The wireless giant in Telekom Malaysia awakens

• Back in the wireless game after 8yrs, TM could be a serious challenger
• Taking its time to ramp up, awaiting P1 deal to clear before pushing ahead

ANALYSIS ON Aug 8, the country’s largest telco Telekom Malaysia (TM) launched its first 4G (Fourth Generation) wireless broadband offering, known as TMgo, in the northern state of Kedah.
 
As reported by Digital News Asia (DNA), TMgo is TM’s effort to provide what in industry parlance is known as fixed-mobile broadband – or nomadic broadband – through the use of Long Term Evolution (LTE) technology and specialised mobile dongles and modems.
 
TMgo is currently available in Kedah and some parts of Melaka. More information on the packages can be found here and here.
 
To the man on the street, this seems to be yet-another mobile broadband service by yet-another operator, albeit in suburban and rural locations, which is unusual.
 
But upon a closer look at the service offerings, as well as TM’s launch strategy, there are several interesting inferences that can be drawn.
 
The first thing to note is that TM has been itching to get back into the wireless game after exiting the business some eight years ago, when it spun off its wireless entity into what is known today as Axiata Group Bhd, formerly known as TM International (TMI).
 
The move then essentially left TM as strictly a fixed-line player, although it also had other forms of business surrounding a typical telco, such as its international gateway and submarine data division.

While these businesses are generally profitable, and while TM’s jewel in the crown – its UniFi fibre-to-the-home business – is booming, industry watchers familiar with the matter have argued that TM has been left out of perhaps the most lucrative business there is in the telco space today: The wireless sector.
 
But as of Aug 8, this is no longer true. According to an industry executive, the launch last week represented a significant step towards TM playing “catch up” with the other wireless players.
 
“The launch and service availability in Kedah and Melaka – although not in the usual urban areas where such advanced data services are launched – are not so much about capturing market share or ramping up subscriber numbers,” said the executive on condition of anonymity.
 
“To me, it’s about ‘bragging rights’ – that is to say: ‘We, Telekom Malaysia, are back in the wireless game, and all our competitors better take note of this’.”
 
The next interesting point is how TM got back into the wireless game.
 
Historically speaking, TM has had a licence to use a block of the 2x5MHz spectrum, courtesy of its takeover of the now defunct operator Mobikom back in 1998. That spectrum – used initially by Mobikom as an analogue cellular service – was converted to support a digital standard known as CDMA (code division multiple access) by TM.
 
According to the industry executive, TM used this CDMA technology to offer fixed-wireless voice service to its customers, primarily in suburban to rural areas where it was not economical for the telco giant to roll out fixed-line services.
 
The challenge was that this CDMA service was very niche and not considered to be a money earner for TM because of the lack of economies of scale.
 
Thus, the move to repurpose the use of this spectrum into a commercial product in TMgo through the use of LTE is a good move by TM, as highlighted by a recent Hong Leong Investment Bank advisory to investors.
 
But even so, why launch the service in suburban to rural Kedah and Melaka?
 
“Launching [TMgo] in these two areas may have something to do with the fact that the original 850MHz spectrum used by TM for its CDMA service was supposed to be for the benefit of suburban to rural folks. In doing so, TM is keeping to its original modus operandi – that of bridging the digital divide.
 
“Now if TM were to have launched TMgo in urban Klang Valley, this would run contrary to this modus operandi and it would have been difficult for TM to be able to justify why the spectrum is used in urban areas,” said this executive.
 
By the backdoor?
 

The launch of TMgo in suburban to rural areas also underlies the fact that TM currently has merely a 2x5MHz block of frequency for its use, which means that it has limited frequencies to provide high-quality and -capacity broadband for use in urban areas.
 
Industry standards suggest that an operator needs to have a minimum of 10MHz of frequency if it were to capitalise on the true benefit of LTE’s speed and capacity. This implies that TMgo is operating at sub-par capabilities.
 
But unbeknownst to many, there is still an unused 2x5MHz block of 850MHz of frequency not yet assigned to any operator. Speculation is rife that TM is not only eying this block of unused spectrum but close to getting a nod from the Malaysian Government to use this spectrum, ostensibly due to the 'influence' the company has with the corridors of power.
 
Currently, it is not clear yet how aggressive TM plans to proceed with its TMgo launch as the strategy it is pursuing, with its proposed takeover of a 57% stake in Packet One Networks (P1), has been delayed.

“But if it does get that second block of spectrum for its use, TM can be a very potent force in the wireless space,” argued the industry executive.
 
“Given that TM is an integrated telco player with huge revenue, and has everything from consumer broadband (UniFi), backhaul fibre connections and international gateway to a fixed network, it can also quickly become a powerhouse in the wireless scene when it does roll out in urban areas,” he added.
 
This is something that other wireless players aren’t happy about as TM’s entry into the 4G market has been 'opportunistic' rather than via the presentation of a viable business case, which the other eight operators had to go through.

Next: What advantage TM has, and its potential future plans