U Mobile’s winning bid for Malaysia’s 5G spectrum sparks talk of cronyism

KUALA LUMPUR – Malaysia’s shock pick of the smallest of its three main mobile operators to award its prized 5G spectrum to has sparked debate, with Communications Minister Fahmi Fadzil forced to defend the decision in Parliament on Nov 7.

On Nov 1, U Mobile was announced as the winner of the restricted tender to build a second 5G network ahead of market leader CelcomDigi and Maxis, both of which have more subscribers and transmission sites, as well as higher revenue.

The decision immediately set tongues wagging over U Mobile’s ownership, both local and foreign.

Malaysia’s King, Sultan Ibrahim Iskandar of Johor, as well as Singapore’s investment company Temasek, holds substantial stakes in the company, which is chaired by local magnate and Berjaya Group founder Vincent Tan.

The country’s roll-out of the high-speed telecommunications network has been

mired in controversy

and delays since 2018, with various frameworks meeting resistance from the industry as well as consumers.

Prime Minister Anwar Ibrahim’s administration finally

decided in 2023

to move away from a cheaper single wholesale network (SWN) framework proposed in 2018 when his Pakatan Harapan was in power.

Instead of relying solely on the

state-run Digital Nasional Berhad

(DNB) set up by the Muhyiddin Yassin administration in 2021, Malaysia will have a dual wholesale network (DWN) with DNB also being majority-owned by private telecommunications companies.

U Mobile will thus have to build up a second network in competition with DNB, which already covers 82 per cent of Malaysia.

Mr Fahmi has insisted that the government’s decision was based on merit, but this assertion is clouded by the fact that little is known about the tender specifications, even among corporates and financial executives The Straits Times spoke to in the telecommunications sector.

Opposition lawmaker Wan Saiful Wan Jan told Parliament on Nov 7 that questions would not arise if “the criteria to obtain the spectrum were revealed to the public from the start, and even up to now we have no idea”.

Former market leader Maxis was initially seen as a front runner for the 5G bid, due to its strong ties with Chinese communications company Huawei.

This came after Datuk Seri Anwar was cited in an October 2023 Time magazine interview as saying “we chose Huawei” for a DWN, instead of an SWN with just Swedish equipment vendor Ericsson.

CelcomDigi, which now controls about half the market after a merger in 2022, had also claimed that its wide network of over 25,000 sites – more than Maxis and U Mobile combined – would allow the company to expedite the roll-out of the second 5G network.

Mr Fahmi told Parliament that U Mobile was chosen “based on several factors such as business and technical plans presented, complaints record and customer satisfaction, as well as its performance in executing other (telecommunications) infrastructure initiatives”, citing how U Mobile has been named Malaysia’s best mobile network six times by market research firm Frost & Sullivan.

But Pasir Gudang MP Hassan Karim, who like Mr Fahmi and Mr Anwar hail from Parti Keadilan Rakyat, responded that “part of the minister’s answer is debatable, and the rest can be disputed”.

He also questioned whether “the selection of U Mobile… factored in any specific individual who owns a share” of the company.

Mr Fahmi did not directly address the query but said that the Malaysian Communications and Multimedia Commission as the regulatory body made its choice independently without interference from him or his deputy.

That U Mobile’s substantial shareholders include Sultan Ibrahim with 22 per cent, as well as Temasek with 48 per cent, has fuelled chatter about the integrity of the deal.

Mr Tan, whose Berjaya Group appointed a former aide to Mr Anwar as chairman of one of its subsidiaries in January 2023, also controls a substantial portion of U Mobile via several companies, and is chairman of its board of directors.

Dr Nungsari Radhi, an economist who is chairman of sovereign wealth fund Khazanah Nasional’s research institute and state-run Malaysia Airports Holdings, called the award “a bad decision” in a posting on X.

In the post, which garnered 300 reposts and 500 likes, he shared an article published in the Politikonomi blog that alleged the government’s decision was an “Ali Baba” deal. 

The term “Ali Baba” in Malaysia denotes deals in which a business is fronted by someone from the Malay majority, which is entitled to preferential rights under the country’s affirmative action policy, but is operated by non-Malay entrepreneurs.

Additionally, national security concerns have been raised over Temasek’s holdings via its telecommunications arm, ST Telemedia, due to the strategic nature of internet infrastructure.

ST Telemedia did not respond at press time to queries from ST.

However, U Mobile on Nov 2 said that in alignment with its commitment to the national agenda, it would “reduce its foreign majority shareholding to 20 per cent”, which would be lower than that of its rival bidders.

Nonetheless, Tasek Gelugor MP Wan Saiful pointed out how the award of the 5G spectrum has multiplied the value of U Mobile, making “the ultra-rich Singaporean owner become richer after this divestment of U Mobile”.

Former deputy international trade and industry minister Ong Kian Ming also questioned whether there would be specific targets for U Mobile to achieve.

He pointed out that this was the case with the DNB, details of which were made public while Mr Anwar and Mr Fahmi were in opposition and had criticised the SWN roll-out for alleged abuses.

“Without a clear and coherent policy on the part of the relevant ministries and the regulator, the gains we have made in the 5G space can easily be lost,” said Dr Ong, who is now on the board of the Malaysian Investment Development Authority, a statutory body tasked with harmonising investment promotions.

Industry sources have told ST that the telcos prefer not to take a stake in the DNB, and instead prefer to

own the second network

so that they can utilise their existing assets, do a demand-driven roll-out for better cash flow, and obtain 5G spectrum bands which are high-value assets for their balance sheets.