Telekom Malaysia Balances Growth Drive and One-Off Hits

Telekom Malaysia Bhd ((MYTEF)) has held its Q4 earnings call. Read on for the main highlights of the call.

Telekom Malaysia’s latest earnings call painted a picture of a company with solid operational momentum but choppy reported numbers. Core earnings, revenue growth and data‑center progress were positive, yet one‑off workforce costs, FX losses and heavy CapEx masked the underlying strength and signalled continued earnings volatility in the near term.

Steady Revenue Trajectory with Strong Q4 Finish

Full‑year group revenue grew 1.4% year on year, but the more telling signal came from the second‑half acceleration. Fourth‑quarter revenue jumped 8.9% quarter on quarter, suggesting improving execution in core segments and better commercial traction after a slower start to the year.

Core Profitability Trends Improve Beneath the Noise

After stripping out one‑off items, underlying EBIT rose 3% year on year and underlying PATAMI climbed 10%. These figures show Telekom Malaysia’s core operations are strengthening even as reported earnings are temporarily dampened by restructuring and accounting clean‑ups.

Consumer Broadband Base and ARPU Hold Up

On the B2C side, fixed broadband subscribers increased to 3.23 million, up 1.6% year on year and 0.7% quarter on quarter. Blended Unifi ARPU stayed healthy at RM137, aided by growth in Quad‑Play and Triple‑Play customers and modest device revenue that adds a small but stable incremental stream.

Convergence and Unifi TV Fuel Better Monetization

Product adoption trends were encouraging, with Unifi TV 2.0 hitting one million downloads in under a month. Converged and FMC offerings are gaining traction, helping stabilize net additions and support higher monetization per household as customers take more services from the same provider.

Enterprise and TM One Show Improving Execution

TM One delivered an 11% quarter‑on‑quarter uplift, signaling better execution in the enterprise arena. Recurring revenue is being reinforced through longer‑term contracts and rising demand for cybersecurity, cloud, data‑center and managed services solutions.

Carrier‑to‑Carrier and Data Center Businesses Scale Up

C2C revenue climbed 14% versus the previous quarter, driven by domestic mobile fiber backhaul rollout and international high‑capacity demand. Data revenue grew 6.2% year on year, while expansions at IPDC and KVDC Block 2 saw more than half of new capacity taken up almost immediately.

CapEx Ramps Up for Networks and Data Centers

Capital expenditure reached RM1.9 billion in 2025, equal to 16.1% of revenue and up 21% year on year but still within guidance. Roughly 30% went into the access network, complemented by significant investment in submarine cables and AI‑ready data center capacity, including 280 MW secured for TM Nxera.

Dividend Payout Signals Strong Commitment to Investors

Shareholders were rewarded with a total dividend of RM0.31 per share, including RM0.27 ordinary and RM0.04 special. That equates to a payout ratio of around 70% of reported PATAMI, the highest since 2018, underscoring the board’s clear focus on capital returns.

Solid Cash Generation Supports Growth and Payouts

The group generated roughly RM1.6 billion of free cash flow and ended the year with RM2.5 billion in cash and cash equivalents. Management emphasized that this balance‑sheet strength provides ample room to fund elevated CapEx while maintaining a sustainable dividend policy.

ESG and Industry Recognition Bolster Strategic Positioning

Telekom Malaysia also highlighted a string of external accolades spanning operations and sustainability. Awards from regional telecom bodies, technology partners and ESG ranking agencies reinforce the group’s positioning as a leading digital and responsible corporate player.

Separation Scheme and One‑offs Depress Reported Earnings

Reported results were hit by voluntary separation scheme costs and other normalizing items in the fourth quarter totaling about RM325 million. This included an estimated RM295 million for the separation scheme and roughly RM30 million of FX losses, temporarily dragging down EBIT and return on capital metrics.

Flat Reported EBIT Outlook Despite Operational Gains

Reported EBIT for the year was around RM2.0 billion, lower than underlying profitability once one‑offs are excluded. Management guided that 2026 EBIT is expected to be broadly flat versus 2025 on a reported basis, as recurring transactional items and potential further separation activity offset operating improvements.

Cost Inflation Weighs on Margin Expansion

Direct costs rose about 14% year on year, reflecting subscriber‑linked costs, higher mobile access charges and international outpayments. Manpower expenses increased around 8% even after a mid‑single‑digit reduction in headcount, highlighting the inflationary pressures the group is navigating.

Depreciation Spike from One‑off Cleanup

Depreciation and amortization rose roughly 3% year on year, with a notable one‑time cleanup and useful‑life review in the fourth quarter. This accounting adjustment weighed on normalized EBIT for the period, but management expects D&A to normalize in 2026 as the revised asset lives bed in.

Higher CapEx Drains Cash but Builds Future Capacity

Year‑end cash declined to RM2.5 billion from RM3.0 billion, and free cash flow fell versus last year as capital investment climbed. For 2026, CapEx is guided higher to 18–20% of revenue, signalling continued heavy spending that may pressure near‑term cash but is intended to underpin future growth.

Provision for Unused 5G Capacity Adds to One‑offs

The transition of certain 5G arrangements is expected to trigger a provision for unused prepaid capacity, estimated in the low hundreds of millions of ringgit. This non‑recurring charge, to be recognized in 2026, will further distort headline earnings even though it does not reflect ongoing operating performance.

Legacy Internet and Voice Lines Face Structural Pressure

Internet revenue recorded a slight year‑on‑year decline amid intense competition, although sequential trends improved in the latest quarter. Traditional voice services continue their structural downtrend as over‑the‑top alternatives gain share, reinforcing the need to pivot toward data and digital services.

Ongoing VSS Uncertainty Clouds Short‑Term Costs

Management indicated there could be a similar level of voluntary separation requests in 2026, creating uncertainty over the size and timing of future one‑off charges. While such schemes should lower payroll costs over the longer term, they introduce volatility into short‑term earnings and margin trends.

Guidance Points to Modest Growth and Heavy Investment

Looking ahead to 2026, Telekom Malaysia expects low single‑digit revenue growth after delivering 1.4% in 2025, with reported EBIT projected to stay around RM2.0 billion. CapEx is guided at 18–20% of revenue, ROIC remains above the cost of capital and the board reaffirmed a sustainable dividend strategy even as investors are urged to adjust for significant one‑off items.

Telekom Malaysia’s earnings call showed a business quietly strengthening beneath messy reported figures. For investors, the story is one of solid core growth, rising data and infrastructure gains and robust dividends, offset by heavy CapEx and recurring one‑offs that will keep headline earnings volatile in the near term.