Broker: UOB Kay Hian
Date of Report: Thursday, 11 September 2025

Malaysia Telecommunications Sector Q2 2025: Growth Driven by Pre-to-Postpaid Migration, Fibre Demand, and Strategic Monetisation

Sector Overview: Stable Growth Amid Structural Shifts

Malaysia’s telecommunications sector delivered a solid performance in the second quarter of 2025, with sector earnings broadly in line with expectations. Notable exceptions were Axiata and CelcomDigi, which underperformed on the earnings front, prompting a sector-wide earnings forecast cut of 6%. The quarter was characterized by disciplined cost management, rising service revenue, robust enterprise pipelines, and strong demand for fibre broadband.
Key catalysts on the horizon include Axiata’s infrastructure asset monetisation and the synergistic savings from the CelcomDigi merger, expected to materialize by 2027. The sector maintains a MARKET WEIGHT rating, with CelcomDigi, TIME dotCom, and Axiata as the top investment picks.

Key Sector Highlights for Q2 2025

• Q2 core earnings rose 8% year-on-year (YoY) and 14% quarter-on-quarter (QoQ) to RM1,552 million.
• Postpaid subscriber growth accelerated, driven by enhanced data plans and family offerings.
• Postpaid ARPUs remained under pressure due to aggressive bundling and price competition.
• Enterprise business pipelines and home fibre demand remain robust.
• Expanded Sales and Services Tax (SST) is expected to compress EBITDA margins by about 1% for major players.

Financial Performance Snapshot: Q2 2025 Core Net Profit

Company-by-Company Analysis

CelcomDigi

• Q2 2025 core net profit: RM439.1m (+2.2% QoQ, +7.0% YoY).
• Challenges: Weaker prepaid revenues and higher provisions for doubtful debts due to elevated long-term contracts.
• Synergy Outlook: Projected steady-state opex savings of RM700m-800m annually after 2027, with major merger costs already absorbed in 2024.
• Earnings CAGR of 4% forecasted for 2024-27, with potential for special dividends and tower asset monetisation (via sale to EDOTCO) as key re-rating catalysts.
• Dividend yield expected at 4.9% for FY25.

Axiata

• Q2 2025 core net profit: RM163.8m (>100% QoQ, -5.5% YoY).
• 1H 2025 earnings from continued operations down 36% YoY, reflecting XLSmart integration costs and lower associate contributions.
• Key Catalysts: Opco performance improvement, reduction of Link Net losses, and the highly anticipated EDOTCO listing (potential valuation RM17b-21b).
• Expected to declare a dividend per share (DPS) of 10 sen in 2025, translating to a 4% yield.

Maxis

• Q2 2025 core net profit: RM398.0m (+7.3% QoQ, +11.8% YoY).
• Postpaid ARPU declined by 1% QoQ amid intense market bundling to reduce churn.
• Dividend yield projected at 4.9% for 2025.

Telekom Malaysia (TM)

• Q2 2025 core net profit: RM438.1m (+9.2% QoQ, +10.1% YoY).
• Benefiting from strong broadband demand and fixed-mobile convergence strategies.

TIME dotCom

• Q2 2025 core net profit: RM113.4m (-3.8% QoQ, +6.3% YoY).
• Outlook remains robust, with a projected dividend yield of 5.3% and a focus on expanding fibre offerings.

Peer Comparison Table

Sector Catalysts and Risks

Growth Drivers & Strategic Events

• UMobile is set to deploy 400-500 new 5G sites nationwide by Q1 2026, mainly in greenfield and residential areas. This will lift its 5G sites portfolio to around 2,000, with further plans to colocate 5G antennas on existing 4G infrastructure.
• Key beneficiaries include TM, OCK Group, and EDOTCO.
• EDOTCO monetisation is a major event: Post-exit from Myanmar, EDOTCO is valued at RM17b-21b, potentially netting Axiata RM7b-9b in equity value (29-38% of its current market cap).
• CelcomDigi and Maxis each contributed an additional RM116.7m as shareholder advances to Digital Nasional Berhad (DNB) in August 2025. YTL and MOF Inc also injected capital, bringing the total to RM600.2m.
• Shareholding in DNB remains unchanged, with MOF Inc as the largest shareholder (42%), and CelcomDigi, Maxis, and YTL each holding 19%.

Risks Ahead

• Heightened competition could erode earnings, especially among fixed-line operators.
• Potential disappointment if the CelcomDigi merger fails to deliver expected synergistic savings.
• Any economic downturn may lead to reduced consumer spending and lower sector revenues.
• Ongoing uncertainties regarding DNB’s shareholding structure and MOF Inc’s exit may dampen sector valuations if unresolved.

Valuation and Investment Recommendation

The sector is expected to maintain stable operating parameters in the near term, with prudent cost control and moderate capex intensity supporting an average dividend yield of 4%. Despite outperforming the FBMKLCI by 6% year-to-date and trading at a premium (+2SD EV/EBITDA of 8x), the unresolved DNB shareholding structure tempers a more bullish outlook. The MARKET WEIGHT call is maintained, with CelcomDigi, TIME dotCom, and Axiata standing out as the top picks.

Conclusion: Outlook for Malaysia’s Telco Sector

Malaysia’s telecommunications sector continues to deliver stable growth, supported by strategic investments in network infrastructure and a clear shift towards postpaid and fibre services. With cost discipline, dividend support, and upcoming monetisation events, the sector remains attractive to long-term investors. However, structural uncertainties and competitive risks must be carefully monitored in the coming quarters.