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Telekom Malaysia Secures RM2.4 Billion Contract with U Mobile for 5G Network Fibre Backhaul Services
KUALA LUMPUR, May 27 - Telekom Malaysia Berhad (TM) is set to invest RM430 million over the next two financial years, representing 18% of the 10-year contract revenue, to roll out fibre backhaul services for U Mobile Sdn Bhd's second 5G network.
As reported yesterday, U Mobile has appointed TM as its key fibre backhaul partner to expedite the deployment of its nationwide 5G network. Under the 10-year partnership agreement worth RM2.4 billion, TM will provide a comprehensive suite of backhaul infrastructure services to U Mobile, including fibre leased line access to its 5G Radio Access Network, data centre and TM Edge Facility leasing for Points of Interconnect.
According to CIMB Securities Sdn Bhd, TM is expected to generate an average revenue of RM240 million annually once fibre connectivity has been fully provided. However, the analyst firm assumes that TM will only generate RM100 million in revenue in the first financial year, due to U Mobile's intended delay in starting fibre backhaul leases until the second half of 2026 to minimize expenses, as well as the prepayment of RM233 million for 5G wholesale leases from Digital Nasional Bhd (DNB).
The analyst firm expects TM's revenue from the contract to climb to RM230 million in the second financial year and reach the full RM240 million per annum from the third financial year onwards. These assumptions have led CIMB Securities to raise TM's core earnings per share (EPS) estimates for the next two financial years by 2-4%.
CIMB Securities maintains a "Buy" call for TM, with a higher target price of RM7.55 per share. The deal represents a major opportunity for TM to strengthen its long-term recurring wholesale revenue under the carrier-to-carrier segment.
The positivity surrounding the contract is shared by Kenanga Investment Bank Bhd, which expects the contract to lift TM's FY2025 forecast earnings by 1% and FY2026 forecast earnings by 2%. The bank has maintained an "Outperform" call and raised its target price to RM8.15 per share.
TM's extensive domestic fibre network positions it as the best choice to help U Mobile achieve its 5G coverage targets of 80% by the second half of 2026 and 90% by the second half of 2027. This deal follows an earlier contract signed with DNB in 2021 to provide fibre backhaul services for its 5G network over 10 years, valued at RM2.0 billion.
While the direct impact on TM's total annual revenue is relatively modest, analysts suggest that this new contract will contribute around 1.8% to TM's total revenue forecast for FY26, and the net profit impact is estimated at around 1% based on comparisons with TM's previous large contracts. Most research houses have not made significant changes to their broader earnings forecasts for TM, reflecting the moderate but positive earnings uplift from the contract.
- This major contract worth RM2.4 billion between Telekom Malaysia Berhad (TM) and U Mobile Sdn Bhd for 5G network fibre backhaul services underscores TM's role in Malaysia's technology infrastructure, particularly in Kuala Lumpur.
- The new contract with U Mobile is expected to boost TM's annual revenue, raising CIMB Securities' core earnings per share (EPS) estimates for the next two financial years by 2-4%.
- The 10-year partnership between TM and U Mobile extends beyond just business, as TM's extensive domestic fibre network will aid U Mobile in achieving its 5G coverage targets, contributing approximately 1.8% to TM's total revenue forecast for FY26.
