Huawei is fighting for a role in reviewing Malaysia’s 5G tender

Huawei is fighting back in the competition to build 5G networks in Southeast Asia, one of the last regions where the Chinese telecom equipment maker retains influence after being blacklisted by Washington.

The company is among those campaigning for a role in Malaysia, according to three people briefed on the situation after the country’s new government announced a review of its predecessor’s 5G plans, including a decision to award Ericsson the contract for the construction of a state network.

“It’s a mix of soft power and open lobbying to try and get adoption of their systems somewhere in the rollout,” said one person briefed on the discussions.

The Southeast Asian country’s 5G plans have become a test of its relations with China and the West, as well as a challenge to Kuala Lumpur’s reputation for respecting the sanctity of trade deals.

Haunted by political infighting, Malaysia has been one of the slowest countries to roll out 5G in the region. The Ericsson deal has allowed the company to launch a single state-owned network, which most mobile operators have agreed to mean lower costs and faster rollout, experts say. In other countries, governments typically auction spectrum to allow operators to build their own networks.

Ericsson of Sweden beat out Huawei and Nokia of Finland to secure the 10-year RM11 billion (US$2.5 billion) deal. However, since his election victory in November, Prime Minister Anwar Ibrahim has ordered a review of the public bidding process, citing concerns about transparency.

A possible outcome is that the government allows another company to build a competing network with Ericsson. Another possible outcome is the privatization of 5G network operator Digital Nasional Berhad (DNB), owned by the Ministry of Finance. A second vendor could also be selected alongside Ericsson to support the current rollout, the people said.

Despite the uncertainty caused by the review, Ericsson has continued to deploy 5G, and Malaysia claims it will have reached 50 percent of populated areas by the end of 2022. Anwar last week brought a target of 80 percent coverage forward by a year – by the end of 2023, making it one of the fastest 5G rollouts worldwide.

In a reference to the operations involved, government envoys from the EU, UK and US warned Malaysia against resuming the bidding process in February last year, when a revision was first rumored.

“If Malaysia reopens this after a review, why should any investor or company have any faith and confidence in the sanctity of commercial contracts in the Malaysian realm in the future?” It’s important for everyone that the processes are fair, open, and transparent,” said Amit Mital, who serves on the boards of several wireless technology companies and is a former official on cybersecurity policy for the US National Security Council.

“You must be wondering why this review was started after such a long time? What could be at play? There are few options,” he added. The government said it expects “some sort of finality” to the review by the end of March.

Washington has imposed severe restrictions on the export of American technology to Huawei because US security officials believe the company is helping China spy. Huawei denies any involvement in espionage. The Shenzhen-based company has been locked out of markets including the UK, parts of Europe, Australia and Japan.

Another former US security official said Washington is also locked in talks with Kuala Lumpur about the review. “Some of the discussions are focused on looking at the safety implications of going down this route,” the person said.

DNB, which placed the order, previously said Ericsson’s bid was RM700 million lower than the next best bid.

Malaysia’s finance ministry said the president’s review of the DNB would “ensure it is managed in a more transparent and competitive manner”. “Discussions with stakeholders are ongoing,” she added. Huawei and Ericsson declined to comment.

Maxis, one of Malaysia’s largest mobile operators, is one of the losers, which has yet to sign up with DNB for 5G access. Huawei is Maxis’ long-term network partner and the companies are collaborating on 5G in the country.

Verification proponents say there are no downsides to appointing another provider. “Right now there is a single point of failure,” said an executive at one of the country’s largest airlines, hinting that a second network would serve as a backup. A number of Malaysian telecom companies, many of whom would prefer to own the spectrum directly, have also lobbied the government during the review.

Others argue that Malaysia’s model could become a blueprint for other nations around the world as they grapple with how best to implement the technology cost-effectively and efficiently.

Chris Watson, a London-based partner at CMS who advises telecoms companies, governments and regulators, said there were downsides to a second 5G network. “A second supplier inevitably doubles costs and eliminates economies of scale, both of which must be borne by users and ultimately consumers, and recouped through higher prices.”

Additional reporting by Richard Milne in Oslo Huawei is fighting for a role in reviewing Malaysia’s 5G tender

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