When two gi­ants work to­gether

The tie-up be­tween TNB and TM in the broad­band arena raises mo­nop­o­lis­tic con­cerns

The Star Malaysia - StarBiz - - Companies & Strategies - By B.K. SIDHU bksidhu@thes­tar.com.my

TE­NAGA Na­sional Bhd (TNB) is fast be­com­ing a sought af­ter part­ner for the thou­sands of kilo­me­tres of fi­bre op­tic ca­bles it has run­ning along its power lines and in the ground.

The ca­bles prom­ise po­ten­tial but re­main not fully utilised un­til talks of a sec­ond fixed broad­band player emerged lately that got the in­cum­bents of the tele­coms in­dus­try worked up.

On Tues­day, Telekom Malaysia Bhd (TM) en­tered into a mem­o­ran­dum of un­der­stand­ing with TNB to look into ways on cap­i­tal­is­ing on those fiber as­sets to help the Govern­ment de­liver on the Na­tion­wide Fiberi­sa­tion Plan (NFP).

The NFP is about pro­vid­ing broad­band for a wider pop­u­la­tion at “dou­ble the speed and half the cost’’ by next year.

“The com­ing to­gether of TNB and TM is like a merger of two gi­ants. But the ques­tion to ask is whether it will cre­ate an­other mo­nop­oly and pos­si­bly en­cour­age car­tel pric­ing, sti­fle the en­try of new play­ers or help in re­al­is­ing the Govern­ment’s ob­jec­tive,’’ asks an in­dus­try ex­pert.

What­ever the talk within the in­dus­try, the tieup did sur­prise many. And it came soon af­ter lit­tle-known Broad­net Net­works Sdn Bhd was named by the Govern­ment to un­der­take the NFP. It is said the Govern­ment will take a golden share in Broad­net, led by some high pro­file cor­po­rate chiefs and civil ser­vants.

The en­try of a new player, like in any in­dus­try, does dis­rupt a mar­ket and puts the in­cum­bent on guard be­cause of im­pend­ing com­pe­ti­tion. As it is, TM is the only player with a high speed broad­band (HSBB) net­work, built un­der a pri­vate-pub­lic part­ner­ship with the Govern­ment but most of the in­dus­try play­ers lease its net­work to of­fer fast speed broad­band ser­vices.

How­ever, the talk of a sec­ond fixed broad­band net­work player is not new. It is an old story with a new twist. Many play­ers in the past have ob­tained li­cences but few have fully cap­i­talised on it.

Ini­tially, the hope was on Time dotCom Bhd to be the sec­ond player but it did not live up to ex­pec­ta­tions and till to­day re­mains a niche player.

With dig­i­tal­i­sa­tion be­ing the buzz word these days, the Govern­ment wants to en­sure there is am­ple ca­pac­ity, wider reach, faster speeds at lower prices so that the na­tion is con­nected dig­i­tally. This is cru­cial since it is invit­ing for­eign in­vest­ments into dig­i­tal free trade zones and other ini­tia­tives, though most of the ur­ban and sub-ur­ban cen­tres are con­nected, and even some ru­ral ar­eas, how­ever, the speed is not same across the ar­eas.

For any tele­coms player to roll out ser­vices, it has to make business and eco­nomic sense and there must be re­turn on in­vest­ments. That ex­plains why the HSBB was a pub­lic-pri­vate part­ner­ship with the govern­ment putting in funds to push for fast speed broad­band ac­cess.

There are also ar­gu­ments that the price of fast broad­band is too high com­pared to neigh­bour­ing coun­tries but an ex­pert pointed out “it should be ap­ple to ap­ple com­par­isons.’’

Still, pay­ing RM129 a month for 10Mbps of fixed broad­band here is higher than the RM125 in Philip­pines, RM118 in In­done­sia and Brunei.

“Prices should come down. They don’t be­cause there is no real com­peti­tor in the fixed broad­band space. Most of the play­ers are rid­ing on TM’s HSBB to of­fer ser­vices,’’ says the in­dus­try ex­pert.

He adds that “for the Govern­ment to talk about dou­bling the speed at half the price, it must have done its own home­work.’’

That ex­plains why Broad­net has mush­roomed.

Broad­net is be­lieved to be work­ing with Red­skill, a spe­cial­ist strat­egy con­sul­tancy firm from Bri­tain, to map out its strat­egy to of­fer fast broad­band in the coun­try at low cost. Those in the know claim that Broad­net had met TNB to use its back­bone in­fra­struc­ture to reach out to a wider mar­ket place, but it not clear what the out­come was. How­ever, TNB said on Thurs­day that it was will­ing to work with any par­ties so long there is “value cre­ation.’’

