KUALA LUMPUR: The ongoing uncertainty surrounding the rollout and adoption of 5G (fifth-generation mobile technology) is expected to remain a significant overhang for Malaysia’s mobile telecommunications sector.
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Maybank Investment Bank Bhd (Maybank IB) said the Ministry of Finance Inc’s (MoF Inc) exit from Digital Nasional Bhd requires the remaining telco shareholders to absorb DNB’s losses in their own accounts.
DNB reported a net loss of RM1.2 billion in 2024, largely due to telcos paying only nominal access fees.
“The overall outlook for the sector remains mixed in our view, with possible upside risks to dividends (more proactive capital management) in the fixed-line space being offset by potential downside risks to earnings in the mobile space (equity accounting of DNB losses). We expect 5G uncertainty to remain an overhang for the mobile telcos,” said the firm.
On the dividend front, Maybank IB expects Maxis Bhd to continue paying a four sen per share quarterly dividend, while CelcomDigi Bhd is likely to maintain a 100 per cent payout ratio, constrained by limited retained earnings.
“We note further manifestation of merger synergies could serve to offset the impact of DNB losses,” Maybank IB said.
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The investment bank expects competitive intensity in fixed broadband to remain elevated in 2026 as mobile players continue to use fixed broadband as a lever for subscriber retention.
Subscriber growth in fixed broadband is also tapering as the segment approaches saturation.
“For the telco sector, we project core net profit growth of 12 per cent in financial year 2026 (FY26), from a three per cent decline in FY25.
“Of the telcos we actively cover, CelcomDigi leads the sector for FY26 net profit growth as merger synergies begin to partially manifest. We have not yet incorporated mobile telcos’ impending equity accounting of DNB’s losses into our forecasts, pending further guidance on prevailing losses run rate,” it added.
The firm maintained its “Neutral” stance on the sector, with Telekom Malaysia Bhd as its top pick for its exposure to data centre themes along with potential upside to dividends.
-NewStraitsTimes