Telekom Malaysian

Assalamualaikum and a very good evening, everyone. Welcome to TM's Financial Year 2025 Analyst Briefing, hosted by our Managing Director and Group CEO, Encik Ahmad Huzaimi, together with our Group CFO, Encik Ahmad Fairuz. I'm Delano from TM's Investor Relations Team, and if you are in our distribution list, you would have received a copy of our analyst briefing presentation by email earlier. The slides are also available on our IR website under quarterly results and will be shown during this session. But before we begin, I would like to kindly remind everyone to keep your microphones muted. We will only open the floor for Q&A session after the presentation. Without further ado, I would like to hand over the briefing to Encik Ammar. Over to you, Chief.

Thanks, Zainal. Assalamualaikum and a very good evening. Thank you everyone for making time to attend the briefing today. As usual, I will begin with our highlights before providing a brief overview of our overall 2025 financial year performance. Filus will then elaborate on the operational and financial details, and I will be back at the end of the presentation with some concluding remarks before we proceed to the Q&A session. Let me begin with our recent highlights, including the latest update on our products, collaborations, as well as the award we received during the quarter. In the B2C segment, Unify continued to strengthen its convergence leadership to enhance Unify Universe campaign and integrated digital experience with attractive connectivity, including mobile, alongside enriched content and smart home offerings. The launch of our UniFi TV 2.0 in the second half of the year have seen encouraging adoption with 1 million Malaysian downloading the new apps in less than a month. UniFi Business continue to empower MSMEs with customizable and reliable digital solutions to grow their revenue and improve productivity. This execution was further recognized through PC.com Leaders' Choice and Industry Choice Award received during the year, reflecting our strong customer and industry validation across Unify and Unify Business. In the B2B segment, TM1 continues to drive digital transformation for government and enterprises. Our participation in MyCityExpo 2025 provides a platform for us to showcase our AI-powered city management with digital solution capabilities, enhancing visibility and engagement with key stakeholders. Last quarter, we were also entrusted by Bintulu Port Holdings to an MOU to support their long-term digitalization roadmap, reflecting confidence in TM's mission-critical solution for large-scale infrastructure operators. We are also named ASEAN Partner of the Year by Cisco, showcasing solid execution and growing traction across connectivity, cloud, data center, and cybersecurity solutions. In the C2C segment, TM Global made solid progress in strengthening regional digital infrastructure and data center capabilities. The completion of our KVDC and IPDC Block 2 expansion has increased total power capacity, supporting growing hyperscaleless demand, and AI-driven workloads. This execution has translated into differentiated product capabilities, including the scaling of GPU as a service, And our TM Nexera has recently secured 280 MW of power, paving the way for the upcoming hyper-connected AI-ready data center campus in Johor. TM global industry leadership continues to be recognized with dual wins at the Asian Telecom Awards 2025, proving our capabilities in advancing digital infrastructure. Overall, momentum remains but will continue with steady progress in translating strategy into delivery as we advance our aspiration to become early to powerhouse by 2030. Before I go into the numbers, let me start with the fundamentals. For year 2025, where the underlying business remains strong, we delivered strong revenue growth, maintained healthy cash flow generation, and strengthened momentum across all customer segments, particularly in the second half of the year. STM accelerates its transition towards a more digital and technology-driven business. We remain attentive to the evolving aspiration of our workforce. During the year, we receive a significant number of voluntary separation requests from employees seeking early retirement or career transition. As a responsible employer, we have accommodated this request with a fair and attractive transition package. This is a win-win for both parties in the long run. Employees can comfortably transition to the next phase of their life while enabling TM to progressively align towards our future digitalization priorities. This underscores the group commitment in ensuring responsible workforce management and upholding the social pillar of our sustainability framework. This has resulted in moderated reported EBIT year-on-year. However, excluding this one-off impact, our underlying earning remains resilient, supported by 8.9% quarter-on-quarter revenue growth. Reflecting the strength of our core operations. With healthy cash flow generation, the board declared a total dividend of $0.31 per share comprising of $0.27 dividend and a special dividend of $0.04. Together with special dividend, total dividend payout stood at circa 70% of reported Patami. The highest payout ratio since we first revised our policy in 2018. We are confident of keeping this momentum to ensure continued commitment and value creation to the shareholders. CapEx for year 2025 is approximately $1.9 billion or 16.1% of our revenue. As we continue to support key growth initiatives, CapEx spending remains within guidance. Looking ahead, TM will continue to deliver sustainable dividends, maintain disciplined capex and further strengthening its balance sheet to support long-term earning growth. With that, I will now hand over to Firuz to walk you through the financial and operation highlights in greater detail.

Thank you, Chief.

