statistics compiled by Forbes.
The same can be seen for Malaysia when the country was placed under the Movement Control Order (MCO) mid-March this year, forcing businesses, agencies, and schools to go online.
Malaysia’s internet traffic surged by 23.5 per cent nationwide during the first week of the MCO, according to statistics from the Malaysian Communications and Multimedia Commission (MCMC), as Malaysians adhered to the order to remain indoors under the MCO.
The second week of the MCO saw a further increase of 8.6 per cent.
Not ready to handle the shift
However, the MCO has also revealed that businesses in Malaysia are insufficiently equipped to transition to a more digital-enabled work environment.
According to a survey by EY, during the MCO, most companies (83 per cent large and listed companies; 84 per cent SMEs) experienced difficulties with online connectivity and communicating with their suppliers and customers, in addition to issues with infrastructure.
“The Covid-19 pandemic has highlighted a newfound sense of urgency to the digital inclusion agenda. While the crisis has enabled hundreds of millions to work, learn and connect digitally, it is easy to see how it has also exacerbated the situation for far too many people in vulnerable situations around the world.
“Now, more than ever, connectivity should be at the core of all national and international priorities – from healthcare, education, government services and beyond.
“This new normal presents an unprecedented opportunity for cross-sector collaboration to bridge the digital divide and enable unforeseen growth opportunities for the economy and society,” World Economic Forum (WEF) Digital Communications Industry Community chairman Mauricio Ramos stated in WEF’s latest ‘Accelerating Digital Inclusion in the New Normal’ report.
“At this watershed moment, telcos and industry verticals, multinational corporations, governmental and non-governmental organisations must mobilise to develop strategies to accelerate digital inclusion,” WEF said.
Aware of this gap, Malaysia’s government had recently announced an digital transformation action plan which focuses on expanding and improving Malaysia’s digital connectivity.
The Jalinan Digital Negara (Jendela) action plan announced recently by the Prime Minister Tan Sri Muhyiddin Yassin, will be the platform to achieve these aspirations by accelerating the country’s digital connectivity through widespread deployment of mobile, fibre and fixed wireless access, and paving the way to 5G, under the 12th Malaysia Plan (2021–2025).
On top of that, to aid the economic recovery, post-MCO, the government has also allocated funds and measures under the Pelan Jana Semula Ekonomi Negara (Penjana) programme to facilitate industries and businesses’ digital transformation.
BizHive delves into the digital push in Malaysia.
Pandemic exposes weaknesses in Malaysia’s digital landscape
As the nation gradually recovers from the peak of the Covid-19 pandemic, the crisis has exposed vulnerabilities in the digital landscape for Corporate Malaysia.
Ernst & Young Advisory Services Sdn Bhd (EY) in a recent study, noted that the Movement Control Order (MCO) has revealed that businesses in Malaysia are insufficiently equipped to transition to a more digital-enabled work environment.
It said that during the MCO, most companies (83 per cent large and listed companies; 84 per cent SMEs) experienced difficulties with online connectivity and communicating with their suppliers and customers, in addition to issues with infrastructure.
Despite the many adverse impact of the Covid-19 pandemic, the crisis has also pushed the digital transformation in Malaysia.
EY Malaysia managing partner Datuk Abdul Rauf Rashid in a statement, commented: “Covid-19 has emerged as a game-changer for digital transformation. Where previous initiatives and programmes to go digital have met with lukewarm responses, particularly from the SMEs, Covid-19 has spurred Corporate Malaysia to accelerate its digital transformation.”
Business leaders in Malaysia are now focusing on leveraging technology and digital to recover and thrive in the new normal, according to the EY Covid-19 business impact survey of nearly 700 companies, large and listed as well as small and medium enterprises.
“In response to Covid-19 and the restrictions that followed in its wake, businesses have accelerated the adoption of technology. Thirty-seven percent (37 per cent) of SMEs and 32 per cent of the large and listed companies have taken steps to expand or upgrade their technology capabilities.
“Close to 30 per cent of businesses (30 per cent large and listed companies; 26 per cent SMEs) have also invested in Work from Home hardware and software to ensure connectivity with their employees and improve employee productivity.
