TM aspires to be sole 5G network infrastructure provider

TheEdge Wed, Jul 08, 2020 03:00pm - 3 years View Original


DIGITAL connectivity in Malaysia still leaves a lot to be desired, especially on the outskirts of cities and towns and in rural areas.

Take last week’s widely reported stories of a tree-climbing Sabahan youth, for instance.

An industrious student, the Sabahan trekked up a hill and then climbed up a tree in a desperate bid to get an internet connection, so that she could be part of a virtual classroom as the Covid-19 pandemic had forced students like her to stay home.

The digital divide in Malaysia is still very wide, not only between rural and urban areas and inter-region but also within urban communities. Given the relatively high cost of digital connectivity, it is prohibitive for most low-income households.

This is the dilemma faced by Telekom Malaysia Bhd (TM), the country’s fixed-line telecommunications company.

As a listed entity on Bursa Malaysia, its investors demand a high degree of profitability. At the same time, as a government-linked company (GLC), it is expected to deliver on the government’s digital connectivity agenda.

How to balance the two demands?

For CEO Datuk Noor Kamarul Anuar Nuruddin, the answer lies in allowing the group to become the underlying wireless infrastructure provider for the 5G spectrum.

The way he looks at it, TM will then be able to provide data connection to those who are not linked to the group’s fibre infrastructure, such as those living in rural areas, as well as in newly developed areas where the infrastructure is not available yet.

His reasoning is simple: If the 5G spectrum is allocated to all the major mobile operators and TM on a piecemeal basis, the opportunity to have a speedy roll-out of 5G connectivity would be lost.

This is because the mobile operators will still have to depend on TM’s fibre network up to their base stations, before being able to broadcast through the spectrum. Developing fibre infrastructure requires a lot of investments, which must meet TM’s return on investment metric.

Simply put, it will not be commercially viable for TM to develop fibre infrastructure in areas with low population or that are deep in the rural part of the country.

It also does not make commercial sense for the mobile operators to develop 5G connectivity when they have yet to recoup their investments in 4G LTE.

If the government continues with the practice of awarding spectrum on a piecemeal basis to mobile operators, mobile operators will divert their resources to develop 5G connectivity rather than increasing their 3G and 4G LTE connectivity.

“Mobile operators only look at the commercial aspects. TM has always had to straddle between our commercial and national agendas. So, for us to balance these two, it actually makes sense to roll out wireless connectivity to rural [areas] and even in the urban centres,” says Noor Kamarul in an exclusive interview with The Edge.

“The magic of the low-band spectrum is that it can penetrate buildings better than high-band spectrum. Not to say it is going to be a complete solution to everything; no, we will still roll out fibre. We are still going to keep doing that because fibre is very important to get connectivity out.”

In order to get connectivity out to the public fast, Noor Kamarul says it is better to use low-band spectrum “and that was why we pitched for it”.

TM was one of five telcos selected for a 5G spectrum allocation in the 700MHz band by the Malaysian Communications and Multimedia Commission (MCMC) on May 15.

However, the award was not publicly announced until the document detailing the allocations was uploaded on MCMC’s website on June 1.

On June 2, the decision was reversed by Communications and Multimedia Minister Datuk Saifuddin Abdullah after a public backlash, as the allocation was reportedly not conducted via open tender. Moreover, MCMC had diverted from the original plan for the 700MHz band to be awarded to a consortium rather than to individual licence holders.

The 700MHz band is the most important within the spectrum as it allows for the licence holders to cover a wider area from their base stations, thus reducing the need for the construction of too many base stations and towers.

The low-band spectrum is also more effective in penetrating buildings — a feature that is needed for the mobile operators to offer stable services in urban areas without depending on fibre infrastructure.

The allocation decision, which was reversed, awarded each of the Big 3 mobile operators — Maxis Communications Bhd, Celcom Axiata Bhd and DiGi.Com Bhd — two bands of 10MHz (2x10MHz) on the 700MHz spectrum.

Meanwhile, Altel Communications Sdn Bhd, a company owned by Tan Sri Syed Mokhtar Albukhary’s Puncak Semangat Sdn Bhd, was given 2x5MHz on the 700MHz band.

Similarly, TM was allocated 2x5MHz on the 700MHz band, even though it is a GLC and considers the allocation “too small” for it to implement its plans to offer wireless connectivity to rural, semi-urban and urban areas yet to have fibre connectivity.

“When MCMC issued the band previously, we complained to the minister. We asked for more bandwidth. To roll out 5G on 700MHz, the most suitable is 2x20MHz. That’s the minimum. But in our request to the government, we said, ‘Why don’t you give us 45MHz.’

“We need more bandwidth in the low-band spectrum because as a GLC, we have always been asked to solve the national agenda [issues] in digital connectivity. So, if you give us a small allocation of the spectrum, how are we going to do it?” asks Noor Kamarul.