Let me walk you through the reported results and adjustments for the quarter as well as the full year. 2025 was a demanding year. Against this backdrop, PM's revenue continued to strengthen, particularly in the second half, reflecting improved execution across our key segments. Reported EBIT and BATAMI reflect the impact of the voluntary separation requests from employees undertaken during the quarter, ordinary change movements, as well as selected non-recurring items. After adjusting all these one-off items, underlying EBIT and BATAMI showed a stronger operational momentum As shown in the presentation, underlying EBIT increased by 3% year-on-year, while underlying PATAMI improved by 10% year-on-year. This illustrates the resilience of our core operations, while reported earnings reflect deliberate one-off optimization actions undertaken during the quarter. Overall, TM delivered resilient top-line growth with revenue increasing 1.4% year-on-year, This represents a stronger uplift compared with the previous year. As mentioned earlier, the underlying business remains strong as we continue to steer towards leaner profitability over the medium terms. More importantly than the full year number, the improvement in the second half momentum and the strong fourth quarter exit provide a better indication of the underlying trajectory heading into our financial year 2026. Let me share more details in the following page. B2C performance remained resilient, delivering 0.7% positive year-on-year while navigating an increasingly competitive retail environment. Fixed broadband subscriber rose to 3.23 million, representing 1.6% growth year-on-year and 0.7% quarter-on-quarter. Net addition has been stabilized in the second half of the year, supported by effective convergence offerings and ongoing enhancements to the customer experience. Within the consumer segment, we continue to see strong demand driven by enhanced converged solutions, including smart home capabilities and enriched content offerings. Unified business segment remains positive as we continue to actively push end-to-end solutions for entrepreneurs, focusing on helping them to grow revenue, cost efficiency, including productivity. ARPU remained healthy at RM137 per subscriber. This is driven by upgrades to higher value plans with devices playing a supporting role, contributing low single-digit of total unified revenue. Convergent offering continued to show positive momentum with MFC penetration improved compared to a year ago. This signals broader household adoptions of integrated broadband mobile content offerings. Quad play and triple play customers grew by 8% year-on-year, supporting higher monetization potential and improving loyalty among converged households. Looking ahead, With rising FMC penetration, stronger device bundle traction, and a stabilized subscriber net app, Unify remains well positioned to deliver steady, high-quality growth and remain a key contributor to overall TM Group revenue. TM1 delivered a stronger quarter with momentum improving 11% quarter-on-quarter, reinforcing execution discipline in the second half of the year. Recurring revenue remains solid contributed by a deliberate shift towards longer-term contracts. This improves overall revenue visibility and mitigates seasonality. Connectivity continues to anchor the business while the new core such as IT services, data center, as well as cloud solutions, recorded a meaningful quarter-on-quarter uplift. This uplift was partly from data center co-location, from banking sector, alongside higher contribution from global digital travel agency. Together, this reflects the re-strengthening of the enterprise-focused data center propositions. From the product mix perspective, there's also a shift in the directions. Cyber security and many solutions are gaining traction as customers opt for longer-term service-based engagements. These deliver more stable recurring revenue and provide sustainable business model. On ESG-aligned initiative, TM1 has secured several strategic collaborations. These include expansion of the Smart Industrial Park with NCT Group, which accelerated customer position as a digital-ready and energy-efficient ecosystem. In the fourth quarter, TM1 also secured a Smart Port Digitalization Partnership with Bintulu Port Holdings Berhad. supporting its transition to a fully digital and sustainable port by 2030. Looking ahead, demand across cybersecurity, cloud, data center, and smart solutions continues to grow, providing visibility into TM1's 2026 growth trajectory. The performance this quarter signals the early pace of structural transition with clearer execution priorities, refreshed leaderships, and a more resilient portfolio TM1 enters the year on a more stable footing to support their long-term growth vision. On the C2C, C2C delivered another solid performance. Revenue is growing 14% against last quarter, supported by consistent domestic and international demand. Revenue remains predominantly recurring. This provides stable support to the group's overall results. Domestic growth continues to be driven by ongoing rollout of mobile fiber backhaul and rising demand of fiber port or our high-speed broadband access. This initiative supports stable domestic revenue base while enhancing our network utilizations. International performance is stronger driven by rising demand for high-capacity dedicated cross-border and data center-to-data center connectivity. Our submarine cable investment readiness continues to scale, supported by diversified east-west routes, access to open cable landing stations, enabling greater connectivity and faster capacity monetization. Demand from growing AI workloads and data traffic continues to drive requirements for scalable digital infrastructure and wholesale connectivity expansion. On data center, we see there's such an improvement or increase, then this is mainly due to completion of our IPDC and KVDC block 2 expansion, which we have achieved more than 50% immediate take-up. On the partnership with Singtel, TM Nexera continues to make steady progress and remain on track to deliver the uplift-enable, bioenergy-efficient and sustainable data center design by second half of the year. Overall, TM Global continues to build momentum in supporting hyperscalers, domestic operators, underscoring the importance of TM in supporting Malaysia's digital economy by providing end-to-end wholesale connectivity. And this reinforces our ambition to become a digital powerhouse by 2030. Taking an alternate view of revenue by product, all product categories recorded quarter-on-quarter growth, reflecting stronger execution in the second half. For the full year 2025, overall revenue performance was supported mainly by data and others, which helped offset softness in voice and internet product and services. Data revenue grew 6.2% year-on-year, supported by strong momentum in the fourth quarter, and the growth was mainly driven by higher demand for international as well as domestic data services, consistent with stronger C2C performance. This is largely driven by improved capacity availability. Other revenues strengthened 10% year-on-year, supported by solid quarter-on-quarter performance in fourth quarter 2025. This was driven mainly from contribution for our data center qualification in C2C, bundle service offering and continued growth in our education arm. As for internet revenue, we see a slight decline year-on-year due to ongoing competitive pressures. Nonetheless, performance improved with positive quarter-on-quarter and modest increase compared to fourth quarter 2024, supported by our convergence campaign indicating signs of stabilization. As expected, our traditional voice revenue continued its structural decline year-on-year following continued adoptions of OTT-based applications. However, quarter-on-quarter growth in the fourth quarter in 2025 partially mitigate the annual decline. Turning into cost-to-revenue performance ratio, the full year 2025 cost-to-revenue profile reflects deliberate choices. We invested in depending B2C, business-to-consumer momentum, including absorbing higher mobile access costs. At the same time, underlying operating costs remain well controlled. Direct costs rose to 14% year-on-year, mainly from incremental revenue to support growth in subscriber, as well as mobile-related costs and international outpayment in line with C2C revenue growth. Cost movement in our ongoing support to drive contract renewal increased, enhanced customer and long-term stability. As for manpower costs, there's increased 8% year-on-year, reflecting the voluntary separation requests undertaken during the third quarter and fourth quarter. We ended the year with a mid-single-digit reduction in headcount, consistent with ongoing productivity action. The increase also reflects differences in incentive offerings compared to the prior year. As for operational costs, we see a decline by 2% year-on-year, driven by multiple items, including some reversal from our impairment on trade receivable due to better collections and credit quality. Meanwhile, our depreciation and amortization increased 3% year-on-year, in line with the planned asset capitalization as well as some one-off items. Overall, PM's largely strong operations continue to support resilient margins in a competitive environment. Moving to the next slide on CapEx, as actually my MD mentioned, our total CapEx spend was $1.9 billion in 2025, or equivalent to 16% of total group revenue. And this is slightly within guidance. Of this, some 30%, one-third was allocated for our access network. 20% for network and the remaining for our support system. Overall, CAPEX intensity remain comfortably within our guidance. with a 21% year-on-year uplift. The higher spending reflect selective investment to support growth initiative and these include investment in digital infrastructure and connectivity as well as completion for our data center and submarine cable investment. We continue to exercise strong capital management discipline with clear allocation priorities. In 2025, Less than 20% of the capital was invested in sustaining and protecting our core business while majority was allocated to value-accurative growth opportunities. This approach ensures capital efficiency while positioning the group for future demand. Now let us move to our cash flow and balance sheet position, which will be my final slide for today. I'm pleased to report for the full year ended December 2025, TM's group cash and cash equivalents stood at RM 2.5 billion compared to compared to $3 billion at the end of financial year 2024. Pre-cash flow, circa $1.6 billion, lower than last year reflecting increase in capital investment spending during the year, coupled with a moderation of inoperating cash flow and scheduled borrowing repayment during the year. Despite a year shaped by one-off item and heavy investment cycle, we continue to generate healthy operating cash flow, providing continued capacity to support both shareholder distribution and future growth initiative. ROIC, or Return on Invested Capital, moderated primarily due to the impact of our voluntary separation request where cost recognized this year and temporarily reducing our reported EBIT. Even with this impact, our ROIC exceeds our cost of capital indicating ongoing value creation. Importantly, this is a non-recurring item. Normalizing this, our ROIC actually improves compared to last year, reflecting continued value creation. As announced earlier by Encik Amar, the Board approved a total dividend of $0.31 per share, representing approximately 70% payout ratio to our reported patami. This is an increase compared to the last year. Overall, TM's group balance sheet remains strong, providing sufficient headroom for future investment and maintaining the dividend commitment. This positioned the group to fund future growth while maintaining a balanced financial profile. That shall conclude my financial and operational highlight and I'm returning back the session to my GCO, Mr. Ammar. Over to you, Chief.

