Malaysia PM Anwar Faces Scrutiny Over 5G Tender Pick

Bloomberg News
·3-min read

(Bloomberg) -- Malaysian Prime Minister Anwar Ibrahim’s government faces criticism after it awarded a tender to build the country’s second 5G network to one of the smallest players in the telecommunications industry.

Most Read from Bloomberg

On Nov. 1, the Malaysian Communications and Multimedia Commission picked U Mobile Sdn. over two larger peers, CelcomDigi Bhd. and Maxis Bhd. Some analysts said it was a surprise.

BMI, a Fitch Solutions company, said in a note on Nov. 6 that U Mobile’s selection was “somewhat surprising” given its size and “dependence of foreign investments.” It urged authorities to provide “greater clarity on the merits of U Mobile’s proposals.”

The MCMC said it was a “rigorous selection process.” Communications Minister Fahmi Fadzil said the decision was final and wouldn’t be reviewed.

U Mobile’s biggest shareholder, Straits Mobile Investments Pte., is a unit of a company owned by Singapore state investment fund Temasek Holdings Pte. It owns almost half the shares. The second-largest is Malaysia’s king, Sultan Ibrahim Iskandar, who holds about 22%. U Mobile’s chairman is the tycoon Vincent Tan.

It’s the latest headache for Anwar, who came to power in November 2022 vowing to stamp out cronyism and corruption.

“The award process goes against Anwar’s commitment to good governance,” said Asrul Hadi Abdullah Sani, a partner at ADA Southeast Asia, a regional consultancy firm. “This could impact investor confidence.”

Anwar, who is attending APEC meetings this week, has yet to publicly discuss the decision and his office didn’t respond to requests for comment. U Mobile, Tan and the national palace didn’t respond to requests for comment.

U Mobile announced this week that Straits Mobile would reduce its stake to 20%. Unlike its competitors in the 5G tender bid, U Mobile is privately held, although it has considered an initial public offering since 2019.

U Mobile was a surprise as either Maxis or CelcomDigi, which both have stronger balance sheets, was expected to win, CIMB Securities analyst Foong Choong Chen said in a note last week. U Mobile has said it would fund the 5G rollout on its own and it wouldn’t cost Malaysian taxpayers.

Public Investment Bank analyst Eltricia Foong said in a note on Nov. 11 that given the capital intensity of 5G deployment and U Mobile’s high debt level, it needs a strong strategic partner to share the costs.

The decision on the second 5G network has drawn criticism from lawmakers, including one from Anwar’s own party.

Hassan Karim, from Anwar’s Parti Keadilan Rakyat, asked if the choice was related to U Mobile’s shareholders. He also said the government was repeating the mistakes of earlier Malaysian administrations in creating the potential perception of “crony capitalists.”

Tan said on Sunday that Sultan Ibrahim had owned U Mobile shares since 2015, nine years before he was made king. The ruler of Malaysia’s southern state of Johor became king in January under the country’s unique rotating monarchy where nine hereditary rulers take turns to serve five-year terms.

“Any comments involving His Majesty our King should be done responsibly based on facts, not wild accusations,” Tan wrote in a column published on a local news website.

Sultan Ibrahim has wide business interests, mainly through his shareholdings in various enterprises. Some of these businesses involve Tan, who founded U Mobile.

“The priority should be to ensure people have access to the best telco service,” said political analyst Adib Zalkapli, who has covered Malaysia for more than 15 years. “We will know in the near future if this was the consideration when U Mobile was made the second 5G operator.”

(Updates with analyst comment in 11th paragraph. An earlier version corrected an analyst’s name in the last paragraph)

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.

Latest stories