KUALA LUMPUR -- The Malaysian government has awarded Sweden's Ericsson an 11 billion ringgit ($2.6 billion) contract to design and build its 5G telecommunications network, snubbing Chinese competitor Huawei Technologies.
Thursday's announcement comes as Malaysia aims to make 5G connectivity available by year-end and cover 80% of the population by 2024. For starters, services are to be rolled out in Kuala Lumpur and Putrajaya as well as multimedia hub Cyberjaya within 2021.
Local media outlet The Edge reported in April that Digital Nasional -- a Finance Ministry entity entrusted with owning and operating the 5G network -- had invited eight vendors to participate in the tender: Ericsson, Huawei, ZTE, Cisco, NEC, Nokia, Samsung and FiberHome.
Malaysia has not shown the same aversion to Huawei as the U.S. and several other Western countries, which have blocked it from bidding for government contracts and especially 5G projects over concerns about security and links to Beijing. In February, Malaysia decided to partner with Huawei on a cybersecurity lab.
Earlier, in October 2019, Huawei was brought in as a 5G hardware supplier for Maxis, Malaysia's largest mobile provider by subscribers. Under the deal, the Chinese company was to provide 5G radio equipment, services and expertise for Maxis' network.
But the Maxis agreement was reached assuming that 5G spectrum allocations would be awarded to individual telecommunications companies, and that the choice of hardware suppliers would be up to the respective spectrum holders. Prime Minister Muhyiddin Yassin's government, however, shifted away from the traditional allocation method by establishing Digital Nasional to own the 5G assets and spectrums.
In a statement on Thursday, Digital Nasional said Ericsson will handle the design and development of the country's end-to-end 5G network. "Ericsson has undertaken to arrange to finance for the supply, delivery, and management of the entire 5G network," Digital Nasional said. The agency said it will securitize future cash flows from its wholesale business via Islamic bonds to finance all other network operating expenses and repay all vendor financing arrangements.
The 11 billion ringgit arrangement includes tower rental and fiber leasing, of which more than 60% will benefit local contractors over the next 10 years, Digital Nasional said.
Ericsson has also committed to value-creation activities in Malaysia, through knowledge building and technology transfers. These endeavors are estimated to be worth 4 billion ringgit over the life of the contract.
"The faster connectivity speeds, ultra-low latency and greater bandwidth of 5G for mobile broadband will empower Malaysia to quickly close the digital divide," Ericsson President and CEO Borje Ekholm said. "To this end, we will collaborate with Digital Nasional on a 5G Experience and Innovation Lab."
Ericsson currently deploys 86 live 5G networks and has been involved in Malaysia since 1965.