KUCHING: Analysts are upbeat on the formation of the Regional Network Consortium by 24 Malaysian telco players to purchase international bandwidth for Internet traffic in bulk as it would give the group greater bargaining power.

This was in light of a recent announcement to Bursa Malaysia which informed of a consortium of 24 major telcos entering into a shareholders’ agreement for the purpose of implementing a Regional Network called Konsortium Rangkaian Serantau Sdn Bhd.

According to ECM Libra Capital Sdn Bhd (ECM Libra Research) head analyst Bernard Ching, a large consortium would have greater leverage when they meet to negotiate for the prices of Internet Protocol (IP) transit cost from suppliers, giving them greater bargaining power.

“Buying in bulk will help to reduce IP transit cost as the group will enjoy a bulk discount and economies of scale accorded to bigger entities,” Ching noted in an online report. “Over the long term, the consortium may even build and own an undersea cable network or partner with other cable networks for cable capacity.

“Controlling the cost of international bandwidth is crucial as the requirement for data capacity rises exponentially, especially in the new era where data usage in smartphones and table PCs are rapidly growing,” he added.

Companies involved in this consortium included Sarawak-based Sacofa Sdn Bhd and Sarawak Information Systems Sdn Bhd, as well as Sabah-based SEDCO Communications Sdn Bhd.

The Regional Network Consortium was an Entry Point Project under the Communications, Content and Infrastructure National Key Economic Area.

In a separate report, analysts from AmResearch Sdn Bhd (AmResearch) noted that the authorised share capital of the consortium would be RM10 million divided into 10 million ordinary shares of RM1 each.

The initial issued and paid-up capital of the consortium was RM240,000, AmResearch added, of which each party held a stake of 10,000 shares of RM1 each issued at par value in the consortium.

“We understand that amongst the local companies, TM, Maxis, TimedotCom and U Mobile have their own gateway points. These points, according to the filing to Bursa Malaysia, will also be part of the cost reduction target,” outlined the research firm.

If executed successfully, ECM Libra’s head analyst believed that end consumers might even enjoy lower-priced internet packages or getting more international bandwidth by paying the same price over the longer term.

“The next few months will be an exciting time for the sector as the telcos convert the recent announcements on joint collaborations into new products which will ultimately give consumers more choices to choose from,” he affirmed.