To lobby regulator for extra 10MHz spectrum in 850MHz band
Battle royale shaping up between TM and wireless service providers
ON the surface of it, later today in the languid northern Malaysian state of Kedah, Telekom Malaysia Bhd (TM) will launch its Long-Term Evolution (LTE) service, branded TMgo, based on its 850MHz spectrum. The service is also expected to cover the state of Melaka initially.
It is expected to be a grand launch, graced not only by senior TM executives but also Kedah’s Mentri Besar (Chief Minister) Mukhriz Mahathir and Mohamed Sharil Tarmizi, chairman of industry regulator the Malaysian Communications and Multimedia Commission (MCMC), according to press invitations sent out on Aug 7.
The TMgo page gives information on two packages. The first is the 4G Mobile Adapter Package which comes with said adapter, a SIM card, free 2GB quota in the starter pack, and a bonus quota of 500MB for six months at an introductory price of RM115 (US$36). The router package is similar but costs RM315 (US$99). To download a PDF of the service’s FAQ, click here.
What the grand launch represents however is really a not-too-subtle ratcheting of TM’s efforts to lobby the MCMC to allocate it 10MHz of additional spectrum in the 850 MHz band for it to roll out a comprehensive LTE service throughout the country, especially in rural and suburban areas. TM currently has 10MHz of spectrum here.
According to a telco executive familiar with TM’s strategy, in return for being allocated the additional 10HZ spectrum, TM will return its CDMA (code division multiple access) spectrum to the regulator. TM then hopes to convert its approximately 1,200 CDMA sites around the country to LTE.
A legacy from its days as a government-owned utility, TM used the CDMA sites to provide inaccessible and uneconomical rural areas with fixed line services.
But the future is all about data services, over which voice can also be delivered. With the economics of delivering data over wireless much superior to delivering it over copper or fibre optics, driving TM’s intense desire to become a wireless player, the stage is set for a battle royale between TM and the wireless service providers in the country.
Indeed, according to RHB Research Institute deputy head of research Jeffrey Tan, “There is growing consensus that TM’s mobile aspirations will be disruptive.
“There is the superiority of the 850MHz [band] which TM can utilise to effectively spread coverage and 2.6GHz to ensure dense areas are adequately served,” he said.
But how disruptive TM can possibly be will depend on its scope of ambition. “It will depend on its ultimate game plan and go-to-market strategy,” Tan said.
That scope has been tempered with TM’s realisation last year that it just did not have the expertise to roll out a wireless service.
“The initial idea was to provide LTE to rural areas and to lease the excess capacity to other players, becoming, in the process an LTE MVNE (Mobile Virtual Network Enabler). But in thinking through this, TM realised it did not have the expertise to do this,” said an industry executive.
In came the consultants, including some Germans, to help with the rollout, With the consultants eventually leaving however, TM realised it needed inhouse skills sets. This then led to its proposed acquisition of a 57% stake in Packet One Networks Malaysia Sdn Bhd (P1) earlier this year.
While P1’s spectrum in both the 2300MHz WiMAX band and 2600MHz LTE band is expected to be used for LTE by TM, the WiMAX player is also about to play a key role in the execution of Phase 1 of TM’s LTE rollout in the second quarter of 2015 involving 5,000 sites by managing the tender process.
Initially under TM, “P1 now has the responsibility to manage the tender process, from the current RFI (Request for Information) stage on to the RFP (Request For Proposal) stage, and will be responsible for the technical evaluation while TM will still look into the commercial part of the proposal,” said a source familiar with how the process will be managed.
With SK Telecom Co Ltd as a shareholder in P1 with deep experience in LTE networks, TM is relying on the South Korean telco’s technical expertise.
Indeed, SK Telecom has already been involved in the LTE pilot carried out across 60 sites in the island of Langkawi over the past few months, according to sources Digital News Asia (DNA) spoke to.
TM’s proposed acquisition of P1 has been delayed somewhat with its detailed business plan pending approval from the MCMC, as DNA reported earlier.
Meanwhile, Chinese telco equipment maker ZTE has been the big loser here as it was initially shortlisted to be the hardware vendor when TM was running the tender process which began last year.
“But TM then started hedging, telling ZTE that its quote was still too expensive. And now, with P1 running it, it is a whole new ballgame,” an industry player told DNA.
And while TM is financially strong, at the end of the day, it is still going to come down to “price, price and price,” noted another telco player who says it can be “quite brutal” dealing with the telecommunications giant.
That description can also be applied to the battle for LTE market share that will happen between TM and the cellular players which are bound to hit TM hard in its fixed broadband market, where thanks to its first-mover advantage, TM has over 500,000 home and corporate broadband customers through its UniFi service.
But an industry analyst feels this will be a tough nut for the cellular players to make inroads in.
“It remains a real challenge to grow simply because wholesale rates are not regulated and it [access to UniFi] is not full unbundling but bit-stream access,” he said.
An industry player sees TM having the advantage here, offering its fixed broadband customers a good ‘mobile’ proposition via its USB LTE modems and MiFi dingles.
“These customers are currently served by the mobile operators but with service levels and pricing that are sub-optimal,” he argued.
Echoing the view of how disruptive TM's entry could be was Analysys Mason telco consultant Nipun Jaiswal (pic). “TM has a great opportunity to differentiate itself by offering converged (mobile + fixed) broadband bundles and emerging as a converged high-speed broadband champion.”
To achieve this though, it would need the additional 10MHz spectrum to be able to offer a quality nationwide LTE service.
But will MCMC see its arguments that TM is best positioned to deliver a strong LTE service, and in the process help bridge the digital divide between rural and urban areas? Or will the regulator opt for introducing competition in this space as the best way to get quality services delivered to customers?
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