KUALA LUMPUR: Kenanga Investment Bank Bhd has reiterated its “neutral” stance on the telecommunications sector following the release of first quarter 2025 (1Q 2025) financial results, which were largely in line with expectations across companies under its coverage.
In a report issued today, the investment bank highlighted that earnings delivery during the quarter painted a mixed picture. While 17 per cent of the companies outperformed expectations, the remaining 83 per cent met projections.
Domestic mobile network operators recorded a year-on-year decline of 0.9 per cent in service revenue, primarily due to a strategic shift by CelcomDigi Bhd (CDB) in moving away from one-time prepaid SIM card users. This move contributed to prepaid subscriber churn, dragging down the segment’s overall performance.
Core sector earnings declined 13 per cent year-on-year, with the downturn largely attributed to CelcomDigi. The absence of prior year tax reversals played a significant role in the earnings contraction.
On a quarter-on-quarter basis, the mobile segment’s performance remained within expectations. Net subscriber additions were buoyed by strong postpaid demand, whereas prepaid numbers continued to show volatility, although sequential improvement was noted.
Average revenue per user (ARPU) remained stable for CelcomDigi, while Maxis Bhd experienced a drop in ARPU following a change in revenue recognition for its Maxis Device Care programme.
In the home broadband segment, Kenanga voiced concern over a broad-based decline in both net additions and ARPU on a sequential basis. Time dotCom Bhd was the exception, while Telekom Malaysia Bhd registered the steepest ARPU drop, which the report attributed to aggressive price discounting.
As this marks the first quarter to reflect widespread competitive pressures, Kenanga is adopting a cautious stance, maintaining a wait-and-see approach for the time being. However, optimism remains, as all major telcos have retained their full-year 2025 earnings guidance, indicating potential recovery in the upcoming quarters.
Telekom Malaysia and Time dotCom continue to be Kenanga’s top picks within the sector, with target prices set at RM8.15 and RM5.91 respectively. The research house also noted that further clarity is awaited on the country’s 5G dual network policy.
-Bernama
