Malaysia gets cracking with its 5G rollout

• Ericsson starts work on building Phase 1A with 500 sites
• Single vendor choice persuaded by pricing, higher commitments

“Get the [...] out in the field to start working. We want to start rolling out soon.” Those who know Ralph Marshall and his no-nonsense leadership style will not be surprised by the gusto, nor the speed at which Digital Nasional Bhd had announced that leading telco infrastructure and services provider Ericsson, had been picked as the sole vendor to build Malaysia’s 5G infrastructure.

DNB is the special purpose vehicle set up by the Malaysian government in early March to accelerate its 5G rollout via a Single Wholesale Network approach.

The July 1st announcement had been expected some time in mid July. But Ralph has no time to work within loose time frames. Over a career spanning four plus decades, Ralph or Mr Marshall as he is called by most subordinates has earned a reputation as being among the top corporate leaders in Malaysia. One with a fearsome reputation for demanding the best from his team.

“You will walk into a meeting with him sweating because if you don’t have your facts, he will chew you up and spit you out,” recalled a manager who once worked at Astro and enjoyed the intellectual rigour. Mind you, this executive had once worked for Amazon in Seattle, an organization that demands the best of its talent.

Fortunately for his team at DNB, he has mellowed, a little, with age. But he is driven by the mission at hand with DNB, to deliver, fast, a world class 5G network, that is expected to strengthen Malaysia’s competitiveness as a world class investment destination while providing the platform for homegrown businesses and entrepreneurs to innovate and be creative in the digital economy.

This is no different from Singapore, which has said of its 5G, through minister for communications and information, S Iswaran, “It sets the stage for the development of a world-class, resilient, and secure 5G infrastructure which will be the backbone of Singapore’s digital economy.”

“My mission is to get it done, at the right price, with the right commitments and to scale this,” Ralph has reportedly told his team.

Ericsson bests Chinese vendors at their own game

That right price, at US$2.6 billion (RM11 billion), as Digital News Asia has learnt, is apparently even lower than what Huawei had bid, said an executive familiar with DNB’s discussions with Huawei and Ericsson. “Once we started negotiating, they brought down their pricing substantially,” said the executive, admitting to being surprised.

For this price, Ericsson will design, supply, manage and build the entire 5G network comprising core, radio access and transport network (RAN), operation and business support systems (OSS/BSS) and managed services, including tower rental and fibre leasing over the next 10 years.

“Benchmarks done shows that the pricing DNB got is very competitive when compared against other global 5G deals,” said the executive.

Well aware of the fragile political situation, DNB also made sure that the highest standards of governance were adopted during the tender. And in contract negotiations, professional services firm, EY Malaysia, was involved in every negotiating meeting with Ericsson, to the point of also recording each meeting.

“They want to make sure they pass any audit with flying colors,” said the executive. As it is, one key objective has been achieved said the CEO of a listed tech company. Picking a Scandinavian company, with the region’s reputation for corporate governance, has stilled any murmurs and speculation of shady backroom deals cut to line pockets.

A vendor who took part in a tender for a supply chain component attests to the selection process being “very thorough and professional”.

Overstated risk of single vendor approach

The selection of one vendor for the project did surprise many as the market had been expecting two vendors to be given the job with the ensuing competition between two parties, raising the standard of their respective work while reducing the feared “single point of failure” risk that comes from relying on a single network.

Indeed one former senior telco executive feels the choice of single vendor does expose DNB and Malaysia to supply chain distruptions and this single point of failure risk. Siva Shanmugam, former country managing director of Nokia Malaysia and Sri Lanka feels is not not wise of DNB to select single vendor for 5G deployment in Malaysia.

While he has no qualms about the technology and roadmap of Ericsson, Siva nonetheless feels at least for the RAN domain, "DNB could have given 30% of the site to a second player to induce competition and pricing.

This will further  reduce supply chain, global politics and economics risk for the single 5G network deployment in Malaysia," he says pointing out that this is a common practice by operators in US, Korea, Sweden and other regions.

To this, a consultant familiar with DNB’s thinking explains that after robust internal discussion and with board approval, DNB decided to stick with a single vendor to get better pricing as well as more commitments from Ericsson beyond getting a good price.

Industry players also point to the vendor financing deal from Ericsson as being a key factor to its contract win. It is unclear if this vendor financing would have been on the table if a portion of the RAN contract had been given to a second vendor.

Meanwhile an infrastructure expert also points out, “A single vendor makes sense as it means the network is easier to manage and run while you have less integration and handover issues.”

He also exlains that the single point of failure risk that is oft spoken of with a single vendor approach is a highly doubtful scenario.

“Most operators technically have a single vendor for their core, the heart of their network. You just have to run two switches that work together but divide the network load equally if you want to ensure your entire network is not vulnerable.”

With the award given and Ralph cracking the whip to get Ericsson into the field to start rapidly building out Phase 1A, all eyes will be on DNB as it races to meet its year-end target of rolling out 5G coverage in Cyberjaya, Putrajaya and some pockets in KL with 500 sites to be built, consisting of a combination of towers and rooftops.

There will be no small cells for now. DNB will use existing infrastructure of mobile network operators and tower/fibre providers with no plans to lay fibre or build towers in this phase.

There is still a lot of work to be done beyond building infrastructure, especially forging commercial deals with the operators. As the DNB consultant points out, “We are just at the first step.”