PETALING JAYA: Mobile operators mostly are seeing stable service revenue and improving margins underpinned by cost discipline, although uncertainty surrounding Digital Nasional Bhd (DNB) continues to weigh on investor sentiment.
According to Hong Leong Investment Bank (HLIB) Research, the telecommunications sector’s first-quarter 2026 (1Q26) earnings largely met expectations, with both mobile and fixed-line operators delivering resilient performances despite a competitive operating environment.
“While DNB remains the key debate, we believe execution risk is increasingly reflected in the valuations of CelcomDigi Bhd
and Maxis Bhd, with greater clarity likely to emerge following the completion of DNB’s share transfer process by the end of 3Q26,” the research house said.
“This was more notable for CelcomDigi with greater emphasis on driving cost efficiency and integration synergies. Similarly, fixed-line operators also delivered resilient results despite a competitive fibre broadband market,” it added.
On the mobile segment, service revenue remained positive, with CelcomDigi recording a 1.6% year-on-year increase, supported by postpaid and home fibre growth that offset deliberate prepaid subscriber rationalisation.
Maxis also posted a 3.3% rise in service revenue, driven by growth in its enterprise segment and a resilient consumer business.
HLIB Research said industry pricing dynamics remain constructive as operators gradually reprice prepaid offerings while maintaining relatively disciplined competition.
Recent moves in this regard include U Mobile’s decision to raise the price of its entry-level prepaid package to RM28 for 50GB of data, compared with a lower pricing previously, it noted. The research house pointed out average monthly data consumption had now surpassed 40GB per subscriber for both CelcomDigi and Maxis.
Despite the encouraging operational trends, it said DNB remained the key overhang for the sector.
CelcomDigi and Maxis are expected to complete the transfer of their respective 33% stakes in DNB by the end of 3Q26, after which they are likely to begin equity- accounting DNB’s losses from 4Q26 onward, it noted.
Both companies have already paid RM328mil each for the Finance Ministry’s put option and provided an additional RM202mil shareholder advance to support DNB’s acquisition of extra fifth-generation (5G) spectrum.
HLIB Research said the additional spectrum should improve network capacity and quality, enabling mobile operators to offload more traffic onto DNB’s shared network and potentially reduce capital expenditure intensity over time.
Meanwhile, the fixed broadband segment remains highly competitive, although the research house noted pricing discipline had improved across the sector.
Telekom Malaysia Bhd’s (TM) average revenue per user or Arpu eased to RM132 from RM137 previously but remained about 4% higher year-on-year, supported by migration to higher-tier plans and device bundling.
Moving forward, HLIB Research maintained its “overweight” call on the sector, favouring fixed-line operators due to their strategic role in broadband and 5G infrastructure development, as well as upcoming data centre deployments.
The research house identified TM as its top sector pick with a target price of RM8.60 per share, citing potential dividend enhancements and stronger shareholder returns from its under-leveraged balance sheet. It also maintained positive views on Maxis, CelcomDigi and Axiata Group Bhd, with the latter being seen as offering potential upside from future asset-monetisation initiatives.
