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Malaysian minister backtracks on spectrum allocation decision

Amid reports of a surreptitious decision to allocate spectrum to five Malaysian operators, the communications minister rescinds his own order, calling for a more transparent review of the allocation process

The Malaysian minister for communications and multimedia has completely reversed a highly controversial two-week-old directive that instructed industry regulator, the Malaysian Communications and Multimedia Commission (MCMC), to award radio frequency spectra to five telcos.

In a startling turn of events late on 3 June, Malaysia’s newly minted minister, Saifuddin Abdullah, reversed his own initial decision to award the much-coveted 700MHz radio spectra, among other spectrum blocks, for a number of reasons, including the need to maintain transparency.

“Eighteen instruments, including the directive and determinations on the use of the 700MHz, 900MHz and 2,600MHz frequency band spectra, have been presented to me,” Abdullah was quoted as saying in the press release, written in Malay.

“On the basis of technical issues, legal requirements and the need for a transparent process, I have directed the chairman of MCMC to cancel these directives and determinations and to review the instruments promptly,” he added.

But Abdullah did not explain his decision to award the spectra in the first place, or why he made an about-turn in his press statement. The surprising news follows various local media reports and tech blogs that have gone viral in the last two days, and which have come under heavy scrutiny from various quarters.

The first of these reports, published on 1 June, noted that Abdullah had quietly issued an official ministerial directive to the MCMC on 15 May, instructing the regulator to issue five blocks of frequency bands to Altel Communications, Celcom Axiata, Digi Telecommunications, Maxis Broadband and Telekom Malaysia.

“The commission will take immediate action under the Act and relevant subsidiary legislation to implement the spectrum assignment to all aforementioned licence holders,” read the directive in Malay, which was signed by the minister.

The order was made under Section 7 of the Communications and Multimedia Act 1998 [Act 588], which empowers the minister with discretion to do so.

Celcom Axiata, Digi Telecommunications, Maxis and Telekom Malaysia are the leading mobile and fixed telco operators in Malaysia. They were expected to have taken part in a consortium among themselves to bid for the spectrum blocks in preparation for their respective 5G roll-out plans.

Altel is a little-known subsidiary owned by Puncak Semangat and is controlled by Syed Mokthar, a Malaysian tycoon believed to be politically well-connected. In 2012, it was awarded precious 4G spectrum but did not build a network, instead leasing its spectrum to Celcom Axiata. It also positioned itself as a mobile network virtual operator (MVNO) riding on its network.

The MCMC, Digi Telecommunications, Maxis and Altel did not immediately respond to requests for comments. Celcom declined to comment, while Telekom Malaysia referred Computer Weekly to the communications and multimedia ministry, which did not respond to request for comments.

Surprising developments

The move to directly assign the spectrum blocks to the five operators raised eyebrows among many industry watchers and players, as well as one federal lawmaker and the former communications and multimedia minister.

Industry observers spoken to by Computer Weekly were caught flat-footed as they expected the 700MHz spectrum allocation to be undertaken via an open tender, as stated in an official MCMC document entitled Public inquiry allocation of spectrum bands for mobile broadband service in Malaysia, dated 1 July 2019.

There are also questions over why Altel was awarded the much-coveted 700MHz spectrum, given that it did not use the 4G spectrum it was awarded to build its own infrastructure in 2012, but instead carried on by leasing its spectrum and being an MVNO.

Industry insiders Computer Weekly spoke to also expressed bewilderment over the seemingly contradictory move.

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“I was completely taken aback by the move to award the spectrum to the five operators, especially Altel,” one senior telco insider told Computer Weekly on condition of anonymity because of the sensitive nature of the developments.

The initial award was also surprising given that Malaysia is still on restricted containment because of the coronavirus pandemic, like many other countries in the region.

These restrictions, known as the Movement Control Order (MCO) which began on 18 March, mandated that all businesses and government agencies cease to operate. 

The restrictions were relaxed on 4 May, allowing most businesses and government agencies to operate, and is scheduled to end on 9 June.

During the MCO period, industry insiders noted that government agencies, such as the MCMC, were mostly dormant and did not hold any events or functions and made no significant announcements.

On top of that, Malaysia’s political scene went through an upheaval in late February, resulting in a second change of government on 2 March led by new prime minister Muhyiddin Yassin. 

As a result of this change, Abdullah replaced his predecessor, Gobind Singh Deo, who was appointed in May 2018, when the Malaysian government was changed for the first time in its 61-year history.

As the new minister, Abdullah kept a low profile during this period. A check on the ministry’s and MCMC’s website showed no official announcements or information about any process for the potential spectrum assignment, neither were there any signs of tender documents made available to interested bidders.

So it came as a shock to many telco executives and industry players that the announcement was made in such a hushed manner.

It is unclear why Abdullah made a 180-degree turn, whether it was because of public scrutiny or having played an unwitting part in the first hushed-up directive.

Calls for transparency

One vocal opposition lawmaker, however, raised a stink over Abdullah’s move and questioned why those firms were selected for the spectrum allocations.

Fahmi Fadzil, member of parliament for Lembah Pantai, called Abdullah’s directive shocking, and said he “felt called to raise these questions”.

“I felt called to raise these questions because the 700MHz spectrum is closely linked to the implementation of 5G technology... which is the future of telecommunications technology, and will surely impact the people,” he said.

“If mistakes of the past are repeated, including infrastructures which fail to be built or coordinated, it is the users who will end up losing.”

Former communication and multimedia minister Gobind Singh also weighed in on the issue, noting that, under his administration, the ministry was not inclined to award spectrum via ministerial orders.

“We chose to adopt an approach with greater transparency and accountability in keeping with our agenda for reform and transparent governance,” he said. “It was a challenge, but we initiated a process to award the 700MHz that began with a public inquiry in July 2019.”

Computer Weekly reported in April 2019 that, according to the MCMC chairman, Malaysia’s 5G spectrum biddings would not profit the government.

Singh said the findings of this public inquiry, dated 31 December 2019, specifically recommended that the 700MHz band be assigned through a tender process.

This would ensure that Malaysians would benefit from improved digital infrastructure coverage and high-quality connectivity while ensuring that the cost of services remained competitive, he said.

“This open tender process was significant in that it would have identified the licensees with the best business plans and with the best track records for implementation,” said Singh.

“It is difficult to see how a direct award through a ministerial order could, in this context, achieve any of these objectives, and there is therefore now a need for an explanation for the sudden shift in approach.”

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