PETALING JAYA: The telecommunications sector is expected to focus increasingly on network efficiency and cost optimisation as operators strengthen their spectrum holdings to accommodate rising data consumption.
However, the latest spectrum awards are unlikely to deliver an immediate earnings boost, with competition, subdued service revenue growth and uncertainty over Digital Nasional Bhd’s (DNB) financial impact continuing to shape the industry outlook.
BIMB Research said the Malaysian Communications and Multimedia Commission’s (MCMC) latest spectrum exercise was “strategically positive as it strengthens spectrum certainty and network positioning”, although it was unlikely to materially change the sector’s growth prospects or earnings trajectories in the near term.
CelcomDigi Bhd
(CDB) and Maxis Bhd have accepted additional spectrum assignments to strengthen their existing network capacity, with the awards allowing both operators to secure contiguous spectrum holdings and improve utilisation of their existing infrastructure.
Nevertheless, BIMB Research cautioned that “additional spectrum by itself does not automatically translate into higher revenue or stronger profitability”.
It maintained its “neutral” stance on the telecommunications sector.
“The sector’s growth is expected to remain sluggish primarily due to the highly competitive consumer market,” it said.
Within its coverage, BIMB Research said Axiata Group Bhd is its top pick, with a target price of RM3, underpinned by balance sheet optimisation, transformation of portfolio towards tech and higher dividend payout.
It maintained its “buy” call on CDB with a target price of RM3.30, while retaining a “sell” rating on Maxis with a target price of RM3.30.
Hong Leong Investment Bank (HLIB) Research said the latest awards represented a shift towards direct ownership of spectrum previously accessed through partners.
HLIB Research said the additional spectrum would increase capacity across existing networks without requiring the additional capital expenditure (capex), rental and power costs associated with building more sites.
“Overall, we view the financial impact as neutral, as spectrum payments should be offset by capex savings and lower network costs,” it said.
The research house maintained its “overweight” rating on the telecommunications sector, citing the continued importance of fixed-line operators in broadband, fifth-generation (5G) infrastructure and data centre deployments.
It named Telekom Malaysia Bhd (TM) and CDB as its top picks.
TM was rated “buy” with a target price of RM9.10, while CDB is ascribed a target price of RM3.70.
Furthermore, HLIB Research maintained a “hold” call on TIME Dotcom Bhd, with a target price of RM5.50, citing balance sheet optimisation and potential improvements in shareholder returns among fixed-line operators.
For mobile operators, it sees stronger rerating potential in the second half of financial year 2026 as uncertainty surrounding DNB gradually eases, with CDB expected to benefit from improving pricing discipline and continued cost optimisation.
Meanwhile, one analyst said the latest MCMC spectrum awards would strengthen network capacity and efficiency, but sustainable earnings growth will ultimately depend on pricing discipline and cost management.
“While better spectrum holdings support long-term competitiveness, operators will need to translate network improvements into stronger financial performance,” he told StarBiz.
