PETALING JAYA: The domestic telecommunications companies (telcos) are expected to gain from a growth in service revenue, supported by the consumer and enterprise segments while keeping a tight lid on costs, says MBSB Research.
The research house, which has kept a “positive” stance on telco stocks, shared that the inclusion of stakes in 5G network operator Digital Nasional Bhd (DNB) scheduled to take place soon, would not have an impact on their financial performance in the fourth quarter of 2026 (4Q26) while dividend yield of 5% remains decent.
It has maintained “buy” calls on CelcomDigi Bhd
and Maxis Bhd with a target price (TP) of RM3.54 and RM4.05, respectively.
It considers CelcomDigi as the top pick, noting that the company’s execution of a cost transformation initiative would be sufficient to make up for the inclusion of DNB’s financials.
“Meanwhile, we also favour Maxis’ operational consistency which has translated to steady profit margin expansion as seen in the past three years,” it said, adding that the company’s impending enterprise segment merger and acquisition exercise would serve as another catalyst to further boost the bottomline.
It said revenue contribution from the consumer mobile segment remains the primary contributor to total revenue, constituting 70.2% and 76.9% of Maxis’ and CelcomDigi’s service revenue, respectively.
“Nonetheless, Maxis has a higher postpaid revenue mix of 61.4% as opposed to CelcomDigi’s 49.9%. As at 2Q26, both Maxis and CelcomDigi posted 4.9% year-on-year (y-o-y) and 3.8% y-o-y expansion in postpaid customer base respectively,” it said.
It anticipates that the proportion of postpaid revenue would gradually increase as they continue to push the pre-to-post migration.
“Compelling plans and/or incentives are being offered to the prepaid and/or prospective customers,” it added.
It observed that a possible higher mix of entry level postpaid subscribers may have caused a slight dilution in both Maxis and CelcomDigi postpaid average revenue per user or Arpu to RM70.5 per month (minus 1.1% y-o-y) and RM60 per month (minus 4.5% y-o-y), respectively.
It said this should not be a concern as both telcos continue to advocate convergence bundling propositions that should translate into better average revenue per account.
Both continue to face challenges in customer retention based on 2Q26 financial results, with CelcomDigi’s prepaid revenue contracting by 4.2% while Maxis just managed to defend its prepaid revenue with a 0.3% improvement.
While Arpu stayed resilient for both, there was customer churn and in the case of CelcomDigi, the prepaid subscription base contracted by 5.5% while Maxis active prepaid customers saw a 0.5% dip.
“Apart from the ongoing pre-to-post, we suspect that they could potentially be losing out to their smaller peers. To defend the market share, some of the initiatives being carried out include a portfolio refresh, upselling efforts as well as a targeted marketing approach,” it said.
It said the outlook for the fibre business remains resilient, with Maxis posting stable fibre business performance in 2Q26 although revenue fell by 0.8%, mainly impacted by lower Arpu of RM109.1 compared with RM110.2.
CelcomDigi posted 33.8% revenue growth for its fibre business, supported by subscription expansion and higher Arpu.
“The low base effect further amplifies CelcomDigi’s fibre business appeal. We anticipate the fibre business would remain resilient, mainly supported by the convergence bundling,” it said.
Both companies continue to focus on connectivity-led services to boost enterprise income and it noted that for the enterprise segment, future growth would be dictated by the array of connectivity and solutions available while the enterprise mobile will serve as the revenue base.
