KUALA LUMPUR (Jan 5): BIMB Securities has turned cautious on Malaysia’s telecommunications sector, citing a more challenging outlook in 2026 due to unresolved structural issues in the 5G roll-out framework.
The transition of national 5G network developer Digital Nasional Bhd’s (DNB) ownership to mobile network operators is expected to raise the risk of earnings dilution once equity accounting begins.
The firm said persistent losses at DNB could result in an estimated RM400 million annual earnings drag, implying a 20% to 25% downside for CelcomDigi Bhd (KL:CDB) and Maxis Bhd (KL:MAXIS), two of the country’s biggest telcos.
In December 2025, MOF Inc exercised its put option to sell its stake in DNB to the remaining telco shareholders — CelcomDigi, Maxis and YTL Power International Bhd-owned (KL:YTLPOWR) YTL Communications Sdn Bhd. Each is required to pay RM328 million, with completion expected within two months. Following MOF Inc’s exit, the telcos will hold associate stakes in DNB and will need to equity-account for DNB’s losses.
DNB recorded a net loss of RM1.2 billion in the financial year ended Dec 31, 2024 (FY2024), as telcos paid only nominal access fees.
Maybank Investment Bank said annual access fees could rise to RM360 million for Maxis and RM288 million for other telcos once required conditions are met, which may help reduce DNB’s losses. However, DNB is expected to remain loss-making in FY2025 and FY2026 due to uncertainty over revenue growth and cost controls. This presents downside risks to earnings for CelcomDigi, Maxis and YTL Power.
Maybank IB has yet to factor DNB’s losses into its forecasts, but estimated potential associate losses of RM100 million to RM200 million per telco, pending clearer guidance on DNB’s loss trajectory.
It projects core net profit growth of 12% in FY2026 for the telco sector, from a 3% decline in FY2025, with potential downside risk from the impending equity-accounting of DNB’s losses.
Against this backdrop, BIMB downgraded the telco sector to 'neutral' from 'overweight', while Maybank retained its 'neutral' call, but cited limited near-term rerating catalysts despite sector valuations trading near historical troughs.
“The overall outlook for the sector remains mixed in our view, with possible upside risks to dividends in the fixed line space being offset by potential downside risks to earnings in the mobile space,” Maybank said in its note on Monday.
Maybank expects capital expenditure for fixed-line operators to taper as fibre roll-outs slow and the market approaches saturation, supporting stronger free cash flow generation and a more proactive approach to capital management.
Meanwhile, the sector's longer-term upside could emerge from enterprise 5G adoption, private networks and premium service tiers. BIMB cautioned that monetisation is unlikely to be linear, particularly with U Mobile’s entry adding competitive pressure.