Malaysia veers away from 3G auction

Malaysia will not charge telecommunication companies an upfront license fee to operate 3G (third-generation) mobile phone services, given the problems licensing fees have caused elsewhere in the world, according to Prime Minister Mahathir Mohamad.

In a speech reported by the government news agency Berita Nasional Malaysia (Bernama) Friday, Mahathir said that rather than hold a license auction, Malaysia was considering a number of alternative ways of charging operators.

“The government believes that getting money up front is not all that important. It is what we are going to get all the way through in the future that is important to us,” Bernama quoted Mahathir as saying.

Mahathir said the government wants to ensure that operators which eventually obtain 3G licenses will be profitable so that they can be taxed later to generate revenue for the government, Bernama reported.

3G auctions in both Singapore and Hong Kong have collapsed recently, with the number of licenses on offer matching the number of bidders, removing the need for bidding.

Malaysia has five existing 2G (second-generation) operators – Telekom Malaysia Bhd., Celcom Sdn. Bhd., DiGi Telecommunications Sdn. Bhd., Maxis Communications Bhd. and Time dotCom [cq] Bhd. – and around 5 million subscribers. All the operators have expressed interest in operating 3G services.

Telekom Malaysia has previously said it expects the costs associated with 3G implementation may lead to mergers among the country’s cash-strapped operators, with only two or three independent entities surviving into the 3G era.

The government has said it expects to decide on how to allocate 3G licenses by the end of this year and award the licenses early next year, with a view to beginning services towards the end of 2002.