Phillip Research Sdn Bhd (Malaysia)
Report Date: 16 July 2025

Telekom Malaysia: Unlocking Long-Term Growth Amid Digital Convergence and Data Center Expansion

Executive Summary: A Forward-Looking Telecom Giant

Telekom Malaysia (TM), Malaysia’s leading integrated telecommunications provider, continues to chart a compelling growth trajectory. Despite a challenging competitive environment and conservative near-term guidance, TM’s robust fibre infrastructure, proactive convergence strategy, and aggressive data centre expansion position it strongly for long-term upside. This in-depth analysis discusses TM’s current performance, future strategies, financial health, and the risks and opportunities that lie ahead.

Company Snapshot: Key Facts and Shareholder Structure

• Bloomberg Ticker: T MK EQUITY
• Shares Outstanding: 3,838 million
• Market Cap: RM25,713 million (USD 6,061 million)
• Net Cash/(Debt): RM394.7 million
• Major Shareholders:
  • Khazanah Nasional Bhd: 20.1%
  • Employees Provident Fund: 17.8%
  • Amanah Saham Nasional: 9.5%
• 52-Week High/Low: RM7.17 / RM6.15
• Latest Close Price: RM6.70
• 12-Month Target Price: RM8.05 (previously RM8.35)
• Total Return Potential: 20.1%

Unifi’s Quad-Play Convergence: A Catalyst for ARPU Growth

TM’s Unifi segment remains its primary revenue engine, contributing approximately 46% of total revenue in 2024. The company’s strategic focus on quad-play convergence—bundling broadband, mobile, telephony, and TV—has begun to show positive early traction. Despite a 5.2% year-on-year (YoY) decline in Average Revenue Per User (ARPU) to RM127 in 1Q25, management is optimistic about future uplift potential. Currently, less than 50% of Unifi subscribers have adopted convergence packages, leaving substantial room for ARPU enhancement as penetration grows.

• Unifi lags behind Maxis and CelcomDigi in net subscriber additions, trailing for two consecutive quarters.
• TM’s extensive fibre footprint—covering over 80% of national fibre—remains a significant structural advantage, even as peer telcos lease fibre access from TM.
  • TM earns RM50–60 per subscriber through wholesale leasing, compared to about RM90 from retail Unifi users.
• Even when competitors add fixed broadband customers, TM benefits from wholesale monetization, cushioning its fibre earnings base.

Fixed Broadband Subscriber Net Adds (Recent Quarters)

Data Centre Expansion: Doubling Capacity and Embracing AI

TM is rapidly progressing with the expansion of its Klang Valley (KVDC) and Iskandar Puteri (IPDC) data centres, each targeting an additional 10MW by end-2025. This will double total domestic capacity to around 40MW, with construction already over 60% complete. In parallel, TM is embarking on a transformative 64MW AI-ready data centre project (Phase 1) in Iskandar Puteri in a 51:49 joint venture with Singtel, scheduled for completion by 2H26.

• Currently operates six data centres in Malaysia and one in Hong Kong, with a combined initial capacity of 20MW at KVDC and IPDC.
• Data centre revenue currently accounts for less than 1% of group revenue but is expected to deliver double-digit segment growth over the long term as demand from hyperscalers and AI workloads accelerates.

TM Global: Submarine Cables and Hyperscaler Demand

TM Global, the group’s international arm, is a key player in regional connectivity, underpinned by its involvement in the Southeast Asia–Middle East–Western Europe 6 (SEA-ME-WE 6) submarine cable system.

• Owns over 340,000 km of submarine cables across 35 international systems, reinforcing its regional leadership.
• Robust demand from hyperscalers for high-throughput fibre and backhaul capacity underpins growth in managed wavelength services and Indefeasible Rights of Use (IRU) for submarine cable leasing.
• TM Global’s revenue contribution is projected to rise from 25% in 2024 to around 30% by 2030, driven by international bandwidth demand and increasing IRU uptake.

Financial Performance and Outlook: Resilient, Yet Conservative

TM’s financials demonstrate resilience amid market headwinds, but management’s 2025 guidance remains conservative.

• Guidance for 2025:
  • Low single-digit revenue growth
  • Flat EBITDA YoY
  • Capex-to-revenue ratio: 14–16%
• Phillip Research projects 3.5–3.6% topline growth over 2025–2027, with core earnings expanding 3.5–4.5% YoY, driven by Unifi and TM Global.
• Net subscriber additions for Unifi are expected at 50–70k annually (2025–2027E).
• TM One’s revenue is expected to remain stable, anchored by recurring managed service contracts with government-linked and enterprise clients.

Key Financial Tables: Historical and Forecasted Figures (RM Million)

Quarterly Performance (Selected Recent Quarters)

Valuation: Discounted Cash Flow and Upside Potential

Phillip Research maintains a BUY rating on TM, revising the 12-month DCF-derived target price to RM8.05 (down from RM8.35) after trimming 2025–26 core EPS forecasts by 4–7% to reflect lower growth assumptions.

• TM’s enterprise value is estimated at RM30,055 million, with an equity value of RM30,881 million across 3,838 million shares, yielding the RM8.05 target price.
• Key valuation assumptions include a WACC of 9.4%, terminal growth rate of 1.0%, and a risk-free rate of 4.0%.

Key Risks and Opportunities

• Downside Risks: Regulatory changes, weaker-than-expected ARPU recovery, intensifying fixed broadband competition, rising operational costs, slower data centre demand, and industry-wide pricing pressure.
• Upside Risks: Faster adoption of quad-play convergence, accelerated demand for data centre interconnectivity, sector tailwinds from digitalisation, and increasing value from hyperscaler partnerships.

Conclusion: A Telecom Leader Positioned for Digital Malaysia

Telekom Malaysia stands out as a structurally advantaged player in Malaysia’s digital landscape. Its dominance in fibre broadband, progressive convergence strategy, and aggressive investments in next-generation data centres and international connectivity infrastructure ensure a resilient and attractive growth profile. Despite short-term moderation, TM’s strategic vision and operational strengths continue to underpin its long-term value proposition for investors.

About Phillip Research Sdn Bhd

Phillip Research Sdn Bhd is a subsidiary of Phillip Capital Holdings Sdn Bhd, providing impartial and independent research for clients across Asia, Europe, the US, and Australia. For further information, please contact their offices in the respective regions.