MCMC is looking at commercial rollouts of 5G in Malaysia in 2021/22. For the telcos’ investors, key items to watch up are timeline, spectrum fees and capex. We expect the government to allocate the 700MHz spectrum by end-2019 while the allocation of 5G spectrum (3.5GHz and / or other bands) may only take place in 2020. While the MCMC chairman said the government has no plans to profit from the award of 5G spectrum, we believe that competition among telcos, global trends and the federal government’s plan to reduce budget deficits may still weigh on the spectrum fees. Lastly, we do not expect the 5G rollout to lift the telcos’ capex significantly, judging from South Korea’s recent 5G rollout. Overall, we do not expect the current newsflows on 5G to affect the telcos’ near-term share price performance. Maintain Neutral.

Tun Mahathir: Malaysia Able to Leverage 5G Within Next Three Years

Malaysia should be able to leverage on 5G technology within the next three years and catapult the national economy towards strong and sustainable growth, says the Prime Minister, reported The Star. Tun Mahathir said the government – through the National Fiberisation and Connectivity Plan (NFCP) and National 5G Task Force – aims to create an environment conducive for 5G growth. To recap, Malaysian Communications and Multimedia Commission (MCMC) had in Dec-18 announced the 5G Task Force to look into the deployment of 5G in Malaysia.

South Korea Launched World’s First 5G Services on 3rd April 2019

South Korean’s three top telecom providers SK Telecom (SKT), KT, and LG Uplus began their 5G services on 3rd April 2019, ahead of US’s Verizon 5G launch (reported The Star). Telecomasia.net reported that the Korean operators are running 5G services over 3.5-GHz and 28-GHz spectrum, allowing for a mix of services and devices. The operators announced several price plans for its 5G services ranging from US$49/month (8GB of data) to US$110/month (300GB of data), according to venturebeat.com.

Snapshot of South Korean’s 5G Journey

(i) Timeline: Completed spectrum auction (3.5GHz and 28GHz bands) in Jun18; secured 1st enterprise user in Dec18; public launch in Apr19 (ii) Spectrum fees: KRW3.0tr (US$2.64bn) for 3.5GHz spectrum (10 years) and KRW622bn (US$550m) for 28GHz spectrum (5 years) (iii) Capex: SKT said 5G service may require greater number of base stations in comparison to LTE, but rolling out the network in stages and implementing new technologies will lessen the capex burden. (iv) Package prices: Based on South Korean average data usage of c.8GB/month, entry-level 5G packages (8-9GB/month) at c.US$49/month is comparably priced to 4G LTE.

Malaysia 5G: the Path Ahead

For the telcos’ investors, the timing of spectrum allocation, fees and capex are important items to watch out. The Malaysian government has yet to announce the spectrum band to be allocated for 5G - the 3.5GHz band is currently use for the satellite communications. Separately, we expect the allocation of 700MHz spectrum to take place by end-2019. MCMC chairman Al-Ishsal Ishak said that the government has no plans to profit from the award of 5G spectrum. However, we believe that competition among the telcos, global trend and the federal government’s plan to reduce budget deficits may still weigh on the spectrum fees. Lastly, we do not foresee a significant increase in the telcos’ capex to roll out the 5G services due to progressive implementations and technology advancements.

Source: Affin Hwang Research - 22 Apr 2019