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“IN this case, it pays to be paranoid,” said a worried telecommunications industry executive in reaction to the news that a Syed Mokhtar al-Bukhary company, Puncak Semangat Sdn Bhd, had won the bid to build, manage and operate the infrastructure for Malaysia’s Digital Terrestrial Television Broadcast (DTTB) service over a 15-year period.
The telco executive is worried that Puncak Semangat is actually eyeing the much-coveted 700MHz spectrum band and that the DTTB bid is just a tactical move by Puncak Semangat to grab as much of this spectrum as it can when the time comes for spectrum re-farming in Malaysia.
Note that Puncak Semangat already has 40MHz of spectrum in the 2.6GHz band for its LTE (Long-Term evolution) rollout to be carried out by its telco arm Altel Communications Sdn Bhd. The spectrum was awarded in December, 2012.
Puncak Semangat submitted its DTTB bid in July 2012 before being shortlisted in November 2012, and finally declared the winner in January 2014.
The telco executive’s concern is premised on the belief that it will be very challenging for Puncak Semangat to make a viable business case for its DTTB rollout, and that, at some point, it will position its DTTB service as a form of national service to ensure all Malaysians, especially those in rural areas, enjoy digital TV.
“In return, it will ask for a chunk of the 700MHz spectrum as a form of payment,” speculated the executive, who requested anonymity.
What’s interesting is that the big three incumbent telcos themselves made an attempt to safeguard the 700MHz band for themselves by supporting Celcom Axiata’s bid for DTTB in July 2012.
According to an executive familiar with the bid, “we had an informal agreement to share the 700MHz between us, and that Celcom’s DTTB bid would act as a sort of representative for the interests of the telcos.”
Celcom however, much to its vexation, was not even picked to be among the final shortlisted three for the DTTB tender conducted by industry regulator the Malaysian Communications and Multimedia Commission (MCMC).
The 700MHz spectrum is a coveted low-band spectrum that substantially improves in-building coverage, making it ideal for urban areas as well as coverage in rural areas. It also travels greater distances than high-band spectrum and therefore is a more efficient way to provide coverage at the edge of cities and in less densely populated areas.
Telcos in the United States have been using it to boost their LTE coverage and just last week, T-Mobile announced it is paying Verizon US$2.37 billion (RM7.81 billion) for 700MHz spectrum that it will use to boost its LTE coverage.
In a December 2013 briefing by MCMC chairman Sharil Tarmizi, 2018 was mentioned as the year when telcos in Malaysia could use the spectrum to increase their level of services for customers.
It should be noted that during a December 2012 MCMC briefing to the media and analysts, Sharil described the allocation of spectrum in the 2.6GHz band as a form of spectrum rebalancing, specifically to give the Tier 2 telcos (Packet One Networks, REDtone Marketing, U Mobile and YTL Communications) the same amount of 2.6GHz spectrum as the Tier 1 telcos.
The MCMC is almost using the spectrum rebalancing as a form of leverage, with Sharil having said, “There is no way we can negotiate with the Tier 1 players if we do not have strong enough Tier 2 players.”
With the MCMC planning to push the big three of Celcom, DiGi and Maxis harder on quality of service issues this year, the billion-ringgit question is, if MCMC is not happy with the efforts from the incumbents, will this same leverage approach be used when the 700MHz spectrum is allocated?
It is a provocative question and will leave the incumbent telcos squirming uncomfortably.
Spectrum in the 700MHz band will become available, likely around 2017, when broadcasters in Malaysia stop transmitting analogue signals over the spectrum and move to the lower band of 470MHz and 694MHz.
And while both broadcasters and telcos have been lobbying for the right to use the 700MHz band for their industry, the MCMC, in making the DTTB announcement on Jan 8, 2014, added that the 700MHz band or Digital Dividend spectrum will be used for more high-speed mobile broadband services.
That got the attention of the telco industry and brings into sharp focus the method that the regulator will use to determine how the 700MHz band will be allocated.
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