MBSB Research maintained its POSITIVE outlook on Malaysia’s telecommunications sector, favouring mobile network operators (MNOs) CelcomDigi Bhd and Maxis Bhd as steady service revenue growth, cost efficiencies and enterprise expansion support the sector’s earnings outlook.
The research house maintained BUY calls on CelcomDigi with a target price of RM3.54 and Maxis at RM4.05, while noting that telecommunications stocks offer dividend yields of around 5%.
MBSB expects service revenue to grow steadily, supported by consumer and enterprise businesses. Postpaid mobile and fibre services are expected to drive the consumer segment, while enterprise growth should increasingly come from connectivity and solutions offerings.
The research house also expects the incorporation of Digital Nasional Bhd’s (DNB) financial contribution into the MNOs’ accounts from the fourth quarter of 2026 to have an immaterial near-term impact.
Postpaid Remains Main Mobile Growth Driver
Consumer mobile remains the largest contributor to MNO service revenue, accounting for 70.2% of Maxis’ and 76.9% of CelcomDigi’s service revenue, according to MBSB.
Maxis has a higher postpaid revenue mix at 61.4%, compared with 49.9% for CelcomDigi.
Both operators continued expanding their postpaid customer bases in 2Q26, with Maxis recording 4.9% year-on-year growth and CelcomDigi 3.8%.
MBSB expects the share of postpaid revenue to continue rising as operators encourage prepaid customers to migrate to postpaid plans through new packages and incentives.
However, postpaid average revenue per user (ARPU) softened. Maxis recorded a 1.1% decline to RM70.50 per month, while CelcomDigi’s fell 4.5% to RM60.
MBSB said the decline could reflect a higher proportion of entry-level postpaid subscribers and was not overly concerning, given both operators’ efforts to bundle mobile and fixed services, which could improve average revenue per account.
Prepaid Market Remains Challenging
The prepaid business remains more difficult, with customer retention emerging as a challenge for incumbent operators.
CelcomDigi’s prepaid revenue contracted 4.2% year-on-year in 2Q26, while Maxis managed marginal growth of 0.3%.
CelcomDigi’s prepaid subscriber base declined 5.5%, or about 694,000 customers, while Maxis’ active prepaid customer base fell 0.5%. Maxis’ total prepaid subscriber base was down 2.8%, equivalent to about 210,000 customers.
Besides customers migrating to postpaid services, MBSB said the incumbents could potentially be losing some customers to smaller competitors.
Operators are responding through portfolio refreshes, upselling and more targeted marketing initiatives.
Fibre Business Remains Resilient
MBSB expects the fibre segment to remain resilient, supported particularly by convergence strategies combining connectivity services.
Telekom Malaysia Bhd’s unifi revenue rose 5.3% year-on-year to RM1.45 billion, with average revenue per user increasing 4.8% to RM132.
Maxis’ fibre revenue slipped 0.8% to RM252 million as ARPU eased to RM109.10 from RM110.20.
CelcomDigi, meanwhile, recorded 33.8% growth in fibre revenue to RM95 million, supported by subscriber expansion and higher ARPU, although MBSB noted that growth was amplified by a relatively low base.
Enterprise businesses also delivered mixed performances. TM One’s revenue increased 3.3% year-on-year, while Maxis’ enterprise revenue grew 3.7%.
CelcomDigi’s enterprise revenue declined 3%, dragged by a 10% fall in enterprise mobile revenue. This was partly offset by 19.3% growth in its solutions business.
MBSB expects future enterprise growth to increasingly depend on connectivity and solutions offerings, with enterprise mobile services providing a stable revenue base.
Cost Discipline Key To Earnings Growth
The research house said maintaining an efficient cost structure will be increasingly important in translating revenue growth into stronger earnings.
Maxis has demonstrated consistent operating efficiency, reflected in steady net profit margin improvement over the past three years.
CelcomDigi has also raised its FY26 cost-savings target to RM470 million from RM450 million, covering cost of goods sold and operating expenditure, with most of the savings expected in the second half.
Telekom Malaysia, however, recorded a higher cost-to-revenue ratio due to strategic initiatives and one-off expenses, some of which could extend into 2H26.
DNB Impact Seen Below 5% Of Bottom Line
The transfer of DNB ownership from the Ministry of Finance to CelcomDigi, Maxis and YTL, initially targeted for mid-2026, has been deferred to early 4Q26.
Based on the latest guidance from the MNOs, MBSB does not expect another delay and anticipates DNB associate contributions to begin appearing in their profit and loss accounts from 4Q26.
The operators have indicated that the bottom-line impact should be less than 5%, which MBSB said was consistent with its expectations.
The bigger consideration will come in 2027, the first full year of DNB’s financial impact.
For CelcomDigi, MBSB believes savings generated from its operational efficiency programme should be sufficient to offset the impact.
For Maxis, the research house said continued improvements to its cost structure should provide some support, while potential mergers and acquisitions aimed at strengthening its enterprise business could provide an additional earnings catalyst.
MBSB has not yet incorporated DNB’s expected 4Q26 financial contribution into its earnings forecasts, adopting a more prudent stance until greater clarity emerges.
