7 Oct 2009Malaysia Broadband Overview

The Malaysian telecom industry was liberalised in the mid 1980’s, following a period during which it faced a number of restrictions. The telecommunications sector was seriously affected by the economic crisis of the late 1990s but recovered strongly in 2002.

The Malaysian telecommunications market has all the characteristics of a developing communications industry in Southeast Asia. The fixed-line sector is dominated by the incumbent operator while the domestic mobile market is fast reaching saturation with local operators looking abroad for future growth. Broadband usage has increased dramatically but the infrastructure is insufficient to deal with the demand. The increased popularity of non-voice services is also significant. Supporting all of this is the thirst for next-generation mobile telephony and the increasing integration of IT technology into telecoms networks.

With a low broadband penetration in comparison with its South East Asian neighbours, the Malaysian government has been making important steps towards improving connectivity, allocating MYR 12.9 billion for the Ninth Malaysian Plan (2006-2010), intent on turning Malaysia into an international hub for IT. While over the last three years, the broadband market finally experienced a major surge with close to 200 per cent expansion during 2006-2008, the slow roll-out of broadband services in recent years had forced the government to lower its household broadband penetration target from 75 per cent to 50 per cent by 2010. Even this figure is optimistic given that household penetration stands at a mere 30.5 per cent in Q1 2009.

The slow take-up of broadband has been exacerbated by the fact that Malaysia’s broadband speeds have been notoriously slow and services costly, compared to other Asian nations. However in 2009, with four 3G players, four WiMAX operators and FTTH coming from Telecom Malaysia as part of the Government’s HSBB project, the broadband sector in Malaysia is set to become a lot more competitive, which should boost the country’s broadband penetration.

Telekom Malaysia is the incumbent telecom operator in Malaysia which began operations in 1984. It is also Southeast Asia's second-largest telecommunication company. Telekom Malaysia officially changed its global brand from Telekom Malaysia to TM in April 2005. TM has a monopoly in the fixed line market and a considerable share of the mobile communications market after its acquisition of Celcom in 2003 and the merger with its mobile operation arm, TMTouch. TM offers DSL broadband connectivity through its ISP subsidiary TM Net, under the Streamyx brand. Due to its near monopoly of last mile connections, TM Net is now the sole DSL broadband provider in the country.

The mobile telephony market has also seen numerous developments since 2000. After an initial phase of immature overcrowding and fierce competition, three main players emerged. They are Celcom, Maxis and DiGi. With a penetration rate in excess of 100 per cent in mid 2009, the mobile market has seen spectacular growth, jumping from 3 million subscribers in 1999 to reach 28.9 million subscribers (5.86 million postpaid and 22.33 million prepaid) at Q1 2009. Of the total mobile subscribers at the end of 2008, 4.37 million were 3G subscribers. As at September 2008, Maxis led the mobile market with 10.5 million subscribers and a 40 per cent market share. Celcom had 7.89 million subscribers, while DiGi had 6.64 million subscribers.

In 2005 both TM Net, operating under the Celcom brand, and Maxis launched 3G services. Celcom was the first operator to launch services which use HSDPA technology in mid 2006. In September 2006, Maxis also launched 3.5G (HSDPA) services as part of the "wireless broadband modem" service targeted at "mass market consumer/home" users (instead of business or corporate). Celcom and Maxis have progressively upgraded their entire 3G networks to 3.5G capability.

DiGi Communications, the third largest mobile operator in Malaysia is owned in majority by Telenor ASA of Norway. In 1995 DiGi became the first telco in Malaysia to launch and operate a fully digital cellular network. They were also the first to offer GPRS (2.5G) and later EDGE (2.75G) in Malaysia in 2004. Finally in March 2009, DiGi launched its long-awaited mobile broadband service based on HSPA technology. DiGi aims to capture a third of the 3G market within the next five years based on the fact that there is a pent-up demand for mobile broadband services in Malaysia, as 60 per cent of people actively use the Internet, but only around 20 per cent of households are connected to the Web.

DiGi first bid for 3G licenses in 2002, when the regulator first issued such licenses in Malaysia. However, DiGi subsequently opted not to bid. In November 2005, there were only three interested parties in the second round of 3G licenses - DiGi, TIME dotCom and MiTV. In April 2006 the bidding winners were announced as Time dotCom and MiTV. DiGi finally secured 3G spectrum when it completed a transfer from government-backed Time dotCom in 2008, effectively allowing it to operate a 3G network.

U Mobile is Malaysia’s newest 3G service provider and is a subsidiary of U Television (formerly known as U Telecom Media Holdings and MiTV Corporation). In addition to offering mobile telephony and mobile data, U Mobile became Malaysia’s first ever true mobile TV service provider in late 2007 with its Mobile LiveTV service using DVB-H technology. In March 2008 U Mobile launched data services using U Mobile’s own HSDPA mobile network, and in October 2008 U Mobile launched its 3G content services. In February 2009 the Mobile LiveTV service was scrapped by U Mobile - possibly due to its DVB-H licence being revoked.