Celcom, DiGi.Com can save by sharing infrastructure

Rivals Celcom Axiata Bhd and DiGi.Com Bhd could save a few hundred million ringgit a year in capital expenditure (capex) and operational expenditure (opex) by sharing infrastructure.

Both parties signed a memorandum of understanding in June to explore areas of possible collaboration in the areas of operations and maintenance, transmission and site sharing, and radio access.

“We have not identified the kind of savings we will get as we have to understand the philosophy but it could be a few hundred million ringgit a year. We are probably coming to an agreement,’’ Axiata Bhd managing director/president/group CEO Datuk Seri Jamaludin Ibrahim said. Celcom is Axiata’s wholly owned unit.

Celcom is the second largest player in Malaysia’s cellular sector and a major contributor of Axiata’s earnings for now. DiGi is the third largest player by subscribers and whose major shareholder is Telenor.

A collaboration would mean both cellular companies do not have to build or expand their own networks individually in the areas of cooperation but can combine efforts and work on upgrading what they have.

There is a similar tieup in Bangladesh between Axiata and Telenor which led them to explore ways to cooperate in Malaysia. The reason that operators are looking to share infrastructure is that cost of developing a network that can support data transmission compared to voice needs to be several times bigger and that would involve a lot of capex.

“As we look at the future to support mobile data, we need to build more sites and more transmission be it in the form of microwave or fibre. The best way is to co-build or co-rent,’’ Jamaludin said,

But could this possible collaboration lead to something bigger such as a merger?

“Not a merger. Not to that extend, and it has never been in discussions. We want to jointly develop transmission to share the sites,’’ Jamaludin said.

Sharing of infrastructure is not entirely new in this country. There are various alliances, and even though the lead is taken by the players this time around, the regulator had in the past cajoled operators to share infrastructure to avoid duplication and to save cost.

Celcom is also not opposed to working with any other player, including the largest player in terms of subscriber base Maxis Communications Bhd.

“We would work with Maxis if it is willing. We do not want to compete on transmission but services. We have approached them casually,’’ he said.

The bottleneck is really at the transmission level, said Jamaludin, and to address that by laying fibre cables would help celcos get the reliability in speed and huge capacity for data.

But Celcom is not going to invest millions of ringgit in laying fibre unless it is for short distances. It would rather collaborate or rent.

Is using Telekom Malaysia Bhd’s UniFi network for the transmission an option?

“We could but sometimes it does not go to homes. We do not want to build the fibre, we want to lease it. However, if we do not get a reasonable price and if they are not focusing on certain areas, then we build our own or co-build,’’ he said.

Capex wise, Celcom is spending RM300mil this year on broadband infrastructure, of which the transmission cost is between 20% and 30%.

Its 3G coverage has reached 75% of the population, while the 2G network coverage is 98%.


By B.K. SIDHU
bksidhu@thestar.com.my