AXIATA: Telecommunications Group Charts Future Growth Amidst Near-Term Earnings Pressure

A leading telecommunications group is strategically repositioning itself for disciplined growth and enhanced shareholder returns through its newly introduced “Axiata28” strategy, slated for 2026-2028. This long-term vision comes as the company anticipates a decline in its core net profit on a year-on-year basis for the fourth quarter of 2025.

Performance Overview

For 4Q25, the group’s core net profit is projected to fall year-on-year to RM110-115 million, down from RM114 million in 3Q25 and RM169 million in 4Q24. This anticipated decline primarily reflects the absence of revenue contributions from XL following its merger, which was completed in April 2025. On a quarter-on-quarter basis, earnings are expected to remain largely flat, with positive contributions from XLSmart’s expanded subscriber base and a modest recovery in prepaid revenue from Robi (Bangladesh) and Dialog (Sri Lanka) being partially offset by adverse foreign exchange headwinds due to a stronger Malaysian Ringgit.

Strategic Direction: Axiata28

The “Axiata28” strategy marks a significant shift from a focus on portfolio repair to driving sustainable growth. It is built upon two core pillars: enhancing telco operations through operational excellence, 5G monetisation, and AI-driven efficiency; and developing technology and digital businesses, including ADA and new cybersecurity ventures. Under this framework, management aims for over 10% year-on-year dividend per share growth and a reduction in net debt/EBITDA to below 2.0x by 2028, a substantial improvement from 2.6x at the end of 3Q25.

Progress on key initiatives continues, with 73% of XLSmart’s network integration completed as of January 2026, targeting full completion by the first half of 2026. The group is also working towards achieving 65% national 5G device penetration by 2026, alongside expanding home broadband coverage in underpenetrated markets like Indonesia, which offers significant growth potential through fibre rollout and Fixed Wireless Access (FWA).

Challenges and Opportunities

While the long-term strategy is clear, the group faces immediate challenges from its exposure to frontier markets, macroeconomic headwinds, currency fluctuations, and regulatory uncertainties, which could temper near-term views. Additionally, ongoing market investability concerns in Indonesia could delay the proposed sale of a 73.5% stake in Link Net. However, the divestment of Edotco is progressing, with management hopeful for completion in 2026. This potential transaction could substantially reduce the group’s net debt/EBITDA ratio, freeing up capital for further growth.

Based on a comprehensive review of the group’s strategic direction and financial outlook, the investment bank TA SECURITIES reiterates a BUY recommendation for the stock, with a target price of RM0.25, representing a 25.0% upside from the last traded price of RM0.20.