Malaysia's Digital Nasional explains process of US$2.6bil 5G award to allay concerns of improper behavior
By Digital News Asia July 8, 2021
- Responds to mis-informed narratives on social media with detailed selection process
- Ericsson bid US$168 mil lower than the total cost of ownership of the next closest bid
Digital Nasional Bhd (DNB) has taken active steps for the nation’s fifth generation (5G) network and infrastructure rollout, starting with the nationwide engagement of industry participants including the Mobile Network Operators (MNOs), tower and fibre owners.
The finalisation of DNB’s appointment of its strategic partner, Ericsson (Malaysia) Sdn Bhd, concludes a rigorous and competitive process which began in April this year.
DNB and Ericsson have begun work and are on track to meet the year-end deadline to launch Malaysia’s 5G network in areas within Kuala Lumpur, Putrajaya and Cyberjaya, with the objective of achieving 80% nationwide population coverage by 2024.
Malaysia embarked on the 5G deployment and adoption to ensure it remains relevant and competitive in the region, as outlined under the Government’s MyDIGITAL Blueprint. Currently, the country needs to catch up to their regional peers who have started this process much earlier.
The design, build and maintenance of the Malaysian 5G Network managed by Ericsson is estimated to cost US$2.6 billion (RM11 billion) – around US$168 million (RM700 million) lower than the total cost of ownership of the next closest bid. Ericsson’s network equipment, deployment services, and ongoing maintenance and network management cost of RM4 billion was the lowest. The balance of approximately RM7 billion will cover network infrastructure costs from other parties comprising primarily tower rental and fibre leasing over a 10-year period.
[RM1 = US$0.239]
The financing of network equipment will be sourced from foreign and domestic financial institutions which Ericsson has undertaken to arrange as part of the agreement to supply, deliver and manage the entire 5G network.
DNB will securitise future cashflows from its wholesale business with MNOs via Sukuk programmes to finance its other network operating expenditure and meet its obligations to repay financiers when it becomes due. Accordingly, there will be no government funding required for the 5G network rollout.
More than 60% of the spend on the network infrastructure will directly benefit Bumiputera interest in the telecommunications industry and Bumiputera contractors.
Ericsson to invest in knowledge economy related socioeconomic measure value at RM4bil
In addition to the network investments, Ericsson is also committed to contribute to Malaysia’s knowledge economy, specific to job creation, 5G-related knowledge building and other socioeconomic benefits which is estimated at a value of RM4 billion over the life of the contract.
DNB’s tender process was structured by an independent professional services firm, Ernst & Young Consulting Sdn Bhd (EY Consulting), according to global standards and involved four panels, comprising some 50 local and international experts from across 10 countries with current 5G network rollout experience.
In response to queries and mis-informed narratives on social media, DNB would like to list out the process which led to the awarding of the tender to Ericsson.
The process began with the initial evaluation of 14 Network Equipment Providers (NEPs), after which, eight were shortlisted and invited to bid for the tender. The criteria evaluated when shortlisting the NEPs were:
- Proven credentials in successful 5G deployment and execution of end-to-end technology solutions;
- Availability of enhanced security to safeguard users and platforms;
- Established Malaysian presence and ecosystem and a sound understanding of the business environment including existing network of vendors;
- Locally based resources for immediate deployment; and
- Effective plan for the transfer of knowledge to be acquired by domestic affiliates.
Of the eight invited, only four submitted their bids.
The tender evaluation team comprised internal and external independent industry experts and experienced professionals. The tender results were then deliberated extensively by the Board Tender Committee and the Board of DNB. The strictest standards of governance were adopted throughout the tender process as advised and facilitated by EY Consulting.
The tender requirements were based on criteria identified and refined through a rigorous process with industry feedback on the requirements of the 5G network and shared with all invited NEPs.
Ericsson was ranked top in all three key components of the tender evaluation criteria which were the following:
- Technical: covering overall 5G technology capabilities, 5G deployment capabilities, integration approach, cyber and network security, and operations and maintenance
- Commercial: covering financing proposal and total cost of ownership
- Socioeconomic: covering local development and socio-economic impact
DNB looks forward to working closely with all parties - government, industry, businesses and the Rakyat – to ensure the nation is adequately equipped with the necessary 5G support to embrace the digital economy in the near future.
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