Kenanga Research said the sentiment on the telecoms sector could be supported by potential yield upside.
PETALING JAYA: The murky outlook of Digital Nasional Bhd’s (DNB) future financials pose profit risks for the mobile network operators (MNOs), cautions Kenanga Research.
It also said that the uncertainty surrounding DNB’s final ownership and control structure – along with the telecommunication (telecoms) sector’s “clouding earnings visibility, capital expenditure (capex) commitments and dividend sustainability” – are key factors behind Kenanga Research’s “neutral” rating on the sector.
On Dec 1, 2025, the Finance Ministry Inc had exercised its put option to sell its entire shareholding in DNB and transfer its remaining shareholder loan to the other three shareholders – Maxis Bhd
, CelcomDigi Bhd and YTL Power International Bhd (parent of Yes) – in equal portions.
Each shareholder must pay RM327.87mil for their respective portion, which Kenanga Research said has a negligible impact on the balance sheets of Maxis and CelcomDigi.
The transaction is required to be completed within two months, or approximately by Feb 1, 2026.
“As the exercise has not been finalised, the eventual shareholding structure and the corresponding accounting treatment and capex commitments for each MNO remain uncertain,” stated the research house.
“If control over DNB is not distributed equally among the shareholders, uncertainty will persist regarding which MNO would take the lead.”
Pointing out that DNB incurred a net loss of RM1.2bil in financial year 2024 (FY24), Kenanga Research however said it does not rule out the potential for improved financial performance in the coming years.
The improvements will be supported by ongoing initiatives to mitigate losses and enhance its long-term viability.
To recap, a corporate restructuring exercise was launched in February 2025, encompassing a comprehensive overhaul of DNB’s business model, financing framework, and operational structure.
This initiative is being carried out in close collaboration with DNB’s shareholders and external consultants.
“We also believe DNB’s financial performance could improve meaningfully once the MNOs transition from usage-based billing for 5G access to fixed minimum fees payable to DNB,” added the research house.
“Under their access agreements, the MNOs are required to purchase a minimum capacity of 1,000 Gbps once specified coverage thresholds are met.
“This translates into estimated annual 5G access fees of RM288mil for CelcomDigi and RM360mil for Maxis. Recall that TM has already adopted this fixed model earlier in the first quarter of FY25.
“In contrast, under the current usage-based structure, we estimate the MNOs will pay DNB lower fees of only RM160mil to RM250mil in FY25.
“In anticipation of the shift to fixed commitments, we understand the MNOs have been accelerating the migration of 4G traffic from their own networks onto DNB’s 5G network since late 2024.”
Looking ahead, it favours fixed-line players, as they are not exposed to risks stemming from the implementation of the 5G dual network framework involving DNB.
On a more positive note, Kenanga Research said the sentiment on the telecoms sector could be supported by potential yield upside, with potential delivery of higher or special dividends from TIME Dotcom Bhd and Maxis.
There could be further merger and acquisition news flow from Axiata Group Bhd’s ongoing efforts to unlock value in Edotco – Axiata’s infrastructure services firm – whether through a strategic divestment, partial stake sale, or other monetisation initiatives.
“Telecommunications companies (telcos) stand to benefit from accelerating contract awards as the rollout of Malaysia’s second 5G network (NW2) gathers steam.”
For its first year of operations until July 2026, U Mobile targets 6,515 site upgrades and deployment of in-building solutions across 170 buildings to reach 80% coverage of populated areas (CoPA).
“As at end-October, only 2,976 sites (58% CoPA) and 11 buildings have been completed, leaving substantial work outstanding.”
This underpins near-term contract opportunities for tower operators, fibre backhaul providers and network deployment and engineering specialists.
“With exposure across key NW2 projects, OCK Group Bhd is our preferred NW2 proxy – as contract wins should drive a meaningful uplift to its order book and earnings vis-a-vis larger peers.”
