Telecom sector revenue growth hits speed bump

By the Editorial Team · Wednesday, September 16, 2026

Malaysia's telecommunications sector reported second-quarter earnings largely meeting expectations but faced limited revenue growth due to challenges in increasing subscriber numbers and monetizing 5G services. Analysts warn that impending annual losses from the 5G infrastructure rollout by Digital Nasional Bhd starting in late 2026 could pressure earnings further, while growth shifts toward enterprise and fibre segments.

The Malaysian telecommunications sector posted second-quarter earnings broadly in line with expectations, though overall revenue growth remained subdued due to ongoing challenges in attracting new subscribers and increasing average revenue per user (ARPU). Industry analysts attribute the muted expansion to a difficult consumer environment and obstacles in monetizing 5G services.

According to a recent sector report by BIMB Research, telecom operators continue to face structural difficulties in translating enhanced network speeds and increased capacity from 5G technology into significant ARPU gains, particularly within the consumer segment. The report highlights that this issue remains a key barrier to revenue growth across the industry.

In addition to operational challenges, the sector is expected to experience near-term earnings pressure stemming from impending equity-accounted losses related to Digital Nasional Bhd’s (DNB) 5G infrastructure rollout. Starting in the fourth quarter of 2026, these losses could amount to approximately RM400 million annually for the sector, BIMB Research warned. While these potential losses have not yet been factored into full earnings forecasts, the research house indicated that valuation discounts applied to major players CelcomDigi Bhd and Maxis Bhd partly reflect this risk.

Financial performance among traditional mobile service providers remained constrained in the first half of 2026 (1H26). Maxis reported a service revenue increase of 2.7%, while CelcomDigi posted growth of 1.5%. In contrast, revenue growth drivers are shifting increasingly toward non-consumer market segments such as enterprise services, wholesale, fibre backhaul, and data centre connectivity.

Fibre operators have outpaced the broader sector in revenue expansion, with Time dotCom Bhd reporting 6.6% growth in 1H26 and Telekom Malaysia Bhd (TM) recording 4.8%. Cost optimization and disciplined operational management have been key factors supporting sector earnings amid revenue pressures.

BIMB Research reaffirmed a neutral stance on the Malaysian telecom sector. Its top stock pick is Axiata Group Bhd, with a target price of RM3 per share, citing the company’s balanced approach to portfolio transformation toward technology assets, balance sheet optimization, and prospects for higher dividend payouts.

CelcomDigi maintains a “buy” call with a target price of RM3.30, supported by operational improvements following its integration and a raised total cost savings target of RM470 million. The research house holds a “hold” rating on TM, with a target price of RM7.78, and on Time dotCom, with a target price of RM5.60. TM’s outlook is underpinned by expected cost efficiencies from the ongoing 5G network migration and upcoming revenue streams from its TM-Nxtera data centre and Asia Link Cable projects.

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.