Thank you, Firuz. Now, let me provide a brief update on our ESG activities for the year. Sustainability remains a key pillar underpinning TM's long-term competitiveness. In 2025, we continue to strengthen our position through recognized governance standards, sustainability-driven innovation, and community impact, with improvements reflected in our ESG ratings and external recognitions. We improved our ESG ratings and were recognized as a National Corporate Governance and Sustainability Award, or NAGSA. TM ranked 7th among 847 listed companies nationwide and received the Industry Excellence Award in Telecommunications and Media. The recognition reinforces the progress we are making on transparency, accountability, and sustainability reporting, areas we will continue to build on. EM was also named as a three-star ESG Lister under the UN GCMYB ESG Select List 2025, recognized by the UN Global Compact Network Malaysia and Brunei. This award is based on demonstrated impact to three categories, namely ESG Trailblazer, ESG Retro Innovation, and Purposeful Partnership, which includes our smart urban forestry solutions. In addition, our Chief Corporate Officer was also awarded the Forward Faster Chief Sustainability Officer Award for Large Corporate early this year. This recognition reflects not only compliance, but the integration of sustainability into how we operate and grow the business. For full year 2025, the group delivered within the guidance provided to the market, reflecting disciplined execution across revenue, profitability, and CAPEX. Revenue grew by 1.4% year-on-year, A low single-digit increase while reported EBIT at $2 billion, with underlying performance exceeded the guidance. TAPEX amounted to 16.1% of revenue, all in line with the guidance previously shared. So as we entered in the final year of defend and build phase under our PWR 2030, we are transitioning to the grow and replicate phase, marking the next phase of our transformation journey. Across the group, each business segment continues to advance its strategic priorities for sustainable growth and long-term value creation. In B2C, our suite of convergence services continue to strengthen through quad-play campaigns. This includes expanded smart home solutions, various device offerings and enhanced unified tv driving deeper customer value per household b2b momentum remains encouraging driven by continued expansion of digital solution across ict cloud data center cyber security and smart services we are also strengthening partnership across enterprise and public sectors in supporting malaysia's digital transformation agenda C2C continues to elevate Malaysia's position as a regional digital hub by expanding core digital infrastructure and services. This includes expansion of submarine cable system capacity, open cable landing station, AI-ready data centers, and GPU as a service to meet the growing hyperscalers demand. Leveraging our network of fiber, EM continues to provide mobile backhaul for the dual network 5G rollout, delivering seamless connectivity. Meanwhile, our data center development continues to enhance the group infrastructure readiness, with TMXERA progressing in line with the initial project timeline. So, TM Outlook for 2026 remains positive and is underpinned by disciplined execution of our strategic priorities. Now, let me provide an update on our 2026 guidance. For revenue, we are projecting a low single-digit increase from the previous year. EBIT for 2026 is expected to be at a similar level to 2025. The CAPEX percentage of 2026 is forecasted to be between 18% to 20% of revenue. This guidance underscores a balanced approach that supports long-term value creation while maintaining financial discipline. Overall, we are confident that we will achieve the 2026 market guidance, supported by continued growth and disciplined execution. With that, I thank you for your attention. We shall now move on to the Q&A session. Thank you.

