PETALING JAYA: The telecommunications (telecom) sector’s second-quarter (2Q26) earnings are broadly within expectations, with top-line expansion restricted to low single digits as a challenging consumer environment limited subscriber expansion and average revenue per user (Arpu) gains.
Operators continue to struggle with monetising 5G capabilities, while impending equity accounted losses from Digital Nasional Bhd (DNB) starting in 4Q26 present a near-term earnings drag, BIMB Research stated in a sector report.
“The 5G monetisation itself remains a structural challenge, with operators still struggling to translate higher network speeds and capacity into meaningful Arpu uplift, particularly in the consumer segment,” the research house said.
The research house estimated that the equity accounting of DNB stakes could amount to RM400mil in annual earnings drag for the sector.
“While we have yet to incorporate the potential DNB losses into our earnings forecasts, we have partially priced in this risk through valuation discounts to both CelcomDigi Bhd
and Maxis Bhd.”
It added that traditional mobile service providers’ revenues were constrained, with Maxis and CelcomDigi recording a modest first-half 2026 (1H26) service revenue growth of 2.7% and 1.5%, respectively.
Growth in the sector is increasingly shifting toward non-consumer segments such as enterprise, wholesale, fibre backhaul and data centre (DC) connectivity, BIMB Research noted.
Fibre operators lead top-line gains, headed by TIME Dotcom Bhd (1H26: 6.6% growth) and Telekom Malaysia Bhd or TM (4.8%). Moreover, sector earnings were primarily anchored by cost optimisation and disciplined operational execution.
BIMB Research maintained a “neutral” call on the telecom sector. Its top pick was Axiata Group Bhd with a target price (TP) of RM3 per share.
The research house likes the company for its balance sheet optimisation, transformation of portfolio towards technology and higher dividend payout.
BIMB Research also has a “buy” call on CelcomDigi with a TP of RM3.30 due to operational excellence initiatives post-integration that has raised its total cost savings target to RM470mil.
The research house has a “hold” call on TM with a TP of RM7.78, and Time with a TP of RM5.60 a share.
BIMB Research noted that TM’s prospects rely on cost savings from 5G network migration, alongside upcoming revenue contributions from the TM-Nxera DC and Asia Link Cable.
