this issue>international

Malaysia
The Heart of Southeast Asia
By Gene Retske

Tucked in between Indonesia and the peninsula of Southeast Asia is the country of Malaysia, one of the most pro-American nations in Asia, or the world. Formerly a British colony, the Malay states were overrun by Japanese imperialism in the early Twentieth Century. When American troops drove out the Japanese near the end of World War II, the country was so grateful that it re-named itself to “Malaysia”, a name coined by American professor Rupert Emerson, as the title for his book on the potential he saw in the region. Even the flag of Malaysia is based on the US flag, and closely resembles it, replacing the field of stars with the moon and sun of Islam instead.

Malaysia is relatively small in terms of the immense populations common in other Asian nations, including its intimate neighbor, Indonesia. Just over 23 million people live in the mountainous country that is comprised of two non-contiguous regions, one located on the southern half of the Malay peninsula, the other across the Straits where it occupies the northwestern part of the island of Borneo.

Malaysia was formed in 1957, when the British granted it independence. The original state was made up of Singapore, Sabah (the Borneo piece) and Sarawak (the Malay piece). Malaysia survived some turmoil in its early years. In 1965, Singapore opted out of the federal union. Indonesia’s dictator, Sukarno, launched a series of attacks against Malaysia, both in Borneo and on the peninsula. All of these were unsuccessful.

In 1969, riots ensued when the majority Malay political party made Malay the national language, and Islam the official religion. A robust Chinese minority dominated business and trade. The Malay controlled government attempted to institute economic reforms setting quotas in favor of Malays. The Chinese formed an opposition party, and after widespread riots in the capital city of Kuala Lumpur, the country was in a state of emergency for two years.

The country has made significant progress in race relations and economic prosperity has resulted. The government has been lead by Prime Minister Mahathir bin Mohammed since 1981. Malaysia is the second biggest oil producer in Asia, after Indonesia.


Malaysia Telecom

The national telecommunications carrier, Telekom Malaysia Berad, was created in 1984. Competition was first introduced in 1996, and today, the Ministry of Water, Energy and Communications is responsible for the telecommunications infrastructure in Malaysia. Presently, five private companies are licensed by the ministry to provide telecommunication services, which cover fixed lines and mobile solutions:
• Telekom Malaysia Berhad,
• Maxis,
• Digi,
• Time Telekom, and,
• Celcom, a mobile services provider, owned by Telekom Malaysia

The duality in Malaysia’s people, geography and government is reflected in the structure of Telekom Malaysia, who have split into separate retail and wholesale divisions.

According to Melissa Chong, senior analyst, Telecommunications Research, IDC Malaysia, “Malaysia’s TNS market is at a crossroad. While data services are expected to increase at a 7% compound annual growth rate (CAGR), voice services are heading in the opposite direction at -2% CAGR through 2008. For the immediate term, IDC anticipates that the splitting up of the incumbent, Telekom Malaysia Berhad’s operations into separate wholesale and retail business units will affect the wholesale market in the short term and the retail market in the medium term. The market is expected to undergo a reduction of prices in numerous fixed line services, thanks to greater transparency in the marketplace. An expected by-product of this phenomenon is greater product innovation, improved product ranges and choices to reach out to more users, and better quality products and customer care.”

Malaysia’s communications and multimedia industry, represented by fixed-line and mobile operators Telekom Malaysia, Maxis Communications, DiGi.com, and Time dotCom, is estimated at US$5 billion in 2003, up by 5% from 2002. In 2003, the communications and multimedia industry as a whole (including broadcasters, postal service providers, and value-added service providers) constituted 8.9% of Malaysias gross domestic product (GDP); this was largely unchanged from the previous year. The national currency, the ringgit, has remained relatively stable, pegged at 3.8 per US dollar.

Government-controlled incumbent fixed-line operator Telekom Malaysia continues to dominate the telecom market in Malaysia. It has a market share of 62% of total communications revenue, 86% of total fixed-line services revenues, and, through its Celcom subsidiary, it had 38% of total cellular telephony service revenues in 2003. The major competitors for the fixed-line market are TIME dotCom and Maxis Communications.

The cellular sector is large. There were 4.5 million fixed telephone lines in use in 2003, and just over 11 million mobile sets. In the cellular sector, Celcom faces off against Maxis Mobile and DiGi.com. Telekom Malaysia and Maxis were both granted 3G Universal Mobile Telecommunications Service (UMTS) licenses. Telekom Malaysia fegan offering limited services in early-2004. Maxis launching a 3G datacard offering at the end of 2004. DiGi.com did not pursue a 3G license in 2002/03, but has signaled that it is interested in entering the Malaysian 3G market.

Telekom Malaysia also dominates the booming Internet sector, accounting for 54% of all dial-up subscribers at the end of 2003 and over 90% of all broadband subscribers by late-2004. In this market, its main rival is Malaysias oldest Internet service provider, Jaring, a unit of the MIMOS research and development group. Jaring did not receive a formal network license until mid-2004, meaning that it was never able to compete very effectively with the incumbent. Now that this limitation has been removed, Jarings fixed wireless access (FWA) broadband services are expected to give it an added leverage in competing with Telekom Malaysia. There were nearly 9 million Internet users in Malaysia in 2003.


Prepaid is Key Strategy

Telekom Malaysia has expressed an interest in expanding operations outside of Malaysia, and prepaid services could be a key to its expansion. Telekom Chief Executive Abdul Wahid Omar has repeatedly expressed his interest in the vast India market regardless if they go it alone or with “other various options.”

Telekom Malaysia is in the process of migrating from its TDM based network to an IP service delivery network in 2005 - a goal that is described by company officials as “aggressive.” The purpose of the conversion is to be able to deliver more prepaid connectivity and enhanced services to more users, and to do so as quickly and cost-effectively as possible. Prepaid services are very popular in Malaysia, as elsewhere, among mobile consumers and temporary users. Telekom Malaysia would also like to expand this service delivery option to its fixed-line, residential customers.

Telekom Malaysia has already used the fledgling network to develop new offerings for its diverse and demanding subscriber base. One innovative prepaid service allows up to ten users to share a single access line. This offering has proven useful and popular among tens of thousands of temporary and immigrant workers within Malaysia, who need the messaging features but cannot afford an individual access line on a permanent basis.