Telcos pay for DNB’s misfire

THE government’s decision to exit Digital Nasional Bhd (DNB) and compel three telecommunication companies (telcos) to buy out its stake is not surprising.

But it is a fresh reminder of how problematic the single wholesale network model has been.

This week, the three telcos – CelcomDigi Bhd, Maxis Bhd and YTL Power International Bhd’s unlisted unit YTL Communications Sdn Bhd – received put-option notices requiring them to pay RM327.9mil each for Minister of Finance Inc’s (MoF Inc) remaining shares and shareholder loans in DNB.

Once the deal is completed, they will each own a third of a company that posted a RM1.21bil net loss in financial year 2024 and sits on RM4.43bil in net debt.

Investors reacted swiftly.

CelcomDigi and Maxis saw their share prices soften over a couple of days after the news, reflecting concerns that absorbing DNB will weigh on earnings.

YTL Power also dipped, adding to market unease about the size of its growing investment commitments.

The three telcos may need to absorb around RM300mil each of annual losses, even after cost-control efforts, depending on DNB’s operational improvements.

Analysts are equally cautious.

Maybank Investment Bank Research notes that CelcomDigi and Maxis will see some near-term cash outlay and will need to equity-account DNB’s losses.

Meanwhile, TA Research warns of near-term earnings volatility for both telcos if DNB’s performance does not improve.

However, the research house offers a more constructive view, suggesting that a privately run DNB could finally enforce cost discipline and better optimise network coverage and infrastructure.

Still, TA Research acknowledges the growing competitive threat: U Mobile Sdn Bhd is rolling out a second 5G network, which could erode DNB’s utilisation and future revenue.

And that is the core irony.

DNB was created to avoid duplication, accelerate rollout and free telcos from hefty 5G capital expenditure.

Yet today, the network is largely built – and the losses are being handed back to the same companies that were initially sidelined.

The government recovers its investment – while the industry inherits the debt, the financial drag and the task of making DNB commercially viable.

It raises an unavoidable question: If DNB had never been created, would the sector now be dealing with this problem at all?

Had telcos been allowed to deploy 5G themselves, Malaysia might have avoided years of policy reversals, delayed spectrum decisions and the billion-ringgit clean-up now under way.