Malaysia telcos suffer 6.6% profit drop in Q2 despite revenue growth

Strong Maxis and TIME dotCom earnings offset weaker Axiata and Telekom Malaysia results.

Malaysia’s telecommunications sector reported $353.8m (RM1.44b) in core net profit in the second quarter (Q2), down 6.6% year on year (YoY) and 19.4% quarter on quarter (QoQ), according to UOB Kay Hian.

The brokerage said strong earnings from Maxis and TIME dotCom offset weaker results from Axiata and Telekom Malaysia (TM).

It said sector earnings came in within expectations, with the quarter marked by 2% YoY service revenue growth, cost discipline, stronger enterprise demand, and robust home fibre demand.

Maxis reported a 9.5% YoY increase in core net profit to $107.1m (RM436m), whilst TIME’s core net profit rose 13.8% to $31.7m (RM129m). TM’s core net profit increased 4.6% to $99.9m (RM406.4m).

Axiata recorded the steepest decline amongst the major operators, with core net profit falling 74.1% YoY to $10.4m (RM42.5m), weighed down by lower ringgit-translated earnings and higher withholding tax expenses.

The quarter reflected the impact of mobile price increases introduced in February. CelcomDigi, Maxis, and U Mobile raised postpaid and prepaid prices by 5% to 10%, driving market-wide service revenue growth.

Maxis’ prepaid ARPU increased 1.4% QoQ in Q2, whilst postpaid ARPU rose 0.3%. CelcomDigi’s ARPU remained stable.

UOB Kay Hian expects the price increases to support earnings in the third quarter, with Maxis and CelcomDigi positioned to benefit from the higher ARPU.

The brokerage maintained its “market weight” rating on the sector and named the two operators as its top picks.

Enterprise demand also supported the quarter, with TM seeing demand from the public sector. Home fibre demand remained strong, driven by fixed-mobile convergence strategies and the expansion of home passes.

CelcomDigi also reported further synergy savings in Q2. The company recorded $24.6m (RM100m) in additional savings, bringing cumulative savings to $34.6m (RM141m) year-to-date.

It raised its 2026 operation expenses and cost of goods sold savings target to $115.5m (RM470m) from $113.0m (RM460m), with UOB Kay Hian expecting annual savings to reach between $172.0m (RM700m) and $196.6m (RM800m) by 2028.

Digital Nasional (DNB) is also slated for consolidation in the fourth quarter, following the successful refinancing of its $368.6m (RM1.5b) Ministry of Finance loan.

UOB Kay Hian does not expect DNB losses to materially affect 2026 earnings and said no cash call or capital injection is required for its near-term capex needs.

DNB is projected to post a net loss of $196.6m (RM800m) in 2026, narrowing to $98.3m (RM400m) in 2027 as its revenue base doubles and the company expands network capacity and traffic management to meet higher 5G data consumption.

UOB Kay Hian expects the sector to deliver a 5.5% net dividend yield in 2026. It maintained “buy” ratings on Maxis, with a $1.03 (RM4.20) target price, and CelcomDigi, with a $1.00 (RM4.05) target price.

(US$1 = RM4.07)