PETALING JAYA: Telekom Malaysia (TM) may remain bound by its agreement with Digital Nasional Bhd (DNB) for an additional year, forfeiting RM127mil in prepaid capacity, says RHB Research.
“In the worst-case scenario, TM may need to continue the existing arrangement with DNB for another year (financial year 2027) with January 2028 being the long stop date for access seekers to terminate.
“The RM127mil in unutilised prepaid capacity for DNB would have to be foregone,” it added.
Additionally, RHB Research said the 5G multi-operator core network deal with U Mobile should yield good savings in direct cost for TM, on top of accessing a newer 5G standalone network, following a spike in FY25 due to the shift to a fixed 5G access payment.
“TM said it has fully complied with the legal provisions and terms governing the termination of the wholesale access agreement (AA) with DNB, which allows access seekers to terminate the agreement within 30 days of the release of a reference access offer by another access provider,” RHB Research cited.
Prior to its recent report, TM said, “This decision was made following a thorough analysis of all legal rights and obligations as per the AA.
“The AA provides mechanisms for resolving any differences in interpretation between the parties, and TM will pursue the appropriate processes under the agreement,” said TM.
The telecommunications company (telco) stated that its priority remains to ensure uninterrupted service for customers while managing this transition in a phased and orderly manner.
Nevertheless, DNB had rejected TM’s notice to terminate its 5G agreement, stating that the long-term contract is still valid and enforceable.
DNB explained the agreement ran until October 2032 and contained specific conditions governing early termination, therefore clarifying that TM had not exercised its right for early termination in accordance with those conditions.
Meanwhile, RHB Research has noted the teleco is primed for stronger earning prospects from FY27, concurred by cost savings from its voluntary separation scheme, rising data centre contributions and steady growth across its core broadband and wholesale segments.
The research house said TM’s primary is expected to hold steady, while its business-to-consumer and Unifi segment are likely to see low single-digit growth.
Notably, 50% of Unifi customers subscribe to converged plans.
On the group’s wholesale segment, TM Global is positioned to sustain at about an 8% growth rate, attributable to structural drivers and additional sub-sea cable capacity coming onstream.
Meanwhile, TM’s enterprise segment, TM One’s outlook is improving, following a leadership transition and the end of significant contract price cuts.
RHB Research has continued to rate the broadband provider as the sector’s leading pick, as the group trends toward growth in FY27.
Due to strong fundamentals, the research house lifted the group’s FY27-FY28 profit forecasts.
“Our FY26 forecast is adjusted marginally but we raise FY27-FY28 forecasts core earnings by 1% and 9%, mainly to factor in lower financing cost, manpower cost savings, and stronger enterprise growth,” it explained.
The research house also raised their expected dividend per share, reflecting stronger capital management.
“TM intends to grow dividends progressively with special dividends to supplement ordinary payouts,” it said.
The group’s revised dividend payout ratio incorporating a minimum payout which offers dividend certainty is still under consideration.
RHB Research highlighted that TM intends to gear-up its balance sheet (net debt/ebitda at a record low of 0.4 times) in order to fund its capex moving forward.
Meanwhile, strong operating cash flows will facilitate dividend payouts.
