PETALING JAYA: The telecommunications (telecoms) sector is expected to deliver a seasonally stronger second half of 2026 (2H26), supported by resilient earnings, improving prepaid average revenue per user (Arpu) and structural growth in fixed-line businesses.
In its latest sector update, RHB Research maintained its “neutral” stance on the telecoms sector, saying telecommunications companies (telcos) under its coverage delivered earnings broadly in line with expectations for the June quarter.
The research house highlighted resilient industry earnings before interest, tax, depreciation and amortisation (Ebitda), manageable exposure to geopolitical risks, continued cost discipline, stabilising prepaid Arpu and sustained dividend payouts as key positives.
Industry mobile revenue increased 0.1% quarter-on-quarter (q-o-q) in the second quarter of 2026, recovering from a 2% decline in the seasonally weaker March quarter.
First-half mobile revenue grew 0.5% year-on-year (y-o-y), led by postpaid services, while industry mobile Ebitda rose 2.5% y-o-y.
RHB Research noted that prepaid Arpu recorded its third consecutive quarter of y-o-y growth despite continued revenue pressure, helped by subscriber base management.
It expects the improving prepaid trend to continue into 2H26 as the impact of operators’ portfolio refreshes in the second quarter feeds through.
Among mobile operators, Maxis Bhd
continued to gain mobile revenue and Ebitda share, with growth of 2.7% and 3.5%, respectively, compared with CelcomDigi Bhd’s declines of 1.1% in mobile revenue and 1.8% in Ebitda.
However, RHB Research expects CelcomDigi’s Ebitda growth to strengthen in financial year 2027 (FY27) as its operational excellence initiatives gain traction following the integration.
The company has also raised its FY26 cost-savings target to RM470mil from RM450mil, having achieved RM140mil in savings during the first half.
The fixed-line segment also remained broadly on track.
Telekom Malaysia Bhd’s (TM) earnings before interest and taxes or Ebit rose 26.7% q-o-q in the second quarter, while TIME Dotcom Bhd recorded a 16% increase in Ebitda in the first half, lifting its Ebitda margin to a high of 48%.
Both operators recorded stronger sequential fibre broadband subscriber additions on stable Arpus.
RHB Research said TM’s exit from Digital Nasional Bhd’s (DNB) 5G access network on July 31 should lower its direct costs, with staff cost savings expected to flow through progressively.
Its new multi-operator core network agreement with U Mobile is also expected to generate 5G wholesale cost savings from FY27.
Meanwhile, concerns surrounding DNB could gradually ease as greater visibility emerges over its earnings and capital expenditure trajectory.
RHB Research estimated DNB’s losses could improve from RM1.2bil in FY24 to about RM600mil in FY26, RM500mil in FY27 and RM400mil in FY28, although it does not rule out further cash calls.
Beyond connectivity, RHB Research saw data centres as a key growth driver for TM.
It expects TM’s data centre business to ramp up on AI-related workloads, with around 70% of capacity at its 64MW first phase TM Nxera venture with Singtel already pre-sold ahead of commissioning in the fourth quarter.
RHB Research retained TM and CelcomDigi as its top picks, citing structural tailwinds for TM and valuation upside for CelcomDigi, while also favouring OCK Group Bhd for its data centre and digital exposure.
An analyst told StarBiz he is taking a more cautious view on the immediate earnings trajectory. “The 2Q26 results were broadly within expectations but top-line growth remained restricted to low single digits as a challenging consumer environment constrained subscriber growth and Arpu gains,” he said.
He added operators are also still struggling to monetise 5G, while DNB’s equity-accounted losses from 4Q26 will create a near-term earnings drag.
