Telekom Malaysia’s Profit Decline and Strategic Shift into 5G

Telekom Malaysia Berhad (TM), the nation’s flagship telecommunications provider, has delivered a starkly disappointing fiscal year. Net profit for FY 2025 fell 15.1 % to RM 1.71 billion, a decline that reflects the loss of a material one‑off tax credit and a spike in operating costs. The quarter‑to‑quarter performance corroborates this trend: 4Q FY 2025 net profit plummeted to RM 222.49 million, more than half of the RM 451.8 million recorded in the previous year’s fourth quarter.

1. Profitability Under Pressure

The drop is not a mere statistical anomaly; it signals deeper structural issues.

  • Absence of tax credit – The previous year’s extraordinary tax concession has vanished, leaving a naked bottom line.
  • Escalating costs – Mobile network sharing expenses and intensified spending on customer acquisition and employee retention have eroded margins.
  • Competitive pressure – As rivals expand their 5G footprints, TM is compelled to invest heavily in network upgrades, further stretching its finances.

With a market cap of MYR 31.2 billion and a P/E ratio of 14.05, investors are justifiably wary. The stock’s recent trading range (52‑week high MYR 8.07, low MYR 6.19) and a closing price of MYR 8.14 suggest a cautious market sentiment.

2. 5G Strategy: From DNB to U Mobile

In a bold move to reassert its competitive stance, TM announced the termination of its 5G access agreement with Digital Nasional Bhd (DNB) and a pivot to a Multi‑Operator Core Network (MOCN) partnership with U Mobile. This shift aligns with Malaysia’s dual‑network framework, enabling TM to access 5G services without relying on the state‑backed DNB infrastructure.

Key elements of the new arrangement include:

  • Three‑year contract with TM Technology Services (a wholly‑owned subsidiary) to deliver core network configuration, integration, activation, testing, optimization, and billing.
  • Cost structure based on usage and negotiated rates, potentially reducing dependency on costly wholesale agreements.
  • Regulatory clearance pending from the Malaysian Communications and Multimedia Commission (MCMC), but no shareholder approval required.

This strategic realignment aims to accelerate TM’s 5G roll‑out, enhance service quality, and potentially unlock new revenue streams. Yet, it also raises questions about the company’s long‑term financial viability: will the cost savings from the DNB exit outweigh the expenses of establishing a new MOCN? Can TM sustain its capital expenditure while maintaining profitability?

3. Dividend Signal Amidst Turbulence

Despite the earnings slump, TM declared a special single‑tier dividend of RM 0.04 per ordinary share for FY 2025, payable on 13 March 2026. While the dividend may appease passive investors, it underscores a paradox: a company grappling with declining profits still opts to return cash to shareholders. The move could be interpreted as a desperate attempt to maintain market confidence in the face of a volatile trading environment.

4. Market Context

The broader Bursa Malaysia index eased amid uncertainty over U.S. trade policy, reflecting global macro‑economic anxieties. In such a climate, TM’s strategic pivots and financial results are under intense scrutiny. Analysts will monitor whether the 5G partnership delivers the promised operational efficiencies and whether the dividend policy remains sustainable.

5. Conclusion

Telekom Malaysia’s recent financial performance and strategic overhaul illustrate a company at a crossroads. The profit erosion, coupled with a costly shift from DNB to U Mobile, casts doubt on its ability to maintain growth without compromising fiscal discipline. Investors will need to weigh the potential upside of a more agile 5G network against the risks of mounting costs and a diluted dividend stance. The next quarterly report will be decisive in determining whether TM can navigate this turbulent transition.