Malaysia's top telecoms official said on Thursday industry consolidation would be left to market forces and that the government would not interfere in the business decisions of its five operators.
Nuraizah Abdul Hamid, chairman of the Malaysian Communications and Multimedia Commission (MCMC), told Reuters the government wanted better services and greater rural coverage but would not force a shakeup in the crowded sector.
"There won't be any manoeuvring by us," she said.
Malaysia's 18 billion ringgit ($4.7 billion) telecoms market is seen as too small to support all its five firms, given the capital intensive nature of the industry and its need to support a continuous rollout of expensive new technology.
Analysts are betting on fewer and bigger players to emerge, especially with the advent of costly third-generation (3G) mobile technology.
On Tuesday, the MCMC issued two 3G licences instead of the three it originally planned - sparking talk it might be managing the sector's consolidation.
Malaysia has ordered shake-ups in some of its industries, like banking and stockbroking, to make its companies more competitive ahead of trade liberalisation.
Nuraizah said the market should not read too much into the numbers. She said that this week's 3G licensing gave the regulator the chance to convince interested parties to offer better services.
"When else will we get the chance?" she said.
"Spectrum is very limited and precious. For the industry to grow, all areas must benefit and the 3G exercise is one way of obligating operators to provide adequate services." 3G promises to bring high-speed Internet access, video and music downloads to mobile phones, but many in the industry question if there will be enough demand to pay for 3G's multi-billion ringgit investment costs.
Shake-up
Licences were issued to Maxis MXSC.KL , the number one mobile provider, and Telekom TLMM.KL , the dominant fixed-line operator. Left behind were Technology Resources Industries TRIB.KL , Time dotCom TCOM.KL and DiGi.Com DSOM.KL .
Rival operators, which failed to secure a licence, are seen merging with either Maxis or Telekom in the near future.
Third-ranked operator DiGi.Com, majority controlled by Norway's Telenor TEL.OL, did not bid.
"At the end of the day, most investors see three operators left in the local market," said Choo Swee Kee, a fund manager who helps oversee 500 million ringgit at KLCS Asset Management.
Telekom is already in the midst of merging its cellular arm with TRI, while speculation has swirled that Maxis might make a takeover bid for Time dotCom.
Plans for full launch of 3G in 2004 are expected to cost the two winners 2.5 to 3.5 billion ringgit in network infrastructure.
Nuraizah and her commission are determined to raise standards even if it means overhauling the industry.
A 57-year old career civil servant, she has caused raised hackles within the industry by pushing for cheaper and better services.
"We are not too sure that 3G will be that important but if it's the next stage generation, then we have to make it available to our companies and industries," she said. (US$ = 3.8 ringgit).