PETALING JAYA: Telekom Malaysia Bhd
(TM) may fund longer-term capital expenditure from additional borrowings, freeing internally generated cash for dividends moving forward.
Its financial year 2025 (FY25) net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) was 0.4 times, said RHB Research.
The research house believes TM’s record-high dividend payout ratio (DPR) of 69% in FY25 signals a potential review of its decade-old DPR policy of 40% to 60% of headline profit after tax and minority interest.
RHB Research added that this may be announced during TM’s first quarter of 2025 (1Q) results in May.
Similarly, TIME Dotcom Bhd targets one to 1.5 times net debt to Ebitda over the next two to three years with a revised DPR policy of 50% to 75% on normalised earnings versus “up to 50%” previously.
The heightened risk aversion has contributed to some rotational interest in the sector with its domestic-centric earnings appeal and decent dividend yields.
RHB Research said its preference for fixed/integrated players are based on their stronger growth prospects and structural catalysts.
The key risks cited are competition, earnings misses, regulatory setbacks, and lower-than-expected dividends.
The research house is maintaining its “neutral” outlook on the telecommunications sector.
The mobile network operators’ 2026 guidance suggests that industry revenue growth will remain tepid (low-single-digit growth) with earnings before interest and tax tracking topline development, while competition remains tight with continued pressure on data yields.
That said, certain re-pricing initiatives within the fibre broadband and mobile segments in 4Q25 and year-to-date merit attention and could be early signs of price hardening.
TM and Digital Nasional Bhd (DNB) are at loggerheads on their 5G wholesale agreement entered into in 2022.
The research house’s base case is for TM to continue on with the wholesale arrangement until 2032. In the best-case scenario, TM gets to exit from DNB by year-end, allowing it to shift to U Mobile Sdn Bhd’s 5G network with a fine imposed.
In its view, the shift to a multi-operator core network deal with U Mobile makes sense as TM’s 5G base is significantly smaller than its peers, allowing it to save on wholesale and direct costs.
As for Maxis Bhd and CelcomDigi Bhd, RHB Research said that it has yet to factor in the impact of the equity accounting from DNB.