“At least with 20MHz, we can solve the issue for a lot of areas. We are willing to commit to deliver that 98% coverage target — and we don’t mind starting in the rural and semi-urban areas first, before we roll out in the cities.”

Does this mean that if TM were allocated all of the spectrum for 5G on the 700MHz band, the group would be the fifth mobile operator, competing against the other established players?

Noor Kamarul says that is not TM’s aspiration. He explains that the wireless strategy is aimed at improving digital connectivity in areas where it is not commercially viable for fibre infrastructure to be developed.

TM plans to do this is by developing base stations and transmission towers in these areas, and getting the people there to connect to the 5G network first, before the telco develops fibre infrastructure.

Providing connectivity to all Malaysians is the main target for TM, not speed, says Noor Kamarul. For someone who does not have digital connectivity, speed is secondary to a stable connection, he asserts.

And since TM plans to roll out the service on a low-band spectrum, consumers will not be able to consume the 5G network at top speed anyway.

Some may consider this to be a waste of spectrum resources and 5G technology. However, Noor Kamarul maintains that it is more important to get the entire country connected to the internet first.

Furthermore, TM will also be able to channel its resources more efficiently as it will know the level of demand for data connection in an area to justify its fibre investments, he says.

What about the mobile operators? Will they be excluded from rolling out 5G networks if TM has the sole right to the 700MHz spectrum?

Noor Kamarul says they can still launch their networks by piggybacking on TM’s spectrum. And by coupling their mid- and high-band spectrum, they will be able to offer 5G network at top speeds.

To get spectrum allocations is also costly. Telcos must pay an upfront fee as well as annual fees. In previous spectrum allocations, some telcos paid up to RM600 million in upfront fees and RM51 million in annual fees for their allotments, according to news reports.

Noor Kamarul is doubtful that the telcos would be able to justify the capital expenditure (capex) to their respective boards. “You already have an infrastructure which can serve the customers well. So, how do you justify to the board that you want to spend another US$100 million to put [up] another network for the same customers? From where would you get the money?

“When the same amount of money is already paying for the current network, why put [up] another network? There is no reason, unless the current customers are willing to pay more, which they would not be willing to.”

But how about the costs to TM to roll out 5G? Would it be willing to spend more on capex if it were allocated enough bandwidth on the 700MHz spectrum for its urban and rural roll-out?

Noor Kamarul says if that happens, the group’s capex will remain within guidance. This is because it is about how much of the roughly RM2 billion of capex a year over the next three years that will be spent on developing wireless connections and fibre.

Since the 700MHz will enable network coverage to a large area, TM can serve more customers. This will allow the group to offer lower cost per gigabit to the public, as opposed to not having enough spectrum in the 700MHz band, Noor Kamarul points out.

“It depends on what the government gives us. If it gives only 20MHz, and gives another 20MHz to somebody else, that’s a different game altogether. If TM gets the spectrum, there will be anticipation that there will be a different guidance moving forward because of the wireless aspiration.”

He says TM cannot state what it is going to do until it knows what spectrum it will be awarded as that determines its future guidance.

 

 

TM’s IoT applications seen as a growth pillar

As a telecommunications company, Telekom Malaysia Bhd needs to be at the forefront of technological innovation and development in the age of the internet, where change is constant.

In the early 1980s, TM — then a government department under the Ministry of Communications and Multimedia — set up a research and development (R&D) arm to assist the group in keeping abreast of developments in the field.

Although TM Research & Development Sdn Bhd (TMRND) has been researching and developing software, solutions and applications for TM, group CEO Datuk Noor Kamarul Anuar Nuruddin believes that it is time to commercialise the solutions. In short, he would like the company to market its own solutions.

One of the areas that TMRND will be focusing on is the Internet of Things application as it has already started applying IoT in a number of government agencies and government-linked companies.

For instance, TMRND’s proprietary Smart Water Management System is used by Jabatan Air Melaka to monitor water flow and distribution as the solution has built-in algorithms that predict consumption, leakage, non-revenue water, water quality and water level alerts in dams and rivers.

“We put [in] sensors, so whenever there is a leakage and other things, they are detected faster [which] helps save a lot of money. The benefit of employing IoT [can clearly be seen],” says Noor Kamarul.

“Right now, we are also addressing the niche market of IoT. It looks small now but it is growing and it is going to be big,” he observes.

TMRND also has manpower management solutions that allow a utility company to send recovery staff or a team directly to the location where there is an issue along its distribution channels.

“We also have this traffic lights monitoring system that is widely used in Kelantan, to monitor the traffic flow at junctions with traffic lights.”

Noor Kamarul points to the increasing application of IoT. “The traction is there already. Of course, sometimes, we don’t have mobile coverage, so we would use other mobile operators and that is why we want to have our own network … so that the wireless network will support this.

“In the next one or two years, they (TMRND) are going to rebrand themselves, so that they will be able to sell these solutions outside. So, we have already started the ball rolling on this.”

 

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