On May 26, Digital News Asia (DNA) released its first Deep Dive report, which looked at the telecommunications space in Malaysia. Over these next two weeks, we will be publishing the articles from the PDF report on our portal, plus other stories. To download the Telco Deep Dive, click here. In this article, Analysys Mason’s Tom Mowat looks at how the LTE competition is playing out from the spectrum perspective.
MCMC allotted similar amount of spectrum to tier-1 and tier-2 operators
MNOs decided to pool their spectrum and share network infrastructure
IN this article, we examine the Long-Term Evolution (LTE) landscape and competitive dynamics in Malaysia from the standpoint of spectrum assignment, spectrum sharing, and recent acquisitions.
Spectrum pooling in Malaysia
In December 2012, the Malaysian Communications and Multimedia Commission (MCMC) auctioned the 2,600MHz LTE spectrum and allocated it to eight operators.
Celcom Axiata, DiGi Telecommunications, Maxis, REDtone and U Mobile received 2x10MHz of frequency division LTE (FD-LTE) spectrum. Altel, a startup subsidiary of Puncak Semangat, a company linked to Malaysian tycoon Syed Mokhtar Al-Bukhary, received 2x20MHz of FD-LTE spectrum.
Meanwhile, WiMax-based operators Packet One Networks (P1) and YTL Communications (YTL Comms) were each allocated 20MHz of time division LTE (TD-LTE) spectrum.
The licence auction was unique in the sense that MCMC allotted a similar amount of spectrum to tier-1 operators (Maxis, Celcom DiGi) and tier-2 operators (U Mobile, REDtone) and new entrant (Altel).
In fact, Altel was allotted the largest block (2x20MHz) of FD-LTE spectrum. This led to a situation where tier-1 operators wished for more spectra so that they could offer higher quality services, especially in dense urban areas. Tier-2 operators and the new entrant had the spectrum but had limited or no existing network infrastructure to deploy services.
Such dynamics led to the eight mobile network operators’ (MNOs) decision to work together, pool their spectrum and share network infrastructure between themselves.
Maxis has the edge
In October 2011, Maxis signed a wholesale 3G radio access network (RAN) sharing agreement with U Mobile. The arrangement was later extended to LTE. Maxis and REDtone agreed to pool their LTE spectrum and share network infrastructure for 10 years beginning July 2012.
Meanwhile, Celcom and Altel announced their decision to pool their LTE spectrum bands and share RAN infrastructure via a mobile virtual network operator (MVNO) arrangement in July 2013.
As a result of the spectrum sharing arrangements with REDtone and U Mobile, Maxis has gained access to a total of 3x20MHz LTE spectrum. This implies that Maxis has the power to offer the highest quality 4G LTE services in the market, though it is not clear how it intends to make use of its spectrum from a technology standpoint.
Maxis also claims to have the highest LTE coverage in the market and was the first operator to launch LTE in Malaysia, in January 2013.
Figures 1 and 2 below illustrate how MNOs’ access to LTE spectrum has changed before and after spectrum pooling.
Without any spectrum sharing arrangements, DiGi seems to lagging behind its competitors. It doesn’t currently offer LTE on 1,800MHz and has only 20MHz in 2,600MHz.
In terms of LTE spectrum availability and differentiating LTE services based on quality, DiGi may lose out to its competitors.
P1, TM may pose a threat
In April 2014, TM was reported to have bought 57% of struggling WiMax player P1. However, we don’t expect P1 to be fully incorporated into TM by this year, as it will be complex and costly at a time when TM is already undergoing major change.
It is possible that P1 and TM will share a network rollout strategy, but commercially, it is mostly likely they will remain separate for the immediate future. P1 is reportedly planning its TD-LTE dongle launch soon and is contemplating a handset launch for later this year.
However, device availability in 2.3GHz has not reached a low enough price-point to reach the market P1 would currently address as it is not currently known as a handset provider in Malaysia, and will most likely seek to address low-value customers.
YTL Comms has a smaller network in terms of number of towers than P1, but a more advanced architecture. YTL Comms also has quite a strong brand, quite a lot of spectrum (20MHz of 2,600MHz + 30MHz of 2,300MHz), and some high-profile deals.
For example, it provides connectivity to schools – in a project known as 1BestariNet – that positions it well in the market. The major issues of the WiMax era, most importantly the lack of handsets, will not repeat themselves in TD-LTE, and YTL Comms appears to have the least work to do in order to get a competitive TD-LTE network to market in Malaysia.
But while YTL Comms might be a known brand for dongles, it has no name in Malaysia as a handset provider and will struggle to take market share off the big three – Maxis, Celcom and DiGi.
As a result of the acquisition of P1, TM now has 20MHz of 2,600MHz + 30MHz of 2,300MHz in addition to its existing 2x10MHz of 800MHz.
We should expect TM to come out with a very strong LTE play, which it can effectively bundle with its home broadband and WiFi solutions to capture valuable consumers. We would also expect strategies like multi-device bundles to be introduced.
The main issues for TM are around the network itself. It does not have an established cellular network in Malaysia and will need to invest significantly in the coming year.
Additionally, having the only 800MHz spectrum for LTE in the market will give better general coverage and a substantial advantage for in-building coverage.
Tom Mowat is principal analyst and Asian programme head of Analysys Mason, a British-based telecom consultant and research firm.
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