MBSB Research said growing enterprise revenue remains a challenge for telcos.
PETALING JAYA: Telecommunications companies (telcos) need to have the right cost structure to significantly improve profitability, given the limited avenues to substantially increase revenue.
MBSB Research, which is “neutral” on the sector, said growing enterprise revenue remains a challenge for telcos.
It said telcos continue to focus on the postpaid segment to grow mobile revenue, while managing the decline in prepaid subscriptions.
Revenue from consumer mobile segments accounts for 59.7% and 74% of total revenue for Maxis Bhd
and CelcomDigi Bhd, respectively.
The research house noted that mobile network operators (MNOs) continue to push pre-to-post migration, with compelling plans and incentives offered to prepaid and prospective customers.
This led to a continued expansion in the postpaid subscriber base.
MBSB Research, which upgraded CelcomDigi to a “buy” while retaining its target price of RM3.67 a share, believes the group is on a stronger footing as integration activities approach completion by 2026.
“CelcomDigi is our ‘buy’ recommendation for the sector, though earnings risk loom. The stock’s attractive valuation provides a good entry point,” it said.
Nonetheless, the research house said earnings risks – similar to that of Maxis – may emerge once both MNOs increase their stake in Digital Nasional Bhd.
According to MBSB Research, profitability of telcos will hinge on cost management initiatives.
For the nine months (9M25) of financial year 2025 (FY25), revenue performance among Maxis, CelcomDigi and Telekom Malaysia Bhd (TM) was poor, it said.
However, telcos largely performed within its expectations in 3Q25.
“CelcomDigi, Maxis and Axiata Group Bhd’s cumulative 9M25 normalised earnings made up 73.6%, 76.5% and 76.6% of our FY25 earnings estimates, respectively.”
Meanwhile, it said TM delivered an outlier 3Q25 results, mainly due to notably lower effective tax rate following a reassessment of deferred tax provisions.
“This led to better-than-expected 9M25 normalised earnings, constituting 86% of our full-year FY25 earnings forecasts.”
