Malaysia telcos face flat 2026 earnings

DNB losses may weigh on near-term profits.

Malaysia’s telecommunications sector is expected to post relatively flat earnings in 2026 as operators defend market share and manage cost pressures.

UOB Kay Hian maintained its Market Weight rating on the sector, which it said is trading at its mean valuation of 7x EV/EBITDA. Its top picks are Axiata and CelcomDigi, both rated Buy, with target prices of RM3.00 and RM4.05, respectively.

The broker said telcos are shifting towards more rational competition, with greater focus on profitability, cash-flow discipline, and cost efficiencies. Enterprise revenue is expected to be supported by demand for connectivity, ICT, cloud, and cybersecurity services over the next three years, partly offset by weaker legacy messaging services.

Competition in the prepaid segment is expected to intensify as more mobile virtual network operators enter the market. UOB Kay Hian said incumbents such as CelcomDigi and Maxis are focusing on pre-to-postpaid migration and bundled offerings to improve customer retention.

Digital Nasional Berhad is expected to remain loss-making until 2028, although losses are projected to narrow from RM1.1b in 2025 to RM172m in 2028. The broker lowered its 2026 to 2028 net profit forecasts for CelcomDigi and Maxis by 2% to 7% to account for DNB’s inclusion.

JENDELA 2 is expected to support infrastructure players, with up to RM780m allocated under Budget 2026 for broadband expansion. The first phase will cover 1,000 sites nationwide, followed by another 1,700 sites later, benefiting players such as EDOTCO, OCK Group, YTL Communications, and Telekom Malaysia.

UOB Kay Hian said key sector risks include fixed-line earnings erosion from competition, weaker-than-expected CelcomDigi merger synergies, and an economic downturn that could reduce customer spending and service revenue.