PETALING JAYA: Revenue growth in the telecommunications sector is likely to be limited to the low single-digit range amid weaker consumer sentiment and intensifying competition.
BIMB Securities Research, which remained “neutral” on the sector, said a challenging consumer environment continues to place a cap on average revenue per user or Arpu expansion and subscriber growth despite rising data consumption.
“Competition remains elevated across both the mobile and fixed broadband segments, with the mobile market facing additional pressure from new entrants such as Eastel and VIBE Mobile,” it said.
Additionally, industry net additions in the fibre to the home segment slowed to about 26,000 in the first quarter of 2026 (1Q26), representing one of the weakest quarterly additions in recent years.
Against a low-growth backdrop, the research house said operators will be more dependent on cost optimisation as a key earnings driver, relying on operational efficiencies, network rationalisation and procurement savings to protect margins.
Beyond this, earnings growth is also increasingly driven by non-consumer segments such as enterprise, wholesale, fibre backhaul and data centre connectivity, BIMB Securities Research added.
In 1Q26, Maxis Bhd
, Telekom Malaysia Bhd (TM) and CelcomDigi Bhd delivered modest year-on-year (y-o-y) revenue growth at 3.3%, 2.9%, and 1.6%, respectively, while Axiata Group Bhd saw the strongest growth at 8.5% y-o-y and TIME Dotcom Bhd remained the domestic standout with 6% y-o-y growth.
In the first half of 2026, the KL Telecommunications Index continued to drag on the broader FBM KLCI performance, with the selloff primarily concentrated in mobile operators, which were weighed by concerns over potential earnings dilution following the eventual Digital Nasional Bhd (DNB) consolidation.
Looking ahead, the research house believes the market will increasingly shift focus towards areas such as DNB’s strategy following TM’s exit, potential changes to 5G access pricing, and DNB’s plans to optimise its network economics through site sharing arrangements with shareholders’ existing infrastructure.
BIMB Securities Research said Axiata remains its top pick for the sector, supported by balance sheet optimisation and potential value unlocking from the monetisation of Edotco Group, which it said remains under-appreciated by the market.
The research house maintained a “buy” rating on TM, which it sees as the best proxy to Malaysia’s structural digitalisation.
In a separate note, MBSB Research pointed out that Astro Malaysia Holdings Bhd, which has seen its market capitalisation drastically eroded to around RM300mil from a peak of about RM18bil, appears to be a potential merger and acquisition (M&A) target.
It cited the group’s notable spread of original content and intellectual property, and continued profitability, having recorded a RM1.6mil profit in 1Q27 despite a challenging operating environment.
The research house said strategic value could be gained for a merger between Astro and TM, largely due to the former’s stronghold on the home fibre business.
The inclusion of Astro’s content could also fortify TM’s bundling proposition, it added. However, MBSB Research also acknowledged that there may be little M&A appetite for TM currently.
“The group continues to focus on its capital spending into fibre expansion and 5G backhaul under access, as well as renewed dividend commitment when it upgraded its dividend policy to a minimum payout of 75% of profit after tax and minority interests which is payable on a quarterly basis.”
