The Great 5G Escape

How Telekom Malaysia Walked Away from DNB’s Billions — And Who Got Left Holding the Bag

Executive Summary

Malaysia’s 5G story is one of the most structurally complex telecommunications policy experiments in Southeast Asia. What began as a bold government-led single wholesale network (SWN) model in 2021 has devolved into a multi-year saga of contested equity deals, disputed access agreements, and billions in unresolved debt — with one player, Telekom Malaysia (TM), emerging remarkably unscathed while others absorb the structural consequences.

This DeepDive traces TM’s two-stage exit from the 5G debt structure: first, the failure to complete its equity subscription in DNB in August 2024; and second, its termination of the 5G access agreement in February 2026 to switch to U Mobile’s rival network. The combined effect is that TM has avoided approximately RM233 million in equity obligations, walked away from a share of RM6.42 billion in total DNB liabilities, and repositioned itself as a supplier-beneficiary rather than a risk-bearing shareholder — all while CelcomDigi, Maxis, and YTL are left absorbing DNB’s accumulated losses and future capital calls.

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1. Background: The DNB Experiment

1.1 The Single Wholesale Network Model

In March 2021, the Malaysian government established Digital Nasional Berhad (DNB) as a special purpose vehicle to deploy the nation’s 5G infrastructure under a single wholesale network (SWN) model. Rather than auctioning 5G spectrum to individual telcos — the global norm — Malaysia opted for a state-owned wholesale entity that would build the network and sell capacity to mobile operators.

The theoretical advantages were clear: shared infrastructure would lower per-user deployment costs, eliminate duplication, and close the urban-rural digital divide through simultaneous mass deployment. DNB signed a 10-year network deployment contract with Ericsson and began rollout in late 2021.

1.2 The Equity Structure

Malaysia’s five major mobile operators — CelcomDigi, Maxis, U Mobile, TM, and YTL Communications — were initially hostile to the DNB model, arguing they could deploy 5G more effectively as individual operators. After protracted negotiations and government pressure, all five agreed to each acquire a 14% stake in DNB, with the Ministry of Finance (MOF) retaining 30%.

Under the Share Subscription Agreement (SSA) signed in December 2023, each telco was required to inject RM233 million into DNB. The deadline for completing conditions precedent was set for June 2024, with extensions available for specific circumstances.

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2. The Two Escapes

2.1 Escape One: The Failed Equity Subscription (August 2024)

While CelcomDigi, Maxis, U Mobile, and YTL all completed their share subscription agreements by the June 2024 deadline, TM required an extension to August 21, 2024, citing the need for shareholder approval at an Extraordinary General Meeting (EGM) because the SSA constituted a related party transaction.

TM was unable to secure shareholder approval by the extended deadline. It requested a further extension to December 31, 2024. DNB rejected this request and terminated TM’s SSA on August 23, 2024. The Communications Ministry confirmed the decision was final.

Immediate consequence: TM avoided the RM233 million equity injection. The remaining four telcos’ stakes were recalculated to 16.28% each, with MOF’s share rising to 34.88%.

2.2 Escape Two: Terminating the Access Agreement (February 2026)

On February 24, 2026, TM issued formal notice to both DNB and MCMC to terminate its 5G access agreement, originally signed on October 30, 2022 and valid until October 2032. TM’s argument centred on a contractual clause allowing termination within 30 days once 5G services became commercially available from another operator.

U Mobile had launched its 5G services on January 26, 2026, and issued a Reference Access Offer (RAO) — the formal wholesale pricing framework signalling commercial readiness. TM argued this triggered its contractual termination right.

Simultaneously, TM announced a three-year 5G wholesale contract with U Mobile, under which U Mobile would provide end-to-end Multi-Operator Core Network (MOCN) services, covering provisioning, integration, activation, testing and optimisation.

Financial consequence: TM disclosed RM127.3 million in unused prepaid capacity under the DNB agreement as of December 31, 2025 — effectively a sunk cost it is willing to forfeit. RHB Research noted that TM may remain bound to DNB for an additional year (until January 2028 long-stop date) in the worst-case scenario.

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3. Financial Anatomy of DNB

3.1 The Debt Structure

DNB’s financial position reveals the scale of the burden that TM has avoided and that the remaining telcos must now absorb:

3.2 The Liability Transfer

In December 2025, MOF Inc. exercised its put option to sell its remaining 41.67% stake to CelcomDigi, Maxis, and YTL. Each telco is required to pay RM328 million (totalling approximately RM984 million) to acquire the government’s equity and shareholder loans. Upon completion, DNB becomes a fully private entity — and all liabilities transfer to the three remaining shareholders.

