PETALING JAYA: The telecommunications sector is entering the second half of the financial year with a more cautious outlook, shaped not only by macroeconomic and geopolitical headwinds but, more significantly, by structural shifts in Malaysia’s 5G policy landscape.
According to a report by RHB Investment Bank Bhd, insights from the first quarter of financial year 2025 (1Q25) and recent management commentary suggest the industry is bracing for a more restrained performance in the coming months. This is primarily due to the expected increase in 5G wholesale costs.
Despite the headwinds, dividend payouts are anticipated to remain steady, offering some reassurance to investors.
CelcomDigi Bhd is expected to benefit from increasing operational synergies as integration-related costs decline through FY25. Nevertheless, the sector may still see further policy recalibrations as the government’s 5G agenda evolves. The completion of the share subscription agreement and ongoing cost rationalisation at Digital Nasional Bhd (DNB) remain in focus.
CelcomDigi, Maxis and Yes are each contributing an additional RM320 million to acquire DNB’s shareholder loan from the Ministry of Finance and related equity stakes by the end of 2025. This financial commitment underscores the significant investment still required from operators as the 5G rollout continues.
RHB Investment noted that Axiata Group Bhd delivered the weakest results among the major players, largely due to its exposure to overseas earnings. Consequently, the research house revised down Axiata’s core earnings estimates for FY25 to FY27. This adjustment was primarily driven by the deconsolidation of XL Axiata, which has been reclassified from a subsidiary to an associate since mid-April.
Similarly, earnings forecasts for OCK Group Bhd were lowered for the same period.
Conversely, TIME Dotcom Bhd emerged as the strongest performer, attracting investor interest amid global trade tensions. Its domestic-focused business model provided a relative safe haven following retaliatory tariffs imposed by the United States.
Within a regional context, RHB observed that four Malaysian telcos currently outperform their Indonesian counterparts but still trail behind players in Singapore and Thailand, particularly in terms of dividend yields.
The March quarter results highlighted ongoing pressure on industry mobile revenues and average revenue per user (ARPU) in the retail fixed broadband segment. Prepaid ARPU fell to new lows, with mobile service revenue remaining soft even after adjusting for seasonal factors. At the same time, retail fixed broadband additions declined, pointing to market saturation in key urban areas.
Despite these challenges, TIME Dotcom continued to outperform its peers in fixed broadband revenue, bolstered by the expansion of its fibre network and increasing penetration into single-dwelling units — an area traditionally dominated by Telekom Malaysia Bhd (TM).
Cost management remains a central theme for industry players, with telcos maintaining a strong focus on operational efficiency amid the uncertain operating environment.
RHB’s top stock picks within the sector include Telekom Malaysia, CelcomDigi and Axiata, reflecting a preference for fixed-line operators over mobile players due to stronger structural drivers and more resilient earnings.
Nevertheless, the outlook remains neutral, with competition, regulatory uncertainty and weaker-than-expected financial results cited as key risks.
-The Star
