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The fight for 4G


The Edge, November 28, 2011

As the government moves closer to awarding the LTE/4G spectrum, mobile network operators are increasingly concerned that the allocation will be lopsided. Industry players say two plans have been put forward and in both of them, newcomer Puncak Semangat Sdn Bhd seems positioned to gain a bigger portion.

Stories by Nadia S Hassan
As the government moves into the last lap of its process to allocate the Long Term Evolution/4G spectrum, rumbles of discontent are getting louder over the proposed allocation. None of the players will talk about it for fear of being left out of the process, but their main concern is that the allocation of spectrum might not be equal.

Though the Malaysian Communications and Multimedia Commission (MCMC) has yet to publicly announce a decision on the allocation of spectrum, it is not secret that all the players are jostling for the best positions. At this point, the biggest question is, how are the battle lines being drawn?

Given the spectrum is a national asset, its allocation is unlikely to be free of politicking. Intense lobbying has been ongoing for a few months now and is expected to pick up steam in the next few months. And while the MCMC will not be making its decision unilaterally, the role of its chairman has never before been more important.

When it first came to light late last year that nine players had been invited by the MCMC to submit their business plans for the 2.6GHz spectrum, the assumption at the time was that all would get an equal slice.

With only 180MHz available for allocation, it was thought that the nine players would each get 20MHz. The nine players are Celcom Axiata Bhd, Maxis Broadband Sdn Bhd, DiGi Telecommunications Sdn Bhd, U Mobile Sdn Bhd, Asiaspace Sdn Bhd, Packet One Sdn Bhd, REDTone Marketing Sdn Bhd, YTL Communications Sdn Bhd and newcomer Puncak Semangat Sdn Bhd.

All of them dutifully submitted a business plan in January as requested by MCMC and subsequently submitted and additional plan six months later.

Earlier reports said the decision may be made in 3Q2011, but with no announcement insight, the players could not be blamed for feeling a little antsy. Hence, the brouhaha when the news broke that the new kid on the block, Puncak Semangat, may end up with a bigger portion of spectrum than the more established players.

It should be noted that the 180MHz is divided into 140 MHz for FDD (Frequency Division Duplexing) – LTE and 40MHz for TDD (Time Division Duplexing) – LTE. The FDD-LTE technology is more suited for those that also have a voice element with the spectrum being split equally between upload and download. For example, if an operator has 20MHz of spectrum, 10MHz is to be allocated for upload and the other 10MHz for download.

In comparison, TDD-LTE is more flexible with the operator determining the uplink and downlink ratio.

In layman terms, if an operator were given 40MHz of spectrum, given that people download more than upload, the player could allocate 30MHz for download and only 10MHz for upload.
It is learnt that only P1 and YTL Comms are looking at TDD-LTE while all the other players are eyeing allocation in FDD-LTE technology. 

Two proposals
Although the MCMC has issued a statement in relation to the Puncak Semangat issue, asking the concerned parties to refrain from speculation, sources say it is currently considering two plans.
The first is that Puncak Semangat, a company with connections to businessman Tan Sri Syed Mokthar Al-Bukhary, be allocated 40MHz of spectrum while the two WiMAX players – REDTone and Asiaspace – get none. REDTone and Asiaspace were awarded their WIMAX license for the 2.3GHx frequency band back in 2007 along with P1 and YTL Comms.

“The reasoning is, given that Puncak Semangat is new to the industry, it should be allocated more spectrum to help increase its chance of a successful rollout. Alos, REDtone and Asiaspace are viewed as not having maximised their utilisation of the current WiMAX spectrum given to them the first time around,” says a source.

For the remaining 100MHx of FDD-LTE, the plan is to divide it among the remaining four players comprising Celcom Axiata, Maxis, DiGi and U Mobile. The 40MHz of TDD-LTE will be split equally between YTL Comms and P1.