Broad­net has since re­mained silent and many are won­der­ing where will it get the fund­ing to get into the fixed and wire­less broad­band business.

Mon­etis­ing as­sets

The real ben­e­fi­ciary of all this im­pend­ing fight in the fast broad­band space is re­ally TNB as its sits on a “gold mine’’ of fiber that has yet to be fully ex­ploited.

With the En­ergy Com­mis­sion an­tic­i­pat­ing lower elec­tric­ity de­mand growth of 2.5% per an­num due to higher fo­cus on re­new­able en­ergy and en­ergy sav­ing ef­forts while an­tic­i­pat­ing lower us­age from the in­dus­trial seg­ment, TNB can now see fi­bre as a means to sup­ple­ment its in­come by mon­etis­ing its fi­bre net­work.

As it is, it has sev­eral clients on its net­work in­clud­ing Time dotCom. Some are quick to pre­dict that TNB can make up to RM200mil a year in rev­enue if it leases out its fi­bre.

TNB’s jour­ney into fiber dates back to 1975 when it put up the 500KV ca­bles and a fi­bre-op- tic ca­bles were in­stalled to run par­al­lel to the 24 strands of con­duc­tor lines. Over the years, it added more fi­bre into the ground and those run in par­al­lel to the power ca­bles across the na­tion. It has about 12,000km of fi­bre op­tic ca­bles and is said to have spent RM10­bil over the years. It power lines are con­nected to 9.2 mil­lion cus­tomers in the coun­try.

“It was a re­quire­ment for TNB to have the fi­bre for its fault-track­ing sys­tem called Scada and re­mote me­ter­ing sys­tems and all that is sunken cost now,’’ says an in­dus­try source.

He adds that “a lot of TNB’s band­width is un­used be­cause it uses very lit­tle for its mon­i­tor­ing pur­poses. As tele­coms com­pa­nies move from 4G to 5G, they need a lot more band­width to cater for growth, so fi­bre is the way to go,’’ he adds.

Power com­pa­nies glob­ally have been leas­ing out fi­bre to tele­coms for many years. Korea Elec­tric Power in South Korea has since 1993 opened its fiber net­work to tele­com play­ers. In 2001, Ja­panese reg­u­la­tors man­dated the use of elec­tric­ity poles and ducts for pro­vi­sion of fiber to homes.

In the US, power providers are ob­li­gated to al­low pole ac­cess for tele­coms pur­poses for over 30 years now, and Thai­land has done that for de­ploy­ment of high speed broad­band ser­vices.

The bulk of TNB’s fi­bre is on its high volt­age lines of 275KV and 132KV, very lit­tle at the 11KV, which are es­sen­tially the con­nec­tion to homes, or com­monly known in the tele­coms in­dus­try as the last mile con­nec­tiv­ity.

“With smart ap­pli­ca­tions, smart cities and smart homes tak­ing cen­tre stage, TNB needs to plant more fi­bre ca­bles es­pe­cially on the 11KV lines. If it does that on its own, it could po­ten­tially be­come the largest fi­bre player in the coun­try and with the 9.2 mil­lion cus­tomers it has, the whole na­tion can be wired with fi­bre,’’ he adds.

TM has over 2.35 mil­lion of the 2.5 mil­lion broad­band sub­scribers in the coun­try as at end-Au­gust 2017, whereas TNB has 9.2 mil­lion cus­tomers. There are 34.1 mil­lion mo­bile broad­band cus­tomers.

Apart from hav­ing its own fiber net­work, TNB also has a 49% stake in Fi­bre­com Net­work Sdn Bhd, an­other fiber op­tic net­work provider in the coun­try. TM holds the re­main­ing 51% stake in Fi­bre­com. TNB has its own ICT unit to man­age its fi­bre net­work.

Fib­erail Sdn Bhd is an­other com­pany in which TM has a 51% stake, and the rest shared be­tween Petrofi­bre Net­work (M) Bhd and Kere­tapi Tanah Me­layu Bhd. It owns three fiber op­tic ca­ble net­works along the rail­way and gas pipe­line cor­ri­dor from Padang Be­sar in Perlis to Jo­hor Baru and branches out from Ge­mas to Tumpat and Ran­tau Pan­jang in Ke­lan­tan.

Val­ued as­set: On Tues­day, TM en­tered into a mem­o­ran­dum of un­der­stand­ing with TNB to look into ways on cap­i­tal­is­ing on the na­tional power com­pany’s fiber as­sets to help the Govern­ment de­liver on the Na­tion­wide Fiberi­sa­tion Plan. — Reuters

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.