UOB Kay Hian’s latest research report reveals that Malaysia’s telecommunications sector experienced a 2% quarter-on-quarter service revenue growth in Q2 2025, largely driven by a shift from prepaid to postpaid services and a strong demand for fibre. Despite this growth, the report highlights that earnings forecasts for Axiata and CelcomDigi have been cut by 6% following their Q2 results.
The report notes that the sector’s core earnings rose by 8% year-on-year and 14% quarter-on-quarter to RM1,552m. However, CelcomDigi’s earnings were impacted by weak prepaid revenues and higher provisions for doubtful debts. Axiata also faced challenges, with a 36% year-on-year decline in earnings due to integration costs and lower associate earnings.
Key drivers for the quarter included cost discipline, a promising enterprise business pipeline, and the continued demand for home fibre services. The expanded sales and services tax, effective from July 2025, has marginally compressed EBITDA margins, with CelcomDigi and Maxis anticipating a 1% impact on their full-year EBITDA.
Looking ahead, the sector is expected to maintain stable operations, with potential catalysts including Axiata’s infrastructure asset monetisation and CelcomDigi’s synergistic savings by 2027. The report maintains a “Market Weight” recommendation for the sector, citing uncertainties around the shareholding structure of Digital Nasional Berhad (DNB) and the potential exit of the Ministry of Finance from DNB.
UOB Kay Hian’s top picks in the sector are CelcomDigi, TIME, and Axiata, with expectations of continued growth and strategic developments in the coming quarters.
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