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Malaysia's LTE spectrum distribution draws criticism

Country's finally awards long term evolution licenses to nine local telcos, but analyst questions if market big enough to support so many players, while one licensee questions validity of other licensees.
Written by Edwin Yapp, Contributor

KUALA LUMPUR--The Malaysian government has awarded long term evolution (LTE) licenses to nine telco companies, albeit under specific conditions. However, the move has prompted an industry analyst to question whether the market will be able to support that many players, while a market player also questions the validity of some of the spectrum allocations.

According to the Star Online, all nine telco players were allocated blocks of 2.6GHz spectrum but in smaller blocks than originally announced. They comprise four cellular players--Celcom Axiata, DiGi.Com, Maxis and U Mobile--and three WiMax players--Packet One, REDtone International and YTL Communications--which will each get 20MHz, comprising two blocks of 10Mhz FD-LTE, spectrum for their LTE deployments. Asiaspace, which has yet to offer any commercial WiMax, got the nod for a 10MHz block, the Star Online noted.

New market entrant Puncak Semangat, which is owned by local billionaire Syed Mokhtar Al-Bukhary, surprisingly landed the lion's share of the spectrum having been allocated 30MHz (TD-LTE) of spectrum.

Cellular players need paired TD-LTE spectrum to operate while WiMax players only require unpaired TD-LTE spectrum.

Business newspaper Edge Financial Daily quoted an unnamed source to say: "That the decision was made to bring in new entrants and allow room for market forces, and in that light, the spectrum allocations are equitable, though, not entirely equal."

All nine operators are awarded the spectrum based on the condition that they re-submit their respective detailed business plans to, and be approved by, local industry regulator, the Malaysian Communications and Multimedia Commission (MCMC), by Dec. 15.

Each licensee will have to pay 5 million ringgit (US$1.6 million) irrevocable guarantee for every 10MHz of spectrum, said Edge Financial, adding that the conditional spectrum assignments will only be granted if their respective business plans meet MCMC's criteria.

Too many players for local market
An industry analyst ZDNet Asia spoke to noted that nine mobile broadband players were simply too many in a market with a population of just over 28 million.

Nicole McCormick, Ovum senior analyst, said this will make it hard for operators to achieve profitability and past mobile consolidation in Malaysia shows this.

"Heavy discounting by operators will likely emerge as nine mobile broadband players contend for market share," McCormick said. "[But] on the consumer side [there will be] cheap prices and plenty of choice."

Asked if awarding 30MHz of LTE spectrum to a nascent player such as Puncak Semangat was a good idea, the Ovum analyst said such practices went against global trends. She noted that in several Asian markets such as Vietnam, India, Indonesia and the Philippines, the trend was moving toward consolidation, rather than the licensing of new players.

McCormick added that she expects consolidation to happen in the next few years as four of the cellular players may become three.

"On the WiMax side, it will be difficult for even two nationwide players--as Malaysia has the most aggressive WiMax play in Asia--to compete alongside three to four TD-LTE players," she said.

Quizzed on whether 20MHz blocks of spectrum were enough for most of the players, McCormick noted that to get more than 100Mbps over-the-air and make full use of LTE's capabilities, cellular operators would require two blocks of 20MHz of contiguous spectrum.

Question over validity of some licensees
A senior executive employed at one of the nine operators which received the license, told ZDNet Asia that the telco was prepared for the spectrum result. "We've already planned for what we've been allocated," he said on the condition of anonymity. "Having more spectrum is always good, but we are prepared to go with what we have."

The executive, however, was critical over the validity of some licensees which were awarded the spectrum.

"The question is how many of these players are going to re-sell their spectrum allocation [at a later date] should they not be able to roll out LTE, given that some of them haven't been successful [with their WiMax rollout] in the first place.

"And what are the mechanisms by which MCMC will use to monitor their business plans this time?" he questioned. "At the end of the day, the allocation of government resources should not be used as a get-quick rich program."

He added that spectrum is a national resource that should only be given to those which has a proven track record and can deliver value to the country.

MCMC first called for the LTE business plans to be submitted in January this year but had stalled the decision process, causing industry observers to criticize the Malaysian government for the delay.

Edwin Yapp is a freelance writer based in Malaysia.

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