BIMB Securities estimated that DNB’s persistent losses could create an annual earnings drag of approximately RM400 million across CelcomDigi and Maxis, representing a 20–25% downside to their earnings. Maybank IB projected potential associate losses of RM100–200 million per telco.

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4. TM’s Net Position: The Ledger

Viewing TM’s 5G-related transactions as a ledger reveals the strategic outcome:

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5. The Dual Network Reality

5.1 U Mobile’s Rise

U Mobile exited its 16.28% DNB stake in May 2025 after being appointed to build Malaysia’s second 5G network. It selected Huawei and ZTE as technology partners and signed a RM2.4 billion, 10-year fibre agreement with TM to leverage TM’s 740,000 km fibre network. U Mobile targets 80% population coverage by the second half of 2026.

However, Ookla’s controlled testing in October 2025 showed that 83.2% of U Mobile subscriber test samples still connected via DNB’s infrastructure, with only 16.8% on U Mobile’s own network — highlighting the scale of the buildout challenge.

5.2 DNB’s Viability Question

DNB now faces a structural dilemma. With U Mobile operating a competing network and TM attempting to switch wholesale providers, DNB risks losing access-seeker revenue while still carrying RM5 billion in deployment debt. The entity has never been profitable, posting RM1.21 billion in losses for FY2024 alone.

DNB received an additional 100 MHz of spectrum (3.3–3.4 GHz band) in late 2025, restoring its original 200 MHz allocation. Its CTO noted that as of October 2025, 84.2% of all 5G traffic from nearly 29 million users still runs through DNB’s network. But the question is whether this traffic concentration will persist as U Mobile’s network matures.

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6. Systemic Analysis

6.1 The Irony of the SWN Model

The original rationale for the SWN model was to prevent telco oligopoly behaviour and ensure equitable 5G access. Instead, the model has produced a new form of structural inequity: one well-positioned player (TM) has leveraged its infrastructure dominance to extract supplier revenue while avoiding ownership risk, while the remaining players are locked into absorbing the losses of a state-created entity they initially opposed.

The RM2 billion fibre lease to DNB and the RM2.4 billion fibre lease to U Mobile demonstrate that TM’s real competitive advantage was never about 5G service delivery — it was about owning the fibre infrastructure that any 5G network depends on. Whether the customer is DNB or U Mobile, TM gets paid.

6.2 Who Bears the Risk?

6.3 Lessons for Malaysian Industrial Policy

The DNB experiment offers several lessons. First, creating a state entity to bypass market dynamics does not eliminate market power — it merely reshapes who holds it. TM’s fibre monopoly meant it was always going to be the critical supplier regardless of the 5G ownership structure. Second, forcing telcos into equity arrangements they fundamentally oppose creates structural fragility. Third, the absence of a clear break-even path for DNB means the debt question is not resolved — it is merely transferred from the government’s balance sheet to the telcos’, with taxpayers as the implicit backstop.

The dual-network model, while theoretically promoting competition, has effectively doubled the infrastructure cost while fragmenting the market. Whether Malaysia’s 5G landscape can sustain two parallel networks remains the defining question of 2026.

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7. Conclusion

Telekom Malaysia has executed one of the most strategically advantageous exits in Malaysian corporate history. Through a combination of governance constraints, contractual clauses, and infrastructure leverage, TM has positioned itself as the indispensable supplier to both competing 5G networks while bearing none of the ownership risk. The RM127 million it forfeited in prepaid capacity is a rounding error compared to the billions in liabilities it avoided.

For CelcomDigi, Maxis, and YTL, the road ahead involves absorbing DNB’s RM6.42 billion in liabilities, managing annual losses projected at RM400 million, and competing against U Mobile’s growing network — all while paying TM for the fibre infrastructure their networks depend on.

The ultimate irony: the entity created to prevent telco oligopoly has produced a structure where one player profits from all sides, three players are trapped with the debt, and the Malaysian public bears the residual risk through government guarantees. The 5G revolution was supposed to democratise connectivity. In Malaysia, it has democratised the losses.

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Disclaimer: This analysis is based on publicly available information and represents independent assessment. It does not constitute financial or investment advice. All data sourced from public filings, news reports, and research notes.