5 days ago
- Business
- New Straits Times
Telco sector tracks estimates in 1Q, Kenanga maintains 'neutral' view
KUALA LUMPUR: Kenanga Investment Bank Bhd has maintained its "neutral" rating on the telecommunication (telco) sector after companies under its coverage delivered the first quarter of 2025 (1Q 2025) performance that largely tracked estimates.
In a note today, the investment bank said sequential earnings delivery presented a mixed outlook with 17 per cent of companies exceeding expectations, while 83 per cent met expectations.
It said service revenue for domestic mobile network operators contracted by 0.9 per cent year-on-year (y-o-y), primarily dragged by CelcomDigi Bhd's (CDB) prepaid subscriber churn as the company strategically moved away from one-time prepaid subscriber identity module users.
Meanwhile, sector core earnings declined 13 per cent y-o-y, also largely stemming from CDB, given the absence of tax reversals seen in the prior year.
Quarter-on-quarter trends for the mobile segment were largely within expectations, said the report.
It said the net additions were supported by strong postpaid momentum, while prepaid remained volatile but improved sequentially.
"Average revenue per user (ARPU) was stable for CDB, whereas Maxis Bhd saw a decline following a shift in revenue recognition for its Maxis Device Care programme," it added.
Conversely, in the home fibre segment, Kenanga Investment Bank expressed concern over the broad-based sequential decline in net additions and ARPUs -- except for Time dotCom Bhd, and in particular, Telekom Malaysia Bhd, which experienced the steepest ARPU drop, attributed to aggressive price discounts.
"Given this is the 1Q where we see widespread competitive pressures, we maintain a wait-and-see approach," said the report.
The investment bank added that optimism is underpinned by all telcos maintaining their financial year 2025 earnings guidance, suggesting a potential recovery in the coming quarters.
It said Telekom Malaysia and Time dotCom remained the investment bank's top picks in the sector, with respective target prices of RM8.15 and RM5.91, while the research house awaited further clarity on Malaysia's 5G dual network policy.
