Will competition reduce 5G leasing costs for Malaysian telcos?

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Competition is expected to reduce 5G leasing costs for Malaysian telcos.

The potential introduction of a second 5G network in Malaysia by 2024 could significantly reduce 5G leasing costs for telecommunications operators. This development is contingent upon the nation's 5G population coverage reaching 80% by the end of 2023. Kenanga Research maintains a positive outlook on the telecommunications sector, anticipating that increased competition will lead to lower access charges, thereby improving telcos' earnings and cash flows, which in turn could support better dividend payouts.
A second 5G network would challenge the current Single Wholesale Network (SWN) model.

The current SWN model, operated by Digital National Bhd (DNB), has faced criticism for its monopolistic structure. This has raised concerns about potentially excessive pricing and a lack of transparency in its operations. In 2022, DNB's proposed 5G leasing charges were set at RM30,000 per 1Gbps per month.
High leasing costs under the SWN model could impact telcos' financial performance.

Under the proposed DNB model, an uptake of 1,000 Gbps could result in annual costs of RM360 million for telcos. Furthermore, these operators would be required to make fixed upfront payments, irrespective of the progress in 5G population coverage. Such additional costs have been a point of concern for the market, potentially leading to a reduction in dividend payments.
Increased competition is anticipated to drive down 5G access prices.

The introduction of a second 5G network operator is expected to disrupt DNB's market dominance and foster greater competition. This competitive environment is predicted to result in reduced 5G leasing charges, allowing telcos to acquire 5G access on a needs basis. Such a scenario would eliminate upfront payment obligations, leading to improved profit margins, enhanced earnings, and more sustainable dividend payments for the operators.
Consumers are also projected to benefit from a more competitive 5G landscape.

Beyond the financial advantages for telcos, a more competitive 5G market is expected to translate into tangible benefits for consumers. These improvements would likely include better overall services, broader bandwidth availability, enhanced internet speeds, and more affordable access to 5G technology, aligning with the government's objectives of bridging the digital divide and promoting Industrial Revolution 4.0.

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Will competition reduce 5G leasing costs for Malaysian telcos?

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