Telco earnings set to strengthen in second half of 2026
KUALA LUMPUR: Malaysia's telecommunications sector is expected to deliver stronger earnings in the second half of 2026 (2H26), driven by a recovery in mobile revenue, sustained cost savings and higher wholesale contributions.
KUALA LUMPUR: Malaysia's telecommunications industry is anticipated to generate stronger earnings in the second half of 2026, fueled by a resurgence in mobile revenue, ongoing cost efficiencies, and augmented wholesale contributions. RHB Research highlighted these elements as key to counterbalancing the impact of escalating 5G access charges.
Despite heightened competition and regulatory uncertainties, the research firm retained a "Neutral" stance on the sector, designating Telekom Malaysia Bhd, CelcomDigi Bhd, and OCK Group Bhd as its primary recommendations. Target prices were set at RM9.30 for Telekom Malaysia, RM3.70 for CelcomDigi, and 80 sen for OCK. Anticipated earnings growth for Telekom Malaysia stems from amplified wholesale contributions, a low base in the first half of 2026, and the implementation of the revised Mandatory Standard on Access Pricing.
The firm further expects benefits from Telekom Malaysia's core network agreement with U Mobile Sdn Bhd, projected to yield direct cost savings in financial year 2027. Telekom Malaysia's data center revenue is projected to rise in fiscal years 2027 and 2028 due to augmented utilization at its Iskandar Puteri and Cyberjaya facilities.
Over 70% of the capacity for Telekom Malaysia's forthcoming artificial intelligence data center in partnership with Singtel has already been pre-sold prior to its planned inauguration in the fourth quarter of 2026. Digital Nasional Bhd's concerns over additional funding prerequisites are expected to lessen post the completion of its RM5.2 billion debt restructuring program.
However, further clarity is required regarding plans to rejuvenate Digital Nasional Bhd's profitability and its future capital expenditure necessities. CelcomDigi is deemed attractive by RHB Research due to integration synergies projected to increase in fiscal year 2027, accompanied by operational enhancements. OCK Group Bhd is also favored as a smaller-cap telecommunications infrastructure firm, owing to its expanding digital enterprise and growing public-sector footprint.
RHB Research advises investors to factor in heightened regulatory risks prior to a potential general election in 2027, with other downside risks encompassing more intense competition, subpar-than-anticipated earnings or dividends, and regulatory obstacles.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
