TM Could Have a Better 2026 Than Expected

Telekom Malaysia Bhd (TM) could be in a stronger position than many investors expected for the 2026 financial year. While the telecommunications giant has maintained a cautious outlook, analysts at RHB Research believe the company has several opportunities to outperform its own guidance as cost savings, infrastructure expansion, and digital services continue to gain momentum.

Following a recent meeting with TM's management, RHB Research maintained its positive view on the company and suggested that its earnings could exceed expectations. The research house currently has a "Buy" recommendation on the stock, with a target price of RM9.30, reflecting confidence in the company's long-term growth strategy.

Cost Savings Could Boost Earnings

One of the biggest reasons behind the optimistic outlook is TM's continued effort to reduce operating costs. RHB Research believes the company may record lower staff redundancy expenses than previously expected while benefiting from improved infrastructure cost savings over the medium term.

The research house also pointed out that there is still room for additional cost optimisation. A key factor will be U Mobile's migration to its own 5G network, which is expected to begin in the third quarter of 2026. Once the migration is underway, TM could reduce certain network-related operating expenses, helping improve overall profitability.

These cost-saving measures may allow TM to perform better than its original guidance of flat earnings before interest and taxes (EBIT) for the year.

Wholesale Business Continues to Drive Growth

TM's wholesale division remains one of the company's strongest growth engines. As Malaysia continues expanding its digital infrastructure, demand for high-speed connectivity services is expected to remain healthy.

According to RHB Research, several projects are expected to support future growth. These include increasing demand for 5G fibre backhaul, where fibre optic networks connect mobile towers to the core telecommunications network. As more 5G coverage is rolled out across the country, reliable fibre infrastructure becomes even more important.

The company's wholesale segment is also expected to benefit from growing demand for data centre co-location and connectivity services. With businesses increasingly adopting cloud computing, artificial intelligence (AI), and digital transformation, demand for secure and reliable data centres has risen significantly.

TM is also preparing for the completion of two major submarine cable systems scheduled for 2027: the Asia Link Cable (ALC) and the South East Asia–Middle East-West Europe 6 (SEA-ME-WE 6) cable. These international fibre optic networks will strengthen Malaysia's global connectivity while positioning TM as an important regional telecommunications player.

Broadband Business Showing Positive Signs

While competition in the consumer broadband market remains intense, there are encouraging signs that TM's retail business is improving.

During the first quarter of 2026, TM's fibre broadband subscriber base remained largely unchanged compared to the previous quarter. This was mainly due to seasonal factors and increased competition from other service providers.

However, despite the flat subscriber growth, TM still managed to grow its internet revenue for the second consecutive quarter. Average revenue per user (ARPU) also increased by approximately 4% year-on-year, indicating that existing customers are spending more on higher-value broadband plans.

This suggests that TM's strategy is shifting from simply adding more subscribers to increasing the value generated from its existing customer base.

Home Pro Campaign Could Support Second-Half Growth

RHB Research believes TM's recently launched Home Pro campaign could provide another boost during the second half of 2026.

Introduced in June, the campaign encourages existing Unifi customers to upgrade to faster internet packages while offering attractive device bundles as an incentive.

Instead of relying solely on acquiring new subscribers, TM is focusing on upgrading current customers to premium plans that generate higher monthly revenue. This approach could improve profitability while strengthening customer loyalty.

As more households demand faster internet for remote work, online learning, streaming services, and smart home devices, higher-speed broadband packages are becoming increasingly attractive.

Data Centres May Be TM's Hidden Opportunity

Perhaps the most overlooked part of TM's business is its growing data centre division.

According to RHB Research, investors have yet to fully appreciate the long-term value of this segment. As artificial intelligence continues driving demand for computing power and cloud infrastructure, data centres have become one of the fastest-growing areas in the technology industry.

Malaysia has also attracted growing interest from global technology companies looking to establish regional data centre operations. TM is well-positioned to benefit from this trend thanks to its nationwide fibre network, connectivity expertise, and existing digital infrastructure.

RHB believes the company's data centre business could become a significant contributor to future earnings and serve as an important catalyst for its wholesale segment over the coming years.

A Positive Outlook Ahead

While challenges such as competition and ongoing industry changes remain, TM appears to be entering the second half of 2026 with several positive growth drivers. Lower operating costs, improving broadband revenue, expanding digital infrastructure, international cable projects, and increasing demand for AI-related services all provide reasons for optimism.

Although TM itself has guided for relatively flat earnings this year, analysts believe the company may be setting expectations conservatively. If current trends continue, Telekom Malaysia could deliver stronger financial performance than anticipated and further strengthen its position as one of Malaysia's leading digital infrastructure providers.

For investors, the company's steady transformation beyond traditional telecommunications into broadband, cloud services, and data centre infrastructure could make TM an increasingly attractive long-term growth story.