PETALING JAYA: Telekom Malaysia Bhd
’s (TM) long-term growth trajectory is anchored by the company’s fixed broadband lead, while the ongoing 5G rollout is expected to provide upside to wholesale revenue through fibre leasing, says Phillip Capital Research.
The research house, which remains positive on the stock and maintained a “buy” call with a target price of RM9.17, said the telecommunications company’s data centre (DC) buildout positions would capture structural demand from hyperscalers.
It expects the company’s third quarter ended Sept 30, 2026 (3Q26) revenue to improve year-on-year (y-o-y) led by the wholesale arm, TM Global, which should continue to benefit from demand for international data connectivity and domestic 5G backhaul services.
Phillip Capital said the company’s enterprise and public sector business solutions arm would record modest quarter-on-quarter growth, supported by continued traction in beyond-connectivity offerings, including cybersecurity and cloud-adjacent services.
“Unifi’s revenue is expected to record modest y-o-y growth, as higher average revenue per user (Arpu) is partly offset by subdued net subscriber additions.
“However, we forecast 3Q26 core net profit to decline y-o-y to RM430mil to RM440mil (2Q26: RM406mil and 3Q25: RM623mil), mainly due to a normalisation in the effective tax rate,” it said, noting that 3Q25 earnings were boosted by a significantly lower effective tax rate of 4.5% following the reassessment of certain tax liabilities.
TM’s Arpu increased by 5% y-o-y to RM132 in 2Q26 (the highest among peers, with Time at RM117, Maxis at RM111, and CelcomDigi at RM109.
“Going forward, TM remains focused on defending its market position while prioritising Arpu growth and higher-value offerings over subscriber additions,” the research house said.
“TM’s DC segment is poised for long-term growth, supported by strong demand and near-full utilisation across its existing facilities,” it said, adding that this reflects the firm’s ability to secure customers ahead of the facility’s full operational launch.
The first phase of the company’s 64- megawatt (MW) Nxera has seen over 70% take-up, with the initial 20MW commencing operations in September, while the Klang Valley DC and Iskandar Puteri DC have expanded their capacities by 9.2MW and 10MW, respectively, in 2025.
Although near-term revenue contribution remains minimal, TM Nxera’s higher rates per MW should support double-digit revenue growth for the DC segment over the longer term.
The company continues to expand its subsea cable network to meet rising international connectivity demand, with the Asia Link Cable system, undertaken through TM Global, on track for being ready for service in 2Q27.
“The South-East Asia-Middle East-Western Europe 6 project has been delayed amid the Middle East conflict, although management indicated that the project is still progressing, with alternative routing options being explored to bypass the affected area,” Phillip Capital said.
“In addition, the Candle and Asia United Gateway East cable systems are under construction. Collectively, these projects are expected to expand TM’s international connectivity capacity, supporting long-term revenue growth and monetising subsea cable capacity.”
It pointed out that while DCs and Indefeasible Right of Use provide incremental upside, domestic connectivity remains the key growth driver, contributing 80% of TM Global’s revenue through 4G mobile backhaul upgrades, 5G backhaul rollout and high-speed broadband access traction.
TM has deployed 9,500 5G backhaul sites nationwide, supporting over 80% network coverage.
Despite broad mobile site coverage, further growth can be expected from additional backhaul connections to support 5G network expansion and rising data usage from Internet of Things and artificial intelligence applications.
“Beyond 5G, the eventual transition to 6G should drive further backhaul infrastructure upgrades. We forecast TM Global revenue to grow 4% to 7% y-o-y from 2026 to 2028, supported by continued domestic network expansion and international connectivity growth,” it said.