Thank you, Encik Ammar and Encik Firuz. We will now begin the Q&A session. If you would like to ask questions, we would prefer for you to use the raise hand function and we will invite each one of you based on the order shown. First question comes from Phuong. Go ahead, Phuong, and now meet yourself.

Hi, good afternoon. Thank you so much for the conference call. I have three main questions. Firstly, can you break down the RM325 million in normalizing items for the fourth quarter? Second question, on the depreciation and amortization, I see that the cost has risen quite a bit. Q on Q, going from the third quarter to the fourth quarter. And I think, Firuz, you mentioned just now during your presentation that there are some one-off items. So can you provide more color there as to what that is and how much was that one-off item? And then my third question is on the guidance. So I see that the EBIT guidance is flat for 2026. Despite the fact that you're expecting some growth in revenue, can you provide us some color as to why you are expecting flat EBIT And can I also clarify whether the base for the guidance, right, is it the $2.47 billion underlying EBIT in FY25? And also on guidance-wise, right, any guidance on dividend policy for 2026? Are we in the midst of reviewing the policy or are we expecting to keep it at 40% to 60%? Those are my three main questions. Thank you.

Thank you for the questions. So your first question is actually what are the breakdowns for the normalizing items in quarter four? Basically, there are two items. One is our separation cost. The other one is actually our forex loss on our operations. And the amount for forex loss is circa 30 million for the quarter. i hope that clarifies for the first questions on the number two on the depositions and amortizations you are right uh i did mention there are some one-off item and this is pretty much some of the cleanup for the assets as well as some risk review of our useful life yeah and uh otherwise actually it should be trending as usual and we hope to see the similar trend back in 2026 the next quarter 2026 yeah back in 2026 okay EBIT flat despite expecting growth in revenue

Thank you, Fung. Let me just take on the dividend policy. Will there be a review of policy? I will assure you we will make announcement should there be any announcement on the change of policy on the dividend there. But we have been stating at least maintaining our dividend thus far and we will certainly make announcement should there be any change in the policy. On the EBIT flat, of course, there could be expectation of increase in cost as well. In that sense, we are maintaining our guidance as EBIT flat. Okay.

And then to address your phone, whether the base guidance is actually on underlying or reported. Typically, we will go on reported. We just want to be very clear. It will be similar level of the reported.