“Clearly, substantially more effort is needed from businesses. They need to step up their digital transformation and adopt technology-enabled processes and systems in preparation for a more digital-enabled environment in the new normal,” it said.
Malaysia Digital Economy Corporation (MDEC) had also conducted an online poll throughout its recently held ‘SME Digital Summit’ and through that summit, it found that 54 per cent of the survey respondents already started their digital journey, nearly 60 per cent intend to focus digitalisation on front-end operations, followed by back-end operations and adopting advanced technologies, both of which are rated at 17 per cent each
It noted that the top hindrances for digital adoption that SMEs face are the lack of knowledge and skills (32 per cent), the investment required for digitalisation (30 per cent) and the cash flow required for SMEs to sustain their transformation (17 per cent)
To enable digital transformation, 32 per cent of respondents stated they would like to receive eligible funding and incentives –followed by training for upskilling and reskilling (29 per cent) and relevant digital transformation programmes (28 per cent).
Aware of the need to mobilise the digital movement across the nation, Malaysia’s government under the Penjana programme has allocated RM700 million for the digitalisation of SMEs and MSMEs.
EY Malaysia Financial Services Consulting leader commened: “To support this demand and enable digital transformation, there needs to be significant enhancements to the businesses’ and nation’s digital and communications infrastructure, online connectivity and broadband speed, besides ensuring the stability of the technology infrastructure.
About 40 per cent of the respondents have identified better and less costly online connectivity as areas for intervention.
“The government can take the lead in such a transformation by transitioning its own processes and operations to be more digital-enabled to handle online transactions, for example, accepting digital documents for import clearances.
“The increasing need for higher technology capabilities to connect businesses, customers and supply networks is fast-tracking the world into digitalisation.”
Improving the foundations of digital connectivity
With the government pushing the ‘Go Digital’ agenda under the Penjana recovery programme, improving the foundations of digital connectivity via upgrading and expanding telecommunication infrastructures across Malaysia continues to remain a priority.
While Malaysia’s fiberisation and connectivity plan is nothing new, with policies, guidelines and targets set up since as early as 2018, the pandemic has shed new light on the need to further accelerate Malaysia’s digital transformation and improve its digital connectivity.
Of note, according to MCMC, in 1Q20, broadband penetration rate in Malaysia, per 100 inhabitants, is at 127.4 per cent, a slight drop from 131.7 per cent recorded in 2019 while
Hence, the government has introduced the Jendela action plan which aims to provide comprehensive high-quality broadband service coverage and to prepare the nation for a steady transition to 5G technology under the 12th Malaysia Plan (2021 to 2025).
“Jendela aims to propel Malaysia to be a more robust and efficient digital nation. Through Jendela, we aspire to look at, among others, enhancing the 4G coverage at populated areas, improving the speed of mobile broadband internet, expanding gigabit access via fibre optic networks, and improving digital infrastructure planning through mapping data sharing collaboration.
“Jendela will be the platform to improve the nation’s digital infrastructure under the 12MP and this will be implemented in a two-phase approach,” said Minister of Communications and Multimedia Datuk Saifuddin Abdullah during the Invest Malaysia 2020 Virtual Series 3 – Advancing Malaysia: 5G and Industry 4.0 conference.
For now, 4G coverage in Malaysia has grown to 71.8 per cent in 1Q20 compared with 51.3 per cent recorded in 2018. With the Jendela programme, the government aims to push the 4G coverage in Malaysia to 91.8 to 96.9 per cent by 2022 to prep itself for the rollout of the 5G network.
The whole Jendela programme is expected to be implemented in phases with Phase 1 starting now until 2022 and Phase 2 is expected to start after 2022.
Focus on East Malaysian digital infrastructures
A main beneficiary of the Jendela blueprint is Sabah and Sarawak as it contains plans to expand the digital connectivity in the two states over the next two years.
In his speech on the announcement for the Jendela programme, Prime Minister Tan Sri Muhyiddin Yassin said 382 new communication towers, as well as upgrading of 924 communication transmitters at existing towers, are being planned under the Universal Service Provision (PPS) programme while 35 new towers and 1,048 communication transmitters will be commercially upgraded by service providers to increase 4G coverage.
He also said, 251,166 premises will also be provided with access to optical fibre.
