Malaysia's YTL prices 5G below 4G as it bets on service revenue growth
Pricing 5G lower than 4G services sounds counter-intuitive. But for YTL Communications in Malaysia it makes business sense, according to its CEO, Wing Lee, speaking at DTW Asia 2023.
One of major factors shaping YTL’s 5G pricing decisions is the structure of Malaysia’s 5G market. In March 2021, Malaysia’s government, which has since changed hands, mandated the creation of a single, national cloud-native wholesale 5G netco, called Digital Nasional Bhd (DNB), to serve the country’s existing communications service providers (CSPs).
The country’s network operators were given the opportunity to acquire equity in DNB and four did so: YTL, TM Digi and Celcom. However, the wholesale 5G network plan has come under criticism in its home market and in February this year, Malaysia's other telco, Maxis, said it will await the results of a review of the national wholesale 5G plan by Malaysia’s new government before seeking shareholder approval for investment in DNB.
In the meantime, in May 2022, YTL became the first operator to launch 5G services using DNB's wholesale network. Part of DNB's goal was to enable CSPs to offer 5G connectivity at lower prices than 4G services. For now, YTL is delivering on this ambition.
“We did something that is totally against the grain. We offer 5G at a lower price than 4G, enabled by the economy of scale of the single [network],” said Lee.
YTL, he explained, has two principal 5G products, a prepaid service that costs US$7 per month and a 5G unlimited data service for $13 per month.
“This single ... network model has allowed us to move up the value chain. We've gone from heavy capex investment upfront for 5G to an opex model,” he explained. This “frees up our resources and - most importantly - capital to let us do high value things,” said Lee. “Because after all, the digital economy is not about towers … the digital economy is about service, applications and innovation.”
YTL's strategy is also shaped by being part of the Malaysian industrial conglomerate, YTL Group, which is active in ecommerce, as well as utilities, construction contracting, cement manufacturing and property development.
“We have numerous investments in utilities. At the board level we look at [YTL Communications] as a utility investment,” according to Lee. “The internet is the ultimate digital utility.”
Despite the relatively low price YTL charges consumers for 5G, Lee said the company makes money from connectivity. However, longer term the company is betting on service revenue.
“The key is that we don't look at the telco business as the only source of revenue. This is about cloud gaming. This is about banking, and …. additional services on top where the network can help with the distribution. Once you have a distributed architecture, the question for us is that how do we add value on top.”.
In the immediate term, for example, YTL is launching a cloud gaming service with Nvidia and will offer 5G-based gaming from a choice of gaming platforms. It has also acquired a banking license and plans to launch a digital bank next year. In addition, it is building a data center with 500 megawatts of capacity to help reduce latency both for consumer services such as gaming, and for future enterprise services.