Underdogs win WiMax licenses in Malaysia

Underdogs win WiMax licenses in Malaysia

Summary: Unexpected move likely demonstrates government's disappointment in the major telcos' inability to roll out 3G services quickly, says analyst.

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MALAYSIA--In an uncharacteristically bold move that spurned the country's top telcos, Malaysia's telecommunications industry regulator awarded WiMax licenses to four lower-tier telcos.

The government last year faced much controversy over its WiMax tender process, after it called off the exercise just before the tender was due to close.

Earlier this month, the Malaysian Communications and Multimedia Commission (MCMC) finally handed out four 2.3GHz wireless broadband spectrum licenses to Bizsurf, Packet One Networks, Asiaspace Dotcom and Redtone-CNX Broadband. The licensees are now scrambling to roll out WiMax services by the end of the year.

Bizsurf, Packet One Networks (formerly known as MIB Comm) and Asiaspace Dotcom will cover Peninsular Malaysia, while Redtone-CNX Broadband will serve the East Malaysian states of Sabah and Sarawak. The four companies beat 13 other contenders which included heavyweights Maxis Communications, TM Bhd and DiGi.Com.

Yeoh Yung Juen, an analyst at TA Securities, said the Malaysian government--in ignoring the major telecom players--was likely giving the smaller players an opportunity to prove themselves.

Yeoh noted that the government was likely disappointed that the major telcos did not roll out 3G services in the country as quickly as it had expected.

The MCMC has given the licensees until the end of the year to roll out their WiMax services, to 25 percent of the population in the areas allocated. By the end of the third year, they are expected to extend their services to at least 40 percent of the population in the areas they cover.

The government also expects each licensee to invest between 250 million ringgit (US$72.5 million) and 300 million ringgit (US$86.9 million) during the first three years of implementation. In addition, WiMax services should be offered at "an affordable price", according to the MCMC's requirements.

However, concerns have emerged over whether the four low-profile WiMax licensees have the financial means and technologies to deliver WiMax services on schedule.

Yeoh concurred that there are "execution risks" involved, noting that funding will be the key to a successful implementation.

"It will be a challenge for the licensees to roll out WiMax services by year-end," he said. "It is more likely that services will be rolled out in 2008." In addition, WiMax-enabled devices would only become more readily available in the market toward the end of the year, he said.

In terms of financial ability, Yeoh believes that Green Packet--which owns Packet One Networks--and Bizsurf have the financial clout to see through the project. Green Packet already has about 300 million ringgit (US$86.9 million) in cash, while Bizsurf is backed by conglomerate YTL Corporation, he added.

Redtone International, which owns Redtone-CNX, said it was "exploring various options to raise the necessary funds and will announce the details when finalized". Redtone International Group CEO Zainal Amanshah was optimistic the company could meet the deadlines to roll out WiMax services in Sabah and Sarawak. He added that its WiMax services would be "affordable", targeting corporate customers, small and midsize enterprises and consumers.

Green Packet also expressed confidence that it would be able to roll out its services before year-end. Company CEO Puan Chan Cheong said its WiMax broadband products would be targeted at enterprises.

Puan added that winning the WiMax license put the company on an "equal playing field" with the big telecommunication players.

Left in the dust
Responding to its loss, DiGi issued a statement noting that it "respects the latest decision on WiMax but regrets the loss of opportunity to use its skills and resources to benefit consumers". The Norwegian-owned company was also overlooked when additional 3G licenses were dished out by the MCMC last year.

TA Securities' Yeoh said: "It's a big loss for DiGi. This will hinder and make their long-term broadband roadmap [in Malaysia] uncertain."

However, the analyst believes all is not lost for DiGi as it could still provide WiMax services through a joint venture with, or an acquisition of, a broadband spectrum licensee. "There's speculation that DiGi may acquire Time dotCom, which has a 3G license," Yeoh said.

NasionCom, which also failed to get a WiMax license, said it would continue to pursue its plans to provide WiMax services. "We are committed to delivering WiMax for broadband wireless access by riding on our 3.5Ghz spectrum allocation," it said in a statement. With its existing spectrum, NasionCom said it could offer broadband Internet access over a wide area and at higher capacities.

Lee Min Keong is a freelance IT writer based in Malaysia.

Topics: Networking, Government Asia, Legal, Mobility, IT Employment, Wi-Fi

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