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Ericsson bags Malaysia’s only national 5G network deal ahead of Huawei

Ericsson has won a major 5G contract in Malaysia instead of Huawei, which could represent a major strategic shift by the country.

The news is significant for two reasons: firstly because the 5G development model in Malaysia is unlike that of most of the rest of the world, with the government controlling the country’s 5G network; and secondly because Huawei had been hotly tipped to bag the deal.

Digital Nasional, a government-backed entity that was set up in March to be Malaysia’s single wholesale 5G network operator, has awarded Ericsson an 11 billion ringgit (around US$2.6 billion) deal for the network build, according to numerous local and international new outlets. Digital Nasional’s own website was down at the time of writing.

It looks to be a vendor financing set-up. Nikkei Asia quoted Digital Nasional as saying that “Ericsson has undertaken to arrange to finance for the supply, delivery, and management of the entire 5G network,” with future cash flows for the business to be securitised via Islamic bonds to fund opex and repay vendor financing arrangements.

The MYR11 billion deal also includes tower rental and fibre leasing, 60% of which will go to local contractors over the next 10 years, the news outlet added.

Nikkei described the contract as a snub to major rival Huawei, while Reuters noted that Huawei had long been seen as the frontrunner for the deal, with the Malaysian government having declined to follow the major Western markets in placing a block on the Chinese vendor’s participation in the 5G space.

However, there is no indication of any political motivation behind the award of the deal to Ericsson; indicating assumptions over Huawei appear to have been misplaced.

Malaysian mobile operator Maxis selected Huawei as its 5G vendor partner back in 2019, the pair taking part in a high-profile signing ceremony that included the participation of then Malaysian Prime Minister Mahathir Mohamad. While that was a clear show of support for Huawei from the Malaysian government at a time when the Chinese firm was coming under fire from all angles, it clearly did not translate to commercial success.

The Maxis deal was based on the assumption that Malaysia would follow international norms and allocate 5G spectrum to the country’s mobile operators, who would then roll out their own networks. But that was not to be the case. The subsequent administration opted for a single national 5G network, setting up Digital Nasional to run it.

“Ericsson will undertake the design and development of the end-to-end 5G network comprising core, radio access and transport network (RAN), operation and business support systems (OSS/BSS) and managed services,” Digital Nasional said in a statement, reproduced by The Edge Markets. “Ericsson will also undertake capacity building and innovation programmes to support local vendor development and participation, as well as to boost 5G adoption amongst the public. This is in addition to developing use cases to accelerate industry participation.”

The regional news provider added that the MYR11 billion contract price is lower than sums previously bandied about, the state having initially budgeted for MYR15 billion.

Malaysia is racing to launch 5G before the end of the year, with Kuala Lumpur, Putrajaya, and Cyberjaya set to be the first to gain access to the technology, it said. More cities will follow in 2022, rising to 17 cities and some rural areas from 2023 with a target of 80% population coverage by 2024.

It will be interesting to see how a state-run 5G rollout progresses compared with those of the world’s private operators.

 

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