I see. Okay. So if I can just follow up with some questions. So firstly, going back to the normalizing items. Okay. So I note it's only two items, VSS and Forex. effects. So I also note that in the P&L that you have other gain of RM92 million that was booked in the fourth quarter. So is this still related to fair value gains on the tech fund? That's question number one. And you also mentioned, I think, some copper sale gains in your notes. So how much was that in the fourth quarter? So that's the first question. And then on the DNA, just to clarify again, right, was there a one-off in the fourth quarter? in terms of DNA, and just to clarify, the run rate going into 2026, should we be looking at the third quarter instead of the fourth quarter DNA? And then lastly, when it comes down to the EBIT guidance, Firuz, you mentioned that we are looking at the reported EBIT, which is only about $2 billion, I see from the slides. So from the underlying amount of $2.47 billion in 2025, you are expecting it to go down to $2 billion in 2026? Is it fair to think about it that way? And if so, why would that be the case? Those are my follow-up questions. Thank you.

Actually, quite a lot of questions. I'm trying to actually dissect again. I think I'll just quickly on some of the questions with regards to depreciation and amortization. You are right. As I mentioned earlier, there's actually one-off item. And as a base, we should be looking at actually quarter three as actually the baseline. Okay. And how much is, did you ask how much is corporate gain?

Yes, I asked about how much is the copper sale gain in the fourth quarter and also whether the RM92 million in other gains that you book in 4Q, is that fair value gain on tech fund again?

All right. So just for clarity, for the other gains, if you see in our consolidated income statement, the RM92 million is referring to our fair value gain, right? So there's actually a spillover from quarter three to quarter four. and that is actually the number yeah uh explaining uh the movement for other gains and as far as actually copper monetization it will be actually reflected under our other operating income got it okay and and uh the ebit guidance you were saying that uh you are looking at it being flat but what you're comparing to is the reported ebit of only about two billion so

From the underlying of RM2.5 billion in 2025, you're expecting it to come down to about RM2 billion in 2026?

Okay, I think let's provide some colours on the EBIT guidance. Of course, I think from a benchmarking perspective, we are looking at the same. We are anticipating a similar trend of voluntary separation request for the 2026, right? So, and actually taking that into account with a similar request and this is actually what we think from EBIT guidance perspective. Yeah.

Okay.

Does that actually answer you?

Yes, it does. Yeah. Clarifies a lot. Thank you so much, Firuz and Ammar.

Thank you. Thank you. Thank you.

Thanks, Phuong. So, up next, we have Luis. Go ahead, Luis.

Hi. Good afternoon and thanks for hosting the call. I initially had three questions as well. The first is the normalized EBIT and PATAMI in the fourth quarter was down a fair bit and seems to be because of direct cost. Is this primarily equipment costs or it's the mobile access cost that you spoke about during the presentation? The second question I had is regarding Unify. The blended ARPU, is that inclusive of device sales still, or is there an actual ARPU uplift in terms of migration to higher-end plants? And the third question is if you could give us an update on the status of the TM Lexera DC. I saw you mentioned that you've secured 280 megawatts of power. Does that mean the DC's long-term target is to be 280 megawatts? megawatts and any progress on the first 64.

Thanks.

Is that the only question, Luis? Thank you. Initially, yes.

Thank you. Let me take on TM Nexera DC on the 380-power megawatt. Of course, it is anticipated to be completed by second half of the year, at least on the first phase. Not on a full scale. It's on the first phase yet. All right. which is 64 megawatt. All right. Second half of the year, quarter three, hopefully. So on the unified blended ARPU, yes, it's inclusive of device.

Okay.

However, the take-up of higher plan also increased for the second half of the year. I'll pass to Firuz on the direct cost. Thank you.

Sorry, Luis, just to add what my MD said. The blended APU is actually a combination of our device. But the factor is actually driven by two things. One is actually the device, as well as higher packages prices. Nevertheless, our total device revenue is a low single digit to total group revenue. Just to give you the context. On the diet, I just want to recap. I think your question, why was it my EBIT went down, and you think it is because of direct cost. Am I correct?

The normalized EBIT. Normalized EBIT, correct.

All right. So I'll break down on the normalized EBIT. Actually, the normalized EBIT looks lower by two items. We have one-off item from depreciation and amortizations, as I mentioned earlier, in the quarter four. And secondly, there's actually just one second. There's a catch-up actually caused on a one-off staff benefit that actually flew in quarter four when it wasn't there in quarter three. So this should be one-off item. Again, the two is one-off item. And that will actually be normalized back in quarter one this year. And consequently, when we're looking at the lower EBIT, it flows down to our Patami similarly. Okay.

Just to clarify, so the DNA and the catch-up benefit is actually one-off, but in terms of the normalization, you didn't classify it as such. That's why normalized EBIT is lower?

Yeah, so for the, sorry, you are asking for the depreciations, right, Louis?

Yeah, and the catch-up benefit on the first half.