The second proposal being put forward, according to the source, is for Puncak Semangat to get just 30MHz of FDD-LTE. Asiaspace and REDTone will then get 10MHz spectrum each while the remaining 10MHz will be divided equally among the remaining four operators. The apportioning of TDD-LTE for P1 and YTL Comms remains unchanged.

At the moment however, neither of these proposals is cast in stoned could be subject to change. “There is even market talk that the TDD-LTE split might not be equal,” says a source.

It should be pointed out, however, that in both the proposals, Puncak Semangat gets the bigger share. Although the argument for Puncak Semangat getting a larger portion of spectrum is that it is a fledging operator, the counter-argument is that because the spectrum is so valuable, it should be allotted to those that have proved themselves.

“Everybody is looking for more spectrum to increase the sophistication of their offerings. If a new operator is given more spectrum, how is that fair to the operators that have already invested significantly in infrastructure and proved themselves successful?” asks and industry player.

In addition, while Puncak Semangat is profitable – according to data from Companies Commission of Malaysia – does the company have the deep pockets and expertise needed to embark on such a capital intensive exercise?

There is no question that some of the player are more established names and with notable corporate figures backing them.

Celcom Axiata, Maxis and DiGi are the country’s Big Three celcos while U Mobile and P1 have international backers. Singapore’s ST Telemedia has a stake in U Mobile, of which Tan Sri Vincent Tan is chairman, while Korea’s SK Telecom has a stake in P1. YTL Comms, whose executive director is Tan Sri Francis Yeoh, comes under the umbrella of YTL Power International Bhd, which has a significant war chest.

Given that the thirst for data is unquenchable, following the increased presence of smartphones and devices such as Apple’s iPad and Samsung’s Galaxy Tab, the importance of obtaining spectrum cannot be understated.

Spectrum is so valuable that auctions held in France and Italy recently managed to attract bids from their respective operators totalling more than 4.8 billion euros. In France, its four operators put in bids totalling 936 million euros for blocks of the 2.6GHz LTE spectrum with portions being priced from 287 million to 150 million euros.

Add to the fact that some of the Malaysian operators are looking to diversify into offering not only high-speed broadband but also television, making the need for spectrum increasingly urgent.

Of the companies on the list, a number have announced activities related to broadcasting, Maxis, for example, has announced its foray into IPTV using the HSBB backbone of Telekom Malaysia Bhd. REDTone also has an IPTV service called DETV, which offers a range of Chinese-centric programmes.

When YTL Comms launched its YES 4G service last year, the company also announced that it was tying up with US-based Sezmi Corp to deploy a hybrid TV service for Malaysia and Asia-Pacific.

Puncak Semangat’s proposals, meanwhile have captured the market’s attention. Earlier in the year, it was reported that the company had put in a proposal to the government to develop the digital terrestrial broadcasting project. It has also entered into preliminary talks with Media Prima Bhd, which owns TV3, 8TV, TV9, and ntv7, on the conversion from analogue to digital. And the figure that is being bandied about for the conversion is RM2 billion.

This has not gone down well with the free-to-air TV operators as they claim the infrastructure can be put up at half the price.  “If the cost is high, the operators will charge the TV stations more. The TV stations are not prepared to fork out for any excessive cost and prefer to see a transparent and competitive bidding process in the project,” says an industry player.

Be that as it may, most of the operators are undoubtedly hoping for a decision to be made soon on the LTE/4G spectrum as time is running out. While the LTE/4G spectrum can only be used from 2013 onwards, switching to an entirely new system requires some preparation work and trial runs.

Although most players have ensured that the switch can be done seamlessly, no doubt some player would like a degree of certainty before embarking on trial runs to reduce teething problems that might occur.

To be fair to the MCMC and given the importance of spectrum and the role it plays in the future development of the telecommunications industry, the organisation cannot be faulted for taking things slow and steady.

Given the sensitivity of the issue, and the potential political ripples that may occur, the question of ‘exactly who gets what’ is indeed a loaded one. Thus, the MCMC can be forgiven for keeping mum until an official decision has been made.

