Telecommunications & Media
Telecommunication Sector - 1QCY25 Earnings Review: Broadly in-line
Tue, 10-Jun-2025 07:35 am
by Steven Chong • Apex Research

Review. Earnings performance under our coverage for 1QCY25 was largely within expectations, with the exception of Axiata, which came in below. The shortfall was primarily due to pricing pressure faced by its key subsidiary, XL Axiata, during the quarter. Nonetheless, the monetisation prospects for Edotco remain intact, though valuation and execution risks will be key factors to monitor.

 

In the mobile space, both Maxis and CDB registered yoy growth in postpaid revenue, partially offsetting persistent weakness in the prepaid segment. The uplift was underpinned by effective customer acquisition initiatives and attractive convergence bundles, which translated into healthy subscriber additions. Nevertheless, ARPU trends remained subdued for both players amid a fiercely competitive landscape. Despite ongoing upselling efforts, ARPU accretion remains elusive as price-sensitive consumers gravitate toward aggressively priced, value-centric plans.

 

In the fixed broadband space, Maxis and CDB outpaced Telekom in subscriber growth, gaining market share through a combination of aggressive promotional bundles and competitive price points. Both operators successfully captured consumer mindshare through sharp value positioning and targeted marketing efforts. While Telekom continues to dominate in terms of infrastructure coverage, its relatively premium pricing and limited mobile-fibre bundling options are constraining its competitiveness in the evolving broadband landscape.

 

Outlook. We anticipate a pick-up in 5G adoption in 2HFY25 as the ecosystem matures and device penetration improves. Nevertheless, MNOs may face near-term earnings pressure from higher wholesale charges linked to rising 5G traffic volumes. This cost headwind is likely to be partially mitigated by ongoing cost optimisation and network modernisation efforts aimed at enhancing operational efficiency. Looking ahead, we expect revenue growth in both mobile and fibre segments to be predominantly volume-driven, supported by steady subscriber gains. However, price competition remains intense, as operators prioritise affordability to capture market share, which in turn caps any meaningful near-term expansion in ARPU. Meanwhile, investor sentiment may hinge on the potential announcement of Jendela Phase 2 (P2), which could serve as a key re-rating catalyst for the sector. 

 

Valuation & Recommendation. We maintain our NEUTRAL recommendation on the telco sector owing to uncertainties on the execution timeline and scope of Jendela P2. That said, we still favour Redtone (BUY, FV: RM0.95), which stands to be a direct beneficiary in the event of a Jendela P2 rollout, backed by its proven track record in Phase 1. We also like Telekom (BUY, FV: RM7.40) for its role as a strategic asset owner and key enabler of 5G fibre deployment. Meanwhile, we view Maxis (BUY, FV: RM4.00) as a compelling value play, currently trading at 8.6x forward EV/EBITDA (-1 std), following the recent weakness in share price performance. We retain our HOLD ratings on Axiata (HOLD, FV RM2.10) and CDB (HOLD, FV: RM4.00) as we believe current valuation have already priced in the bulk of merger-related synergies.

Recommendation: Neutral
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