KUALA LUMPUR (Jan 7): Telekom Malaysia Bhd’s (KL:TM) earnings growth in 2026 is expected to be supported by sustained demand for 4G and 5G backhaul services, as the nationwide roll-out of next-generation networks drives higher fibre leasing and domestic connectivity revenue.
"The ongoing 4G/5G roll-out under DNB (Digital Nasional Bhd) is expected to provide upside to wholesale revenue through fibre leasing, while its data centre buildout positions TM to capture structural demand from hyperscalers," said Phillip Research in a note on Wednesday.
The firm said TM's wholesale business arm, TM Global, is expected to remain the group’s primary growth engine, supported by continued expansion in backhaul services as well as high-speed broadband access.
“We forecast TM Global revenue growth of 2.3% to 3.6% year-on-year over 2025 to 2027, driven by sustained domestic network expansion aligned with the government’s 2030 5G coverage target of 98%,” the research firm said, adding that 80% of TM Global's revenue comes from domestic connectivity.
The outlook is further underpinned by TM’s expanding data centre footprint, with the recent completion of capacity expansion at its data centres in the Klang Valley and Iskandar Puteri, which added 10 megawatts each.
Meanwhile, construction of the 64MW Nxera data centre is about 15% complete and remains on track for commissioning in the third quarter of 2026, positioning TM to capture longer-term demand from hyperscales and artificial intelligence-related workloads.
“TM One should see modest sequential improvement from beyond-connectivity offerings such as cybersecurity and cloud-adjacent services, “ Phillip added on the enterprise front.
Despite stronger contributions from TM Global and TM One, Phillip expects core net profit to decline quarter-to-quarter to RM500 million-RM550 million for the fourth quarter of 2025, mainly due to normalisation of the effective tax rate following a one-off low base.
Phillip maintained its 'buy' call on TM with an unchanged target price of RM8.90, citing the group's dominant position in the domestic market and potential of growing.