MALAYSIA: Competing standards

Rivalry in Malaysia's crowded telecommunications sector is expected to become more heated in 2011 as wireless service providers roll out widely anticipated fourth-generation (4G) mobile broadband technology.

Telecoms regulator the Malaysian Communications and Multimedia Commission (MCMC) will next year auction three spectrum blocks for LTE, a new 4G standard that is expected to be adopted by most operators in the next two years.

However, there are only three proposed LTE licences, so one of Malaysia's four main operators – Maxis, Celcom, Digi and U Mobile – will miss out on a chance to offer the potentially lucrative service. Maxis and Digi are still putting the finishing touches to their 3G networks.

WiMAX is a rival 4G standard that has been available in Malaysia since 2008. Despite questions over the technology's long-term viability, the country's WiMAX segment has recently attracted interest from overseas.

At the end of June, WiMAX operator Packet One Networks (Malaysia) announced it had sold a 25.8% stake to the South Korean provider SK Telecom for $100m. Packet One, a subsidiary of the publicly listed Green Packet, intends to use the funds to continue its roll out of WiMAX services across the country and increase its existing customer base.

At the end of March, Packet One had some 175,000 subscribers, compared to 140,000 at the end of last year. However, the company has estimated that it needs at least 280,000 customers to break even, a figure it hopes to meet by year's end.

Puan Chan Cheong, managing director of Green Packet, said his company's partnership with SK Telecom not only enhanced his firm's ability to serve the Malaysian market, but also had wider implications for the country's telecoms industry as a whole.

"Having access to SK Telecom's expertise as a leading global telco, supports our strategic agenda to be the leading 4G WiMAX telco in Malaysia and eventually in the region," he said. "Through this alliance, Malaysia as a nation can draw from this experience in pursuing its own broadband penetration goals."

When the 4G network is up and running, Malaysia's operators plan to offer wide-ranging new services to create as wide a subscriber base as possible. Green Packet officials said they plan to invest $170m this year in high-speed broadband services, on top of the $140m it has spent since Packet One's WiMAX services were launched in 2008.

SK Telecom becomes the first foreign telecoms company to take a vested interest in a WiMAX operator in Malaysia. Jung Man-won, SK Telecom's CEO, says the partnership is a perfect fit for the South Korean firm, which is looking to expand beyond its saturated home market.

"The investment in Malaysia is meaningful, as the country has a lot of room for growth left in its telecommunications infrastructure," he said in an interview with Korean media on July 9. "SK Telecom's business in Malaysia will bring growth, although it's too early to talk about our specific business strategy."

The South Korean firm's entry into the Malaysian market was likely welcomed by the government, which has spent the past 18 months trying to open up the economy, remove restrictions on foreign investment and focus development on targeted areas as part of its goal of becoming a "high-income economy".

The telecoms and information and communications technology sectors were two of 12 key economic areas identified by the government for growth as part of its high-income strategy. With new technologies, increased competition and potential for foreign investment, telecoms may well see the rapid growth that the government has envisioned.