Malaysian mobile operators face rising competition risks: CGSI

The brokerage prefers Telekom Malaysia and Axiata over mobile operators.

CGS International maintained its Neutral stance on Malaysia’s telecoms sector, but warned that mobile operators face rising competition risks that the market may be underestimating.

The brokerage said its analysis of Singapore’s mobile market after 2019 points to potential underlying risks for Malaysian mobile operators, particularly as U Mobile scales up its 5G network.

CGSI said competition is a greater risk than the impact of Digital Nasional Berhad’s losses. It expects U Mobile’s newer 5G rollout to provide a lower cost structure, potentially allowing it to undercut DNB’s price points once its network reaches scale around 2028.

U Mobile’s 5G network had reached 83% population coverage as of March 2026, whilst two of the three mobile virtual network operators that entered Malaysia since 2025 are using U Mobile’s network.

CGSI cited Singapore as a cautionary example. The number of MVNOs in Singapore rose from four in 2018 to 12 in 2026, whilst mobile revenues of listed incumbents SingTel and StarHub fell 24% between 2018 and 2025 due to increased competition.

The brokerage said Malaysian operators could use MVNOs to weaken U Mobile’s cash flows and slow its network rollout, but warned that similar moves in Singapore led to significantly reduced profitability for listed incumbents.

CGSI also factored in the impact of DNB equity accounting, which it expects to begin in 3Q26. Following the completion of the DNB acquisition effective 2H26, it cut its FY26 to FY28 core net profit estimates for Maxis and CelcomDigi by 0.4% to 7.8%.

For Maxis, CGSI reduced its FY26, FY27, and FY28 core net profit forecasts by 4.9%, 7.2%, and 0.4%, respectively. For CelcomDigi, it cut forecasts by 7.3%, 7.8%, and 4.2%.

The brokerage expects DNB losses to persist until at least 2030, although the impact should be partly mitigated by higher network rental income and lower capital expenditure, as 5G investments will be carried out by DNB rather than individual operators.