For the DNA, it's actually basically a one-off. Some are due to clean-up and review of our useful life. We expedite some of the assets, right? So that's actually one part. On the catch-up, so that is actually a one-off item that was actually supposed to be, that was actually flowing in quarter four, yeah?

But it was not part of the normalization of the EBIT and the PATAMI.

Yeah, but that's correct. That's not part of the normalize, but that's the reason why the overall EBIT went down, correct.

Yeah, it's more of timing. Okay. Sorry, just to clarify on the next era, is there any prospective tenancy you've already, you can let us know about? Is it primarily filled already once you've get the second half construction?

Yes, the demand is encouraging. So we are now considering on the next phase of the build-up if we are able to complete the construction by at least the second half of the year.

Great. I'll thank you for any questions. Thanks.

Thanks, Luis. Prem, you are up next. Go ahead and unmute yourself.

I thank you for the opportunity. I have a bunch of questions. Essentially, I just want to clarify with regards to your guidance and all these one-off items. First of all, this one-off staff cost benefit that showed up in the fourth quarter, it is unusual for the fourth quarter. It is significant in the fourth quarter. You have not taken it out, but Is this something that we see every year anyway? So it is not really one-off. Is that a fair comment on this staff benefits?

I'm going to do it one by one. Okay. So, Prem, it is a flow-through in quarter four. It should be normalized in 2026.

so it will not show up in 2026 is that what you mean it will not show up in 2026 yeah okay good secondly the vss costs by the sounds of it since you adjusted 325 million at the ebit level And you, I mean, as per the announcement, 30 million ringgit in Forex losses realized. Therefore, VSS is potentially about 295. Are we expecting a similar number for 2026 or a bigger number for 2026?

Hi Prem. Thank you for asking on the voluntary separation. These are requests which we receive from our employees. As you know, we're moving into the digitalization and our transformation. We are very attentive to this aspiration of the employees. And based on the trend, hence that's why we are predicting there could be possible similar take-up. Hence we are prepared to ensure that we are able to at least accommodate

for some of them okay all right perfect now am i right in thinking that when there is a vss there is typically a payback period for that cost and therefore the actual vss impact in the sector I mean, one year after, if you were to get a two-year payback, then you'd assume half that VSF cost comes back in the form of a lower staff cost. Would that be a fair assumption? Yes. So in 2026, having spent, let's call it 300 million in 2025, we potentially get back about half of that in 2025. lower staff costs in 2026.

Yes, some of the benefit will flow through in the year 2026, but we expected a full payback within circa of maybe two years. Yes, okay, perfect.

Now, with regards to, there's also as part of your announcement, there is this, the post event where you are switching 5G network to your mobile. And as a result, you forfeit something like 127 million ringgit in prepaid fees for 5G access. Do we need to take further provisions for this in 2026? Or has that already been captured in our accounts already?

I think, Prem, I think as we explicitly mentioned in our announcements, this unused prepaid capacity will need to be provisioned in 2020.

Okay, so you will need to provide. And in your guidance for 2026, is this $127 million part of the Adjusted EBIT or the underlying EBIT because it's all getting very confusing what you're putting in and taking out. So if your baseline EBIT guidance for 2026 is $2.0 billion, is that after taking into account this $127 million or not?

Yes, Prem.

So it's already captured that 2.0 guidance includes what is essentially 300 million of VSS, 127 million of 5G-related forfeits. Anything else that is one-off in nature that is being guided for in that 2026 guidance?

And I think we discussed a bit on the separations. It is actually based on request. What we only have is actually 100-year grant. So that get emulates and actually incorporated part of our 2026 guidance. So, yeah, those are the items. Thank you.

All right. I'll leave it there for now. Thank you.

Thanks, Graham. Isaac, you're up next. Go ahead.

Hi, everybody. I have some questions. I'll just focus on the manpower cost itself. I think if I compare today's and I look at the trend for the past 10 years, the manpower cost as a part of the revenue has always been hovering around 20% to 22%. Well, the number of staff strength has shrunk quite very significantly compared to 10 years ago. So I was just trying to understand, I mean, what happened? I mean, we are seeing more than 10,000 declines in the staff strength, and yet manpower cost as part of revenue is still quite sticky at 20% to 22%. That's question number one. Number two is also related to manpower, but why don't we just take this first?

Thank you for the question, Isaac. So one of the main reason is because of the, even though we are able to optimize the manpower, but there will always be increase in salary on your per annum basis and also recurring salary adjustment as and when the interval comes. So that kind of like push it up again one way or another.