It should also be kept in mind that the MCMC has a new captain in the form of Datuk Mohamed Sharil Tarmizi, who was formerly the organisations’s COO. Sharil took over from Tan Sri Khalid Ramli officially on Oct 16 this year.

With a new head at the helm, significant changes could be made to the plans that had previously been put in place. Those who have met Sharil says he is extremely efficient and single-minded about getting the job done.

“He is also known for not being afraid to speak his mind, “says an industry player.

Sharil has previously served as a member of the MCMC – from May 2006 for two terms – before leaving for other things. One of his more notable positions was as executive director of consulting firm BinaFikir. Given his experience as Coo, Sharil might not find slipping on the mantle of chairman that much of a change, but there is no question that he will be facing a busy couple of months until an official decision has been made on the LTE/4G spectrum.

Progress made in LTE at home and abroad

Although most have touted the importance of LTE/4G going forward, most consumer would not feel the change, interestingly enough. This is simply because the number of devices that support LTE/4G is slowly on the increase, and soon it will be as ubiquitous as the current 3G standard. An analyst with Goldman Sachs was quoted recently a saying that the market for TDD-LTE handsets equipment and semiconductors will total US$98 billion from 2012 to 2016. Even Apple is said to be launching an incarnation of its iPhone that supports the LTE network, according to reports. One news report quote an analyst with research firm Ovum as saying that LTE will be used by 19% of mobile broadband users in Asia Pacific by 2016.

Certainly, the use of LTE/4G is picking up steam globally, Telia Sonera and Telenor were among the first to commercially launch their LTE/4G services in Stockholm and Oslo back in 2009. The Telenor group is the parent company of DiGi.

US operator Verizon Wireless recently announced that it had launched its LTE/4G network in 14 new market stateside and made major expansions in its four existing markets.

Japan’s Softbank is also planning to commercialise its LTE/4G network by early 2012, expanding it to cover around 92% of the country’s population by the end of next year. China and India are also increasing their adoption of LTE/4G networks even as they look to improve their 3G frameworks, Closer to home, Singapore’s M1 Ltd was the first telco in Southeast Asia to launch a commercial LTE/4G network this June with nationwide coverage expected by the end of 2012.

On the local front, the players have not been resting on their laurels. Maxis was the first to conduct an LTE/4G trial in June last year. “We completed extensive LTE field trials with four leading vendors  early this year, providing us with enormous learning in design, planning and optimisation of LTE networks,” it says.

Celcom Axiata and DiGi, meanwhile, have invested or are planning to invest billions in their networks to make themselves LTE/4G ready.

According to a Celcom Axiata statement, “We have taken several steps to prepare for LTE readiness by appointing Ericsson and Huawei to supply the latest radio access equipment and build a new world-class mobile network.

“Apart from that, we have contacted Nokia Siemens Networks to boost network capability as part of our ongoing modernisation with a view to roll out our first LTE network before January 2013. We have been conducting live LTE trials since the beginning of the year”.

DiGi’s ongoing network swap to a single radio access network, which is part of its modernisation process, will ensure that the change to LTE/4G will be seamless.

Even the smaller players are starting to make some headway. Puncak Semangat showcased its LTE/4G proof of concept this July and has already conducted trials in Johor.

P1 has also been very open about how its network is LTE/4G ready, having conducted extensive testing on TDD-LTE since 2011, according to data from the company. In a previous interview, C C Puan, group CEP of major shareholder Green Packet Bhd, said P1 had successfully showcased and upgrade from WiMAX to LTE/4G in April this year, a process that took only 30 minutes.

So, there is no question that all the players are ready to adopt LTE/4G in some shape or form. But with the MCMC still holding the cards at this stage, when the battle is starting to heat up, it is too earl y to say who the victor will be. However, given the important role that LTE/4G will go playing forward, this decision will have repercussions for years to come.

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