TM to invest RM430m in fibre backhaul for Malaysia's second 5G network
KUALA LUMPUR, May 27 — Telekom Malaysia Bhd (TM) is expected to incur capital expenditure (capex) of RM430 million over the financial years (FY) 2026-2027, representing 18 per cent of the 10-year contract revenue, to roll out the fibre backhaul services for the second 5G network, according to CIMB Securities Sdn Bhd.
It was reported yesterday that U Mobile Sdn Bhd has appointed TM as its key fibre backhaul partner to accelerate the deployment of the former's 5G network nationwide.
Under the 10-year partnership agreement worth RM2.4 billion, TM will provide U Mobile a comprehensive suite of backhaul infrastructure services, including fibre leased line access to U Mobile's 5G Radio Access Network, data centre and TM Edge Facility leasing for Points of Interconnect.
CIMB Securities said the contract implies that TM will generate an average revenue of RM240 million per annum once fibre connectivity has been fully provided. However, it assumed that TM will only generate RM100 million in revenue in FY2026.
'This is because U Mobile may want to start the fibre backhaul leases closer to the commercial launch of its 5G services in the second half of 2026 (2H2026) to minimise expenses and given that it has prepaid RM233 million for 5G wholesale leases from Digital Nasional Bhd (DNB).
'Thereafter, we expect TM's revenue from the contract to climb to RM230 million in FY2027 and to the full RM240 million per annum from FY2028,' it said.
Factoring in these assumptions, CIMB Securities have raised TM's FY2026-FY2027 core earnings per share (EPS) estimates by 2-4 per cent.
'Post revisions, we forecast TM's core EPS to grow 5.6 per cent/2.7 per cent/2.2 per cent year-on-year (y-o-y) in FY2025/2026/2027, respectively — an improvement over our earlier projections of largely flat core EPS in FY2026-2027,' it said.
Commenting on the contract win, CIMB Securities said the development comes as little surprise, noting that TM has by far the most extensive domestic fibre network in Malaysia and is therefore best-positioned to support U Mobile in achieving its 5G coverage targets of 80 per cent by 2H2026 and 90 per cent by 2H2027.
The deal also follows an earlier contract signed with DNB in 2021 to provide fibre backhaul services for its 5G network over 10 years valued at RM2.0 billion, it said.
CIMB Securities has maintained a 'Buy' call for TM with a higher target price (TP) of RM7.55 per share.
Meanwhile, Kenanga Investment Bank Bhd said the contract announcement does not come as a complete surprise as TM had publicly expressed its eagerness to serve as an infrastructure partner for U Mobile's second 5G network deployment.
'However, we are mildly surprised by the slightly higher contract value of RM2.4 billion for second 5G network from RM2.0 billion in the first 5G network, which may be an indication that both networks are of comparable scale,' it said.
The investment bank is positive on the contract as it is expected to strengthen TM's long-term recurring wholesale revenue under the carrier-to-carrier segment.
'Assuming the contract value is evenly spread over 10 years (similar to the first 5G network agreement), we estimate that it could lift TM's FY2025 forecast earnings by one per cent (assuming contributions start in 2HFY2025) and FY2026 forecast earnings by two per cent.
'We maintained 'Outperform' call and lift our TP by one per cent to RM8.15 per share (from RM8.07 per share),' it added. — Bernama
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