Periodic/Sector reports
Telecommunications: 2Q26: Broadly In Line, Positive Price Hike Spillover In 3Q26
MARKET WEIGHT (Maintained)
Analyst
Highlights
2Q26 sector earnings came in within expectations, with Maxis and TIME delivering strong earnings. This was partly offset by Axiata’s weak earnings due to lower ringgit translated earnings and high withholding tax expense.
The quarter saw: a) a 2% yoy service revenue growth, driven by market wide ARPU uplift; b) cost discipline; c) encouraging enterprise demand especially for TM; and d) commendable home fibre growth.
Maintain MARKET WEIGHT. Catalysts include Axiata’s infrastructure asset monetisation and CelcomDigi’s synergistic savings by 2027. Our sector top picks are Maxis and CelcomDigi.
Analysis
2Q26 results wrap: Wireless gained momentum. The quarter’s earnings moderated to RM1,444m (-7% yoy; -19% qoq) on the back of weak earnings from Axiata and TM. Axiata’s 2Q26 net profit (-74% yoy; -89% qoq) was weighed down by lower ringgit translated earnings and elevated withholding tax expense while on a sequential basis, TM’s earnings were partly dragged by high FIFA World Cup content cost (booked in Jun 26). Positively, TIME dotCom (TIME) reported commendable bottom line growth (+14% yoy), driven by strong retail and wholesale demand while Maxis’ earnings uplift was attributed to margin expansion from good cost discipline. Broadly, earnings came in within expectations.
The quarter was characterised by: a) a 2% yoy service revenue growth, driven by market-wide pricing revision in Feb 26 across post-and-prepaid products; b) good cost discipline; c) encouraging enterprise demand especially for TM from the public sector segment; and d) robust home fibre demand, driven by fixed-mobile convergence strategies and home passes expansion.
ARPU uplift to drive 3Q earnings. We note that 2Q26 reflected positive impact from a market-wide mobile price uplift executed sometime in Feb 26. CelcomDigi, Maxis and UMobile collectively raised postpaid and prepaid prices by 5-10%, signalling market repair and rational price competition. Consequently, Maxis saw improved 2Q26 ARPUs in prepaid (+1.4% qoq) and postpaid (+0.3% qoq) while CelcomDigi saw stable ARPUs. We expect positive spillover in 3Q26, driving earnings upside for both Maxis and CelcomDigi.
No cash call: Some clarity on DNB. The consolidation of Digital Nasional (DNB) – as a 33% associate to CelcomDigi and Maxis – is slated for 4Q26, after a successful refinancing of the RM1.5b Ministry of Finance (MoF) loan. The DNB losses are not expected to materially impact 2026’s earnings while no further earnings guidance was offered for 2027. Positively, the assurance is that there is no cash call or capital injection required for DNB’s near-term capex requirements.
Highlights
2Q26 sector earnings came in within expectations, with Maxis and TIME delivering strong earnings. This was partly offset by Axiata’s weak earnings due to lower ringgit translated earnings and high withholding tax expense.
The quarter saw: a) a 2% yoy service revenue growth, driven by market wide ARPU uplift; b) cost discipline; c) encouraging enterprise demand especially for TM; and d) commendable home fibre growth.
Maintain MARKET WEIGHT. Catalysts include Axiata’s infrastructure asset monetisation and CelcomDigi’s synergistic savings by 2027. Our sector top picks are Maxis and CelcomDigi.
Analysis
2Q26 results wrap: Wireless gained momentum. The quarter’s earnings moderated to RM1,444m (-7% yoy; -19% qoq) on the back of weak earnings from Axiata and TM. Axiata’s 2Q26 net profit (-74% yoy; -89% qoq) was weighed down by lower ringgit translated earnings and elevated withholding tax expense while on a sequential basis, TM’s earnings were partly dragged by high FIFA World Cup content cost (booked in Jun 26). Positively, TIME dotCom (TIME) reported commendable bottom line growth (+14% yoy), driven by strong retail and wholesale demand while Maxis’ earnings uplift was attributed to margin expansion from good cost discipline. Broadly, earnings came in within expectations.
The quarter was characterised by: a) a 2% yoy service revenue growth, driven by market-wide pricing revision in Feb 26 across post-and-prepaid products; b) good cost discipline; c) encouraging enterprise demand especially for TM from the public sector segment; and d) robust home fibre demand, driven by fixed-mobile convergence strategies and home passes expansion.
ARPU uplift to drive 3Q earnings. We note that 2Q26 reflected positive impact from a market-wide mobile price uplift executed sometime in Feb 26. CelcomDigi, Maxis and UMobile collectively raised postpaid and prepaid prices by 5-10%, signalling market repair and rational price competition. Consequently, Maxis saw improved 2Q26 ARPUs in prepaid (+1.4% qoq) and postpaid (+0.3% qoq) while CelcomDigi saw stable ARPUs. We expect positive spillover in 3Q26, driving earnings upside for both Maxis and CelcomDigi.
No cash call: Some clarity on DNB. The consolidation of Digital Nasional (DNB) – as a 33% associate to CelcomDigi and Maxis – is slated for 4Q26, after a successful refinancing of the RM1.5b Ministry of Finance (MoF) loan. The DNB losses are not expected to materially impact 2026’s earnings while no further earnings guidance was offered for 2027. Positively, the assurance is that there is no cash call or capital injection required for DNB’s near-term capex requirements.
MARKET WEIGHT (Maintained)
Analyst
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