Telcos face cautious outlook as 5G risks remain

By the Editorial Team · Tuesday, September 15, 2026

Malaysia’s mobile network operators CelcomDigi, Maxis, and YTL Power are set to equity account Digital Nasional Bhd’s financial results starting in 4Q26, providing clearer insight into the financial impact of their 33.3% stakes in the 5G network provider. This development is crucial as it may affect operators’ earnings and dividends amid ongoing regulatory uncertainties and continued funding needs for DNB’s path to cash-flow breakeven.

Malaysia’s telecommunications sector is facing a cautious outlook as regulatory uncertainties surrounding the 5G dual network model continue to affect mobile network operators (MNOs), according to recent analysis by Kenanga Research.

A key development anticipated in the fourth quarter of financial year 2026 (4Q26) is the equity accounting of Digital Nasional Bhd’s (DNB) financial results by its MNO shareholders—CelcomDigi Bhd, Maxis Bhd, and YTL Power International Bhd—each holding a 33.3% stake. This milestone is expected to provide greater clarity on the operators’ earnings and dividend outlook, shedding light on the financial impact of their investment in DNB.

Kenanga Research maintains a neutral view on the overall telecommunications sector amidst these challenges, while continuing to rate CelcomDigi as an “outperform” stock with a target price of RM3.28. CelcomDigi’s current share price of RM2.72 trades at 21.3 times its forecast earnings for financial year 2027, which is notably below its historical average of 26.2 times. The research house sees potential for a 37% upside under a bull-case scenario, compared with a 26% downside risk. In comparison, Maxis is deemed a “market perform” with a target price of RM3.70, showing an estimated 21% upside and 20% downside. Maxis shares currently trade close to their historical valuation mean.

CelcomDigi’s stronger outlook is attributed in part to ongoing post-merger cost savings, which Kenanga Research estimates could reach RM800 million annually by FY27. These savings are expected to boost the company’s earnings before interest and tax margins by five to six percentage points compared to pre-merger levels. However, these benefits have yet to be fully incorporated into current earnings forecasts, indicating potential for upward revisions and valuation re-rating if the cost-saving initiatives accelerate as planned.

Conversely, Maxis’s stronger earnings resilience is largely reflected in its current share price, leaving limited room for significant gains. The research house highlighted that while Maxis’s earnings performance is commendable, it also bears a tighter margin for error going forward.

A significant source of uncertainty remains the financial condition of DNB, which continues to operate at a net loss estimated to narrow from RM1.2 billion in FY24 to RM500 million by FY27. This loss is projected to impact the equity-accounted earnings of MNOs by approximately 8% in FY27. Each operator has already contributed about RM880 million to DNB, not including the cost of acquiring U Mobile’s former stake. While their balance sheets are currently able to manage additional funding requirements, Kenanga Research cautions that prolonged shareholder funding commitments could pose longer-term risks until DNB achieves sustainable cash-flow breakeven.

An analyst noted that some of the financial pressure linked to DNB may ease from 2027 onwards as CelcomDigi and Maxis could potentially lease network elements back to DNB, concurrent with a reduction in their own capital expenditures. This potential shift may help to alleviate operational expenses amid ongoing regulatory and financial uncertainties as Malaysia’s telecommunications sector navigates the implementation of its 5G infrastructure.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.