All right. Number two is on the ESS expectations for 2026. is there a reason why this okay so do you approve all the applications uh for 2025 or there was some application that's not approved that's why you expect to come in in 2026. and we're just trying to understand i mean beyond 26 about 27 28 what should we be looking at in terms of where do you want to go in terms of your sub counts and in terms of your manpower cost for that matter

Well, of course, we can see quite a rapid trend for 2025, but most of it is attributed to early retirement. So we could foresee it would taper down over the years for the early retirement, right? And that's where we expected at least the trend would taper down. But since this year, I mean, since last year, we noted that there's quite a request, a significant request for separation, yeah? for career transition, for early retirement. And for us, we take the liberty to approve all these requirements, requests. And as I said earlier, we can foresee the trend to at least taper down. But that's what we are expecting. Perhaps the trend could be almost similar for this year. And we are prepared for that.

All right, just I think one more question before I pass it to someone. So now that you are transitioning to the U Mobile, so when is the transition supposed to start? And in terms of the annual savings, is there any numbers that we can hear? Is that more of the cost? Is that more of the efficiency like on this one? Any guidance on that would be very helpful. Thank you.

So we have initiated the process by issuing a notice of termination. Since it's a process, it will be a gradual phasing out of our subscribers from DNB to your mobile. So we anticipate it will be completed by end of the year, hopefully by quarter four this year. where it will be fully cut over if all is being delivered according to plan. And with respect to the saving, yes, there will be, as per the disclosure in Bursa as well, we anticipated that there will be a saving in this near term with respect to the commercial.

So in terms of the unused amount, so by the end of the year, would it be lower than what it was shared? Or that was the, I mean, so the 121 million, as you continue to use it throughout this year, will then that be lower by the end of the year? How should we look at that?

No, not necessarily, Isaac. Because the capacity can be carried over throughout the contract tenure.

Okay. All right. Thank you.

Thank you. Thank you, Isaac. Isaac, up next, Paige, go ahead and unmute yourself.

Hi, and thank you for the opportunity for questions. I apologize for kind of doubling down on this, but I want to talk further about the EBIT guidance. Can you give EBIT guidance on an underlying basis? Like, how do I understand it from the 2.4 into next year? And then how do I think about it building on the adjustments for which I understand is the 5G forfeits, the VSS? But like on an underlying basis, can we just get a clear number on that, please?

We expected it to be similar to the current guidance page, yeah.

So to clarify, underlying EBIT guidance for next year would be in line with the $2.4 billion for this year, is that correct?

Yes, for the underlying, correct.

And then you would expect that, I mean, obviously we're expecting some revenue growth, so we're just expecting cost growth in line with revenue growth.

Exactly. So there will be some growth in terms of our IT applications and some other licensing as well, which we can see that the trend is rising in the market.

Okay, wonderful. Thank you.

Thank you so much. And you're back again, Luis, for round two. Go ahead.

Yeah, just two housekeeping questions, please. Are we expecting copper sales again this year and going into the long term? Any guidance on how much inventory you still have to sell? And second is just to nail down that the fair value gains on the tech fund, Those are all done already so that we won't see that in the 2026 hundreds.

I believe you will not see the tech fund for 2026. That one I can confirm. But for the copper sales, as you know, we are ramping up the recovery of this copper to mitigate the case of cable theft as well. So it is in our best interest to speed it up and we have started off this year. So you can expect the same trend for next year.

Okay. Thank you.

Thank you for that. Up next, we have Mun Chen. Go ahead and unmute yourself.

Yeah, hi. I just have one question. Actually, what's the main reason for you to switch from this D&B to U Mobile?

Thank you for the question. I think for Telecom Malaysia, for the announcement of the government for the dual 5G network, so we have run through a process of acquiring what would be the most competitive in the tender process. So the outcome is what we have announced today. I hope that will clarify.

Sorry, just maybe just a follow-up. So, does that mean that you should be enjoying a better terms under this EU mobile as compared to D&B?

Yeah, I mean, for example, as I mentioned earlier in our disclosure as well, we expected to see some benefit within the near term with respect to the rates.

Okay, I see. Okay, thank you.

Okay, thank you for that. Up next, Kylie, thanks for joining us from your, even though you are on maternity leave. Go ahead, Kylie.

Hi, Ising. Thanks for having me as well. I just want to dive in deeper on the DMV access agreement. So, are you subject to other penalties or termination fees from the termination? And for your U-Mobile account, Is it based on actual usage? Is there a minimum capacity offtake or just based on traffic volumes? So that's all for now. I've got another set of questions later. I'll follow up after you answer this set.

We are exercising our rights as per the access agreement on our termination notice. So we don't foresee any penalty as we are merely exercising our rights under the agreement. That's one. What was the question on the paper usage traffic volume?

Oh, right. Is TM subject to a minimum capacity offtake? The reason I ask because that was one of the terms under the DNB agreement. For your mobile agreement, is it the same terms?

As per any typical Moken agreement, there will be a minimum capacity uptake, but the level will be different.

Okay. All right, thanks. Okay, just one more. Yeah, just one more, just on your submarine cable. For Asian Inc., Should we expect material earnings contribution? And what services will you offer that will ride on this cable? Is it mainly managed wavelengths or IRUs? What should we expect?

