OBG talks to Mohamed Sharil Tarmizi, Chairman, Malaysian Communications and Multimedia Commission (MCMC)

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Interview: Mohamed Sharil Tarmizi

What progress has been made in increasing cooperation among local telecommunications firms?

MOHAMED SHARIL TARMIZI: As Malaysia’s telecommunications sector enters an age of economic pressures, decreasing margins and intense promotional pricing, everyone is looking to squeeze the best out of the installed assets they possess. In the past, market participants would typically look at the three basic layers of a mobile business – retail services, infrastructure and connectivity services – as one vertically integrated model. As a result, efficiencies that were achieved in the infrastructure layer or connectivity layer would often find themselves subsumed at the retail level. Whereas, if a mobile operator audits the efficiency of its network operations side by decoupling its returns on network investment as opposed to combining it with retail investments, most will find they are maximising their assets’ value at 30% or 40% at most. Cooperation, such as radio access network (RAN) sharing is proven to bring this up to 80%. As the regulator, we have been championing smart partnerships and sharing of network infrastructure since 2000. The impediment to such cooperation was self-imposed among market participants who did not want to give competitors coverage in areas where they had the edge in penetration. “Coopertition”, as we call it, is just making its first major strides in Malaysia, where mobile operators are finally moving towards a model of competing on services and cooperating on networks. Celcom and DiGi have been engaging in some elements of this with site sharing, site consolidation and even tower sharing in some cases. However, of larger significance is that in 2011 Maxis and U-Mobile completed the first ever RAN sharing initiative, involving over 1000 sites. This allows Maxis to maximise their physical assets and U-Mobile to achieve network coverage that would have otherwise taken nearly three years to build. We expect to see another round of RAN sharing taking place involving the 2.6 Ghz spectrum for the upcoming 4G exercise.

How will the roll-out out of long-term evolution (LTE) technology progress among the nine providers which were awarded spectrum?

TARMIZI: Base station build-out will be difficult for new LTE players, but for existing telecoms it is only a matter of back-end infrastructure. We do not want to see build-out of nine separate LTE networks – even five is far too many as we expect to see each licence holder come to the table equipped to cooperate from the outset. The ecosystem in Malaysia is slightly different than what you would find in other jurisdictions. The LTE licence holders have the right to use spectrum, but how they offer the service is relatively open-ended.

At what stage of investment is the Malaysian telecommunications industry and how do you see its movement into an industrialisation stage?

TARMIZI: From a longer-term perspective, infrastructure investment in Malaysia’s telecommunications sector has not yet plateaued – we are actually entering a new phase of the evolutionary cycle. The bulk of investment required in high infrastructure, such as towers, cellular base stations and core networks has indeed been put in place. However, the focus is now on rural areas and further outlying regions, which have comparatively inferior systems. 3G investment in peninsular Malaysia is in place, but the investment cycle in Sabah and Sarawak is just beginning. The other investment cycle that has not yet taken place is targeted improvements in service quality and pre-existing network upgrades. Many operators are refocusing on capital investment as competition raises the issue of spectrum scarcity. As a result, I see another round of significant hardware investment in the immediate term to improve service coverage, service quality, and to get in place the core network and back-haul investments needed for LTE roll-out. For example, telecoms will no longer be able to simply use microwave links to connect cellular base stations to the network controller, and will be forced to start investing in a new fibre-based infrastructure.

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The Report: Malaysia 2012

Telecoms & IT chapter from The Report: Malaysia 2012

The Report

This article is from the Telecoms & IT chapter of The Report: Malaysia 2012. Explore other chapters from this report.

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