KUALA LUMPUR (April 15): Kenanga Research has maintained its 'neutral' call on Malaysia’s telecommunication sector, citing lingering uncertainties over the financial impact of the takeover of Digital Nasional Bhd (DNB) by mobile network operators, even as the country’s 5G roll-out enters its final phase.

In a sector note, the research house said questions remain over how the transaction will affect earnings, capital expenditure (capex) commitments and dividend payouts for mobile players such as CelcomDigi Bhd (KL:CDB), Maxis Bhd (KL:MAXIS) and YTL Power International Bhd (KL:YTLPOWR).

“The 5G endgame is in sight, but the question remains,” Kenanga said, noting that greater clarity on DNB’s financial outlook and the eventual contribution from the takeover is still needed before investor confidence can fully recover.

Under the latest development, CelcomDigi, Maxis and YTL Power have each paid RM327.9 million to Minister of Finance Inc as part of the put option exercise for DNB. Upon completion, each operator is expected to hold a 33% stake in the 5G infrastructure company.

While the mobile segment faces uncertainty, Kenanga said fixed-line operators remain more compelling, as they are largely insulated from the DNB overhang.

Its top sector pick remains TIME dotCom Bhd (KL:TIMECOM), supported by stronger exposure to enterprise demand, data centre connectivity services and the potential for higher dividends.

The research house also expects subscriber growth across postpaid, prepaid and home broadband segments to remain broadly healthy, driven by bundled offerings and improving network coverage.

Beyond retail consumers, growth is increasingly being driven by enterprise and wholesale demand, particularly as Malaysia continues to attract investments in co-location data centres and hyperscale cloud infrastructure.

Kenanga added that sector sentiment could improve further if major players such as Telekom Malaysia Bhd (KL:TM), TIME and Maxis raise payouts or declare special dividends amid robust cash flows and relatively subdued capex needs.

"Sector sentiment could be boosted by potential yield upside from higher payouts or special dividends from TM, TIME and Maxis amid subdued capex, robust cash flows, and balance sheet optimisation (for TIME).

"Additionally, further updates on M&A (merger and acquisition) activity may arise from Axiata [Group Bhd]'s (KL:AXIATA) ongoing efforts to unlock value in Edotco, potentially through a strategic divestment, sale of a partial stake, or other monetisation measures."