In Sarawak, 636 new communication towers are being planned while 977 communication transmitters at existing towers are expected to be upgraded under the PPS programme. A total of 49 new towers and 825 communication transmitters at existing towers will be commercially upgraded while 43,013 premises are expected to to be provided with access to optical fibre.
Forming a united front
The Jendela is also a collaborative digital blueprint brought together by the government as well as major telecommunication companies and operators in the country.
To facilitate this push Malaysia’s digital transformation, the telecommunication industry saw telcos Celcom Axiata Bhd, Digi Telecommunications Sdn Bhd, Maxis Berhad, U Mobile Sdn Bhd, Telekom Malaysia Bhd and TIME dotCom Bhd, jointly announcing that they are fully committed to partner with the government and make connectivity a basic utility to fast-track Malaysia’s transition into a high-income digital society.
“The Covid-19 pandemic has triggered an urgency for Malaysia to address the ‘new normal’ and cater for future demands of connectivity as an enabler for all facets of life: The economy and people’s livelihoods, education, business opportunities and building and connecting communities amongst others.
“To prepare for the future and to fulfill our digital malaysia aspirations, it is clear the industry must aspire to enable everyone in this journey through quality and reliable connectivity,” the telcos said in a joint statement.
“The industry will work closely with the Government to fast-track the nation’s progress towards becoming a globally competitive, resilient and enriched digital society and economy through Jendela,” it added.
An analysis on Jendela
Jendela is blueprint introduced as a near-term response for the need to push the digital agenda in Malaysia amidst the current Covid-19 pandemic.
According to a report by the research arm of AmInvestment Bank Bhd (AmInvestment), 2QFY20 data demand jumped year-on-year (y-o-y) with Digi registering an increase of 58 per cent, Maxis 54 per cent and Celcom 48 per cent, spurring the need to increase investments to improve communication infrastructures nationwide and at the same time, ensure that the quality of these digital connection remains good or improved.
But at what cost?
AmInvestment highlighted that given the low and potentially negative investment returns to provide 4G connectivity to sparsely populated and remote areas of the country, service providers would be collaborating and sharing resources such as sites, network facilities, fibre connectivity and broadcasting towers to defray their costs.
“We expect these operators to continue this collaborative model with the rollout of 5G services, which could be more costly than any of the previous 4 generations of cellular technology,” it opined.
Maybank Investment Bank Bhd’s research team (Maybank IB Research) opined: “The recently announced digital infrastructure plan (Jendela) is unlikely to materially raise telcos’ near-term capex, in our view.”
It added, “For the mobile players, the infrastructure plan initially priorities a further strengthening of 4G networks. 5G capex risk has been deferred for the mobile telcos, with 5G deployment realistically only beginning in 2022, at the earliest.
“Meanwhile, 3G networks are slated to be phased out by end-2021, meaning there is a possibility of impairment or accelerated depreciation of 3G equipment by the telcos.”
It noted that currently, none of the telcos have disclosed the residual value of their 3G equipment.
“We note that Axiata and Maxis have historically treated accelerated depreciation as exceptional items for financial reporting,” it added.
For fixed-broadband players, Maybank IB Research commented that the “seemingly ambitious target” of raising premises passed from 4.95 million currently to 7.5 million by end 2022 has been set.
“With home fiber connections only totaling more than three million currently, we believe these figures include premises that are being served by fixed-wireless access (FWA). Gigabit speeds are thus achievable when 5G is eventually deployed.
“Nevertheless, fiber deployment should continue unabated both for mobile backhaul and retail broadband, with Tenaga Nasional Bhd possibly emerging as a credible player in the space in the coming years,” it said.
Meanwhile, AmInvestment believed that the industry could still see a consolidation amongst its players.
“As we have highlighted on August 11, 2020, declining data yields, new 5G spectrum fees and capex pressures are likely to drive players to seek consolidation amongst themselves to reduce costs, secure economies of scale and reduce rivalry,” it opined.
It noted that while the MCMC has shown a preference for maintaining competitive pressures to provide reduced broadband prices for consumers, it believed that the industry’s stagnant revenue trajectory would eventually drive the sector towards more merger and acquisition activities.
Source: The Borneo Post