PETALING JAYA: U Mobile Sdn Bhd’s capital expenditure (capex) may surge from financial year 2025 (FY25) to FY27 due to its rollout of the second 5G network.
The company was named the second 5G network operator in November 2024.
However, CIMB Research said funding should not be a concern as U Mobile is expected to leverage vendor financing and bank loans to support the increased capex requirements.
It noted that in FY24, U Mobile had outpaced its bigger peers in terms of mobile service revenue growth, with revenue market share rising to 15.7%, potentially driven by improving postpaid traction and expansion in East Malaysia.
“Despite this, we estimate U Mobile posted a core net loss (excluding shareholders’ advances and redeemable convertible preference shares) of RM19mil in FY24, owing to higher costs due to one-offs.
“The softer performance year-on-year (y-o-y) was due to substantial increases in operating expenditure,” the research house said in a report.
In FY23, the company posted a core net profit of RM295mil.
“Based on limited information from financial statements, we note higher staff and device costs. Network-related and administrative costs may also have risen.
“We believe part of the increase is due to one-off items, without which it is possible that U Mobile may have reported a core net profit instead.”
Excluding shareholders’ advances and redeemable convertible preference shares, it said U Mobile’s net debt (including finance leases and vendor financing) fell 3% y-o-y to RM2.7bil at end-FY24.
However, net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) rose to 2.2 times at end-FY23, up from 1.8 times the year before, driven by a 19% drop in Ebidta before adjusting for one-off items.
Capex spent in FY24 remained modest for a third consecutive year at RM189mil or just 5.1% of sales, reflecting selective 4G investments and traffic offloading to Digital Nasional Bhd’s (DNB) 5G network.
“But we expect U Mobile’s capex to rise sharply in FY25 to FY27, potentially reaching RM3bil cumulative as it rolls out its second 5G network, targeting 80% population coverage by the second half of 2026 (2H26) and 90% by 2H27,” CIMB Research added.
Meanwhile, Kenanga Research maintained a “neutral” view on the telecommunications sector, pending clarity on the execution of Malaysia’s dual 5G network policy.
While it is encouraging that the mobile network operator shareholders of DNB are currently focused on “rebuilding” the company, it said the restructuring process may take time to materialise.
