ALTHOUGH support has been expressed for the government to form a special purpose vehicle (SPV) to roll out 5G infrastructure, it is simply not the best body to do so, and there are likely to be considerable inefficiencies and bloated costs.
Plus, we already know about government-owned SPVs and how they can be abused. The most notorious is 1Malaysia Development Bhd, the self-styled strategic development company owned by the Finance Ministry that hid behind a cloak of anonymity, dispensing with any semblance of accountability, and looting the country of billions of ringgit, much of which we may never get back.
With a capital expenditure of some RM15 billion over 10 years (you can bet your life that it will at least double), the 5G roll-out is no small matter, and will offer plenty of opportunity points for corruption and patronage to take place, with cost overruns as a direct result.
What we propose instead is a private sector initiative that will remove all risks for the government, obviate the need for the government to pump funds into the project, and get badly needed revenue almost immediately into government coffers.
The next-generation telecommunications technology that is 5G leads to faster speeds and greater connectivity. A government SPV leading the roll-out may well torpedo the effort, and if that happens, it will jeopardise our competitiveness and development as a nation. We simply cannot afford to take risks with the 5G roll-out.
It is vital that this is put in the hands of the right people – meaning telecommunications companies, through a consortium of firms involved in the trade. This has been suggested in the past for both fibre and 5G technology.
Unfortunately, fibre was put in the hands of Telekom Malaysia Bhd (TM) exclusively, and now, 5G is going to a government SPV.
The signs are there that the government will fumble again. Consider this extract from a group interview by Communications and Multimedia Minister Datuk Saifuddin Abdullah: “Companies, including TM and Huawei Technologies Co, are expected to play a significant role once the work begins as soon as possible to have the network available by end-2021.
“We want to be among the first Asean member states to roll out 5G deployment, and not just limit ourselves to 5G test labs. It is very important for investment, and this is where companies like Huawei will play a very, very significant role.
“The government’s decision to build the network itself was made for the simple reason that it would be faster. This was after the government considered options including issuing tenders and asking the main carriers to form a consortium.”
First, why back Huawei as a 5G provider now? Is the minister not aware that Huawei faces international problems? There is no need to commit now. And, there should definitely be an open tender first. Make the assessment at the right time. And, why should TM get preference?
Second, why was the option of a consortium of the main carriers rejected? This has been proposed in the past, but political considerations seemed to have overridden the logic behind it.
Let’s reconsider this option on several grounds. First, expertise and technical know-how. None in the government have this expertise. But, a consortium from the private sector can gather all the best 5G experts within and outside the country to make the consortium a success. All of the carriers have been working hard at this, and have considerable expertise within their ranks in anticipation of rolling out their individual 5G networks.
The main carriers – Celcom Axiata, Digi Telecommunications, Maxis, U Mobile, TM, and TIME dotCOM – can collectively own the 5G infrastructure provider, provide the board members, and decide on management.
One possible candidate for chairman that immediately comes to mind is Tan Sri Jamaludin Ibrahim, who retired recently as chair of the Celcom Axiata group. He played key roles in the development of both Celcom Axiata and Maxis, and has in-depth knowledge of the field.
This consortium can then negotiate with the government on the price to pay for spectrum allocation, based on expert valuations. It is likely that this will be worth several billion ringgit.
The capital for the 5G roll-out will come from the carriers themselves, which will share the infrastructure, and instead of having to roll it out on their own at a high cost, pay an agreed amount based on their usage of the infrastructure that ensures a fair return to the consortium. There will be substantial cost savings from shared infrastructure.
The consortium can recover part of the costs through a listing on Bursa Malaysia as an infrastructure company, in which government investment companies can invest as well. Valuations are likely to be strong for such a utility with a long-term guaranteed income. This will help add depth to the stock market by offering a valuable, viable, and long-term investment grounded in solid fundamentals.
The government bears no risk from this at all, will put the 5G roll-out in the hands of competent experts, will benefit from an upfront cash payment for spectrum allocation and recurrent income from taxes, and will see the most efficient roll-out possible from 5G players in the market, who will decide on an arms-length basis and choose the best companies and people to do this.
The country will benefit from the provision of efficient key infrastructure at a reasonable cost, which will facilitate the absorption of future technologies, improve connectivity across systems and devices, increase speed tremendously, and pave the way for technological and other breakthroughs.
With oversight by the Malaysian Communications and Multimedia Commission, the overall cost savings can be passed on to consumers, who will benefit from a truly world-class 5G service at a reasonable price, without delays and bureaucratic problems. Everybody wins.
Instead, the government is choosing this dubious plan of an SPV with all the attendant risks of inefficiency, incompetence, lack of accountability, bad decisions, the possibility of corruption and patronage, and even the possible collapse of the roll-out, requiring costly remedial measures.
The repercussions of a bad 5G roll-out will cause shocking reverberations across the economic and social landscape, leading to damage that will take many years to remedy. It’s imperative – more imperative than most things – that we get it right from the start.
Why, oh why are we embarking on this perilous path? A government SPV indeed! – The Vibes, February 25, 2021
P. Gunasegaram suspects why this happens over and over again, but that’s an article for another day. He is editorial consultant of The Vibes and executive director of Sekhar Institute