Telekom Malaysia: From Telco to Digital Powerhouse — Data Centers and 5G Transition Fuel a Re-rating
H1 2026 shows revenue momentum, strategic shift to AI-ready infrastructure, and a higher dividend despite one-off costs.
4863.KL · Earnings Call · 2026-08-20
The Quarter in Context
Telekom Malaysia's H1 2026 results are a story of deliberate transformation. Revenue grew 4.8% year-on-year to MYR 5.9 billion, with all customer segments positive. Underlying EBIT held at MYR 1.2 billion, while reported profitability was dragged by content cost from the FIFA World Cup and a one-time 5G MOCN write-down. But the strategic narrative is unmistakable: the company is pivoting from a traditional telco to a digital infrastructure player.
We are progressively advancing our new growth areas such as data center, cloud, cybersecurity, smart services, and also AI.
Strategic Shift: From Telco to Digital Infrastructure
The most telling signal this quarter is the data center momentum. Iskandar Puteri Data Centre Block 2 is now 100% taken up, and the AI-ready TM Nxera facility is ahead of schedule with 70% of its first phase already contracted. CFO Ahmad Fairus noted: “We expect to partially RFS it on September 2026, at least approximately about close to 20 MW, where the remaining will be make ready by first quarter 2027.” — Ahmad Fairus, Group CFO · 2026-08-20 This is not just a side bet — it is central to the Digital Powerhouse 2030 vision.
Equally significant is the completion of the 5G network migration. The company moved to the second network at the end of July, which should lower costs and improve margins. As Dato' Amar Huzaimi explained: “Iskandar Puteri Data Centre Block 2 has been fully taken up, reflecting healthy demand for data center capacity.” — Dato' Amar Huzaimi, Managing Director and Group CEO · 2026-08-20 The new network brings with it an optimized wholesale cost structure, a clear tailwind for H2.
Riding the Global Data Center Wave
TM is not alone. The global tape shows AI data centers as a top momentum mover, and multiple reporting companies — from telecoms to hyperscalers — are citing similar expansion. TM's international connectivity and submarine cable investments align perfectly with this theme. The Asia Link Cable landing in Johor adds strategic route diversity, and the company is well positioned to capture hyperscaler demand in Southeast Asia.
Yet there is a company-specific twist: the World Cup broadcast lifted Unifi TV app downloads to 1.5 million, creating a larger future monetization base. One-off content costs will fade, while the subscriber stickiness may endure.
Financial Resilience and Returns
Despite the non-recurring items, the balance sheet is healthier than ever. Gross debt-to-EBITDA improved to 1.0x, free cash flow rose 20% to MYR 955 million, and the board declared a higher interim dividend — 75% payout, up from last year. Management is clearly confident in the trajectory, and the enhanced dividend framework signals a new capital allocation discipline. As CFO stated in the Q&A: “We expect that we will have a positive outcome on our bottom line.” — Ahmad Fairus, Group CFO · 2026-08-20
One caveat: the TM One growth, while encouraging, still faces a competitive market. The company's doubling down on cloud and cybersecurity is the right counter, but execution risk remains.
Overall, TM is not just reporting a quarter — it is demonstrating a strategic inflection. With data centers, AI, and 5G optimization all converging, the market may start to re-rate this telecom as a digital infrastructure play.