So, yes, there will be some contribution as one of the cables that we have invested in will be ready this year, which is ALC. The services will be, there are many services, not only IRU, there are bandwidth services, IEPL as well, that we are selling on the international market.

Right. So can I just confirm that dark fiber sales for these international submarine cables are something that TM would not be prioritizing?

Can you repeat the question again?

Oh, right. So the main services that you will offer for your global, for TM Global's customers would just be leased bandwidth, right?

Yes, our submarine cable on bandwidth leasing.

Okay, then that's all. Thank you. I don't have anything else.

Thank you.

Thanks, Kelly. Up next, Azim Faris. Go ahead.

Hi. Can I just get you to recap what is the normalizing item for the third quarter of 2025?

Azim, if I can just help to recap. Actually, there are two items. One is our separation cost and the other one is our forex.

I mean for the third quarter 2025, not the first quarter.

Yeah, correct. Actually, it's the same. Both items, third quarter.

Can I get the number, the amount?

Yeah, majority of the normalizing item in quarter three is actually coming from our VSS and I think they're added actually with our Forex loss in the quarter. Thank you.

Next, my question is about the gain on the pay value, right, for your investment fund. May I know where is it showing up in the balance sheet? Because I see actually there's some decline in the investment per value through P&L. Is that the line that we should look at?

Sorry, Azim, if I can just recap, you would like to clarify where we derive the fair value in the balance sheets, right? Yes. Is that correct? Because there are other gains in our income statement, and that you can see the fair value from the balance sheets category, it will be part of our net, not part of our non-current asset and the investment at fair value through P&L, FDTPL. Thank you.

Yeah, because I think if you compare to the third quarter, third quarter 25, the amount is actually larger.

Sorry, Azim, you are actually breaking up. Can you just repeat that question again?

Yeah, I think I'm looking at the same line, which is the non-current asset, the investment at fair value, right? In the third quarter, the amount is, I think, $250 million. And this first quarter is $107 million. It's actually declining. Am I seeing the right thing?

Sorry, Azim, I'm trying to actually, hopefully I can provide a better clarity because it's actually, it is done over a period, right? So during the quarter, so we have actually revised up. Then when actually the disposal was completely done, then actually, then that's hence the reason why you cannot see the differences. Yeah.

So, meaning there is some disposal on the investment in the fourth quarter, right?

Yeah, correct.

Oh, okay. Magna, what's the value of that?

Sorry, say that again?

The value for the disposal?

We have not disclosed this, but because it's actually one of our long-term technology fund.

Yeah. Okay. Okay.

Okay, thank you very much. Up next, we have Joe. Go ahead, Joe, and unmute yourself. Hi. Hi, everyone. Can you hear me? Yep. Loud and clear?

Yep. all right great um i have three questions from my hands i first i just want to uh reconcile your adjusted part of me with your adjusted ebit in the fourth quarter of 25 so adjusted part of me is 363 medium according to your slides your adjusted ebit is 541 million i just want to know in between these two what are the items that you actually deduct from the giving. Because if I just deduct your interest and your tax, I wouldn't be able to get $363,000. So is there an additional item that you actually deducted to get the part of me? I just took part of me.

Yeah. Thank you, actually. Thank you, Joe. So I think we have actually been mentioning on a couple of items. One is actually our VSS cost. The other one is actually our forex. So taking down to forex, there are also forex on borrowings. And these are all net tax impact. All right. Okay. And only those two items, OREX and operations and borrowings, as well as actually the VSS net tax. Thank you.

Okay. So that will get me to the $541 million EBIT, right? Adjusted EBIT, correct? So if I knock off my tax and I knock off my interest, I will be able to get about $430 million, not 363 meters. So that's why the discrepancy there.

Oh, sorry. I probably should actually, we also actually normalize the one-off gain from our technology fund at the part-time level. Thank you.

all right but that would that would mean you deduct the gains from the technology fund twice isn't it because the 541 million already excluded the gains from the technology fund gain is not actually recognized actually below the debit line the gain from actually our yeah thank you okay okay all right the second question is in regards to gmd so i if maybe you have shared it earlier but uh what was the full year dnb access cost you paid for at 0.25 so we have not actually declared any uh dnb access cost and yeah all right okay But then the last question for me would be as to CAPEX guidance for the year. I think CAPEX has raised from 16% to 18% to 20%. I just want to know where will the increase be coming from.

So our CAPEX, we will remain actually committed to actually continue expand our network capacity and reach. But bulk of the investment also will cover our submarine cable investment.

This CAPEX, does it include the TM Nexera CAPEX?

We don't consolidate at CTM next year.

Thank you. Thank you so much.

That's all the questions. Thank you so much. Joe, thanks a lot for that. Do we have time for maybe one more question from anyone else? Okay, with that, thank you very much everyone for joining us today. And we will see you in the next quarter again. If you have any other questions, please feel free to drop myself or the IR team a line. Thank you very much. Thank you. Thank you very much.