Malaysian Telecom Update Q1 2021

Summary Bullets:

Alfie Amir
A. Amir

• The Malaysian telecom market is undergoing a massive change with the 5G special purpose vehicle (SPV) and Celcom-Digi merger announcements.

• Telcos continued to expand their enterprise ICT capabilities to capture the growing opportunity.

This report discusses key trends, market impacts and recommendations for service providers based on major announcements from industry players in the recent quarter and GlobalData Malaysia Mobile Broadband Forecast Q4 2020 and Malaysia Fixed Communications Forecast Q4 2020 published on March 24, 2021.

1. COVID-19: The Winner and Loser: COVID-19 has significantly impacted various industries, including the telecom sector. The overall mobile subscribers in 2020 declined by 3.6% YoY due to lower prepaid and roaming users while data usage increased by almost 40% in the same year driven by large-scale remote working, growth in content streaming and limited fiber infrastructure in the country.

Among the telcos, while Maxis regained the market leadership in total subscribers with a share of 25% this year, Celcom had the biggest gain with an increase of 306k subscribers (3.7% YoY) in 2020 which drove its market share by 1.4%. Celcom’s strong performance was driven by both postpaid and prepaid segments. Digi took the biggest hit from the pandemic, losing 840,000 users (-7.4% YoY) last year with a drop of its market share by 1.0%, largely due to the decline of its prepaid subscribers.

Figure 1: Malaysian Mobile Subscriber Market Share 2019 and 2020.

2. How Fast Will Malaysians Adopt 5G?: 5G is expected to be available in Malaysia in 2021 through an SPV. The adoption is expected to start picking up in 2023 with an estimated 400,000 users by the end of the year (0.9% of total mobile users). 5G adoption will continue to grow to 2.9 million subscribers accounting for 6.5% of the total mobile users at the end of 2025.

However, this is expected to be slower compared to neighboring countries such as Singapore, Thailand and the Philippines. The 5G adoption in ASEAN is estimated to be 17% of the total mobile users in 2025 (for more, please see: ASEAN 5G Q1 2021 Roundup: More Edge Computing and Private Network Developments, April 13, 2021). Despite the wider availability of devices, the slow 5G take-up in the country will be mainly due to slow coverage expansion by the SPV as compared to telcos’ aggressive deployment plans. The early phase of the deployment is expected to cover only city centers and selected key locations.

Figure 2: 5G Adoption in Malaysia, 2020 – 2025

3. Celcom Cloud Suites: In January 2021, Celcom partnered with Microsoft to launch Azure-based cloud services. The solutions offer IaaS and PaaS with tiered packages (Basic, Standard, Pro & Pro Plus) to address wider market segments. The move is timely to address the growing demand for cloud services during the pandemic. It also shows Celcom’s strong momentum in closing competitive gaps with TM and Maxis and expanding its enterprise ICT portfolio following its recent SD-WAN launch. However, there is a lack of integration of the solutions with Celcom’s existing capabilities and differentiators against other Azure cloud providers.

While the impact on the local cloud market is low, other service providers should see the launch and Celcom’s other enterprise ICT initiatives as a growing threat. With a strong position in the enterprise mobility market and a wide presence in the public sector, Celcom could leverage this advantage to penetrate the market and challenge existing players. Nevertheless, other providers could counter Celcom’s Cloud Suites with a strong professional service capability, a wider partner ecosystem (e.g., with AWS, Google Cloud); advanced features such as multi-cloud, container, AI and analytics; and domestic data centers for data residency.

For more analysis, please see: Celcom Partners with Microsoft to Launch Cloud Suites for Malaysian Enterprises , January 22, 2021.

Figure 3: Event Rating and Competitive Impact of Celcom Cloud Suites

4. Maxis Programmable Network (MPN): Maxis launched MPN in February 2021 to offer scalable network solutions with self-service capabilities to Malaysian enterprises. The solutions also support interconnections to major cloud providers such as AWS, Amazon, Google, IBM, and Alibaba. The launch was a timely move for Maxis to address the growing need for scalable network solutions to support remote working requirements during the pandemic and the increase of cloud adoption in the country. MPN also offers Maxis a competitive advantage in the networking market as SD-WAN is still new in the country and most competitors’ offerings are still rather basic.

Nevertheless, there are several gaps in the offering that other service providers can leverage to counter Maxis MPN. For example, TM and TIME could highlight their more extensive fixed-line infrastructure as the network underlay. Other providers could also differentiate with a multi-vendor approach that addresses wider market needs.

For more analysis, please see: Maxis Takes Its Networking Play to the Next Level with the Launch of Maxis Programmable Network (MPN) , February 10, 2021.

Figure 4: Event Rating and Competitive Impact of Maxis MPN

5. 5G Through an SPV: The government announced in February that 5G will be available in the country by the end of the year. However, unlike the regular spectrum allocation to individual telcos like for 4G, 3G and 2G, the SPV will be fully responsible for 5G infrastructure rollout in the country and wholesale the network bandwidth to service providers. One of the biggest benefits of this approach lower 5G barriers to entry which could attract new players in the market. This will provide a level playing field for all players and enable market challengers to offer comparable coverage to the bigger mobile players from day one. However, it could also limit 5G innovation in some instances. Developing new enterprise 5G applications often requires collaborations with other technology providers and industry players. But limited access to the SPV 5G facilities may hamper the development of edge application. Service providers will also need to align application requirements with the SPV 5G roadmap.

While the SPV’s 5G plan is still unclear, service providers could consider 5G innovation labs and trials to drive industry collaborations, gain a better understanding of enterprise needs, and strengthen their brand share in the market. They could also start exploring edge computing opportunities leveraging their cloud capabilities or through partnerships with hyperscalers.

For more analysis, please see: Malaysia 5G Through SPV: One Step Forward and Two Steps Back, March 8, 2021.

6. Celcom and Digi Merger: Celcom and Digi are in advanced discussions to merge both companies. Axiata and Telenor will both own 33.1% stakes in the merged company – Celcom-Digi Bhd, as the deal covers only their Malaysian operations. With a combined market share of almost 50%, nearly double of the next largest player, Maxis, the merger is expected to significantly change the competitive landscape of the Malaysian mobile market. However, the impact is low in the enterprise ICT segment as both telcos are still new in the market and have limited portfolios. Furthermore, between both companies, there are more overlapping capabilities than complementing resources. This will make the integration process more challenging.

For other telcos such as TM and Maxis, they could consider accelerating their fixed-mobile convergence initiatives to differentiate against the new entity. As the merger could result in service disruptions and hence loss of customer trust, competitors could also take an advantage of this opportunity by targeting the impacted segments.

For more analysis, please see: Celcom and Digi Merger: The Impact on the Malaysian Enterprise ICT Market, April 13, 2021.

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