Telekom Malaysian

Assalamualaikum and a very good evening, everyone. Welcome to TM's 2026 first quarter analyst briefing hosted by our managing director and group CEO, Mr. Ahmad Huzaimi, together with our group CFO, Mr. Ahmad Firuz. I'm Zulanul from TM's Investor Relations team. And if you are in our distribution list, you have received a copy of the analyst briefing presentation by email earlier. Slides are also available on the IR website and the quarterly results and will be shown during this session. Before we begin, I would like to kindly remind everyone to keep your microphones muted. We will 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 meeting this time to attend this briefing. I will start with a snapshot of our quarter performance before handing the session to our group CFO, Encik Ammar Firuz. to elaborate on the operational and financial details. I will be back at the end of the presentation with some concluding remarks before we proceed to the Q&A session. Let me start by giving you the lens through which we view this quarter. First, our top line grew across all three clusters, B2C, B2B, and C2C. Group revenue rose 2.9% year-on-year. to RM2.2 billion with fixed broadband subscribers reaching 3.2 million. That breadth of growth matters as it reflects that the strategies we set out at the start of the year are gaining traction in the market. Customers are responding well to our convergence proposition. Government and enterprise customers continue to give trust to TM for our higher value digital solutions propositions at the same time. our international carrier business is benefiting from rising hyperscale demand for regional collectivity. Second, our reported profitability disclosure reflects a one-off transition cost, specifically the write-down related to our current 5G access agreement, following the announcement made in February. Excluding this impact, the underlying business continues to show growth in both Ibis and Potami. That distinction is important, and Firus will take you through the details shortly. Third, we continue to manage capital with discipline. CapEx is at 7.2% of revenue, and we are applying strict discipline to allocate CapEx for our business growth. Our investment remains focused on areas with the clearest long-term sustainable returns, including submarine cables, data centers, network monetization, and the digital platforms that will support the next wave of demand growth. Reflecting our confidence in the business trajectory, the board has declared a first interim dividend of 6.5 cents per share. This is in line with our revised dividend policy of a minimum 75% payout of reported part-time. At 70% this quarter, we are delivering above that threshold. The revised policy reflects our confidence in the sustainability of TM's cash generation and our commitment to delivering consistent and predictable returns to shareholders. Overall, TM enters the rest of 2026 with a clear strategy, a resilient balance sheet, and a strong execution momentum across the organization. Firuz will now take you through the details. Firuz.

Thank you, Chief.

Let me now take you through the underlying picture, because this is where the operational story of the quarter becomes clearer. On this slide, we have normalized our first quarter 2026 performance for three non-recurring items. First is the 5G Moken write-down. Second is our foreign exchange law serves on operations. And last one is the pre-hating contributions. Revenue stands at $2.93 billion, growing at 2.9% year-on-year, and 9.9% quarter-on-quarter decline reflects the typical seasonality of our business. Fourth quarter is always our strongest quarter due to project completions and revenue realizations, particularly in B2B and C2C. This is a pattern we see every year, and the year-on-year comparison is the more meaningful way. Underlying EBIT is at $593.3 million. up 6.3% year-on-year and 9.8% quarter-on-quarter. It represents the true operating performance of the business and it shows that our core operations are not only resilient but growing in profitability despite the cost pressures from device subsidies and mobile access we have absorbed during the quarter. In addition, underlying Patami is at $436.3 million, up by 9.3% year-on-year and 20.1% quarter-on-quarter. The Fatami growth is faster than EBIT, supported by lower net finance costs, with the effective tax rate broadly stable at 23.9%. Let me now walk through each of our consumer segments, starting with our consumer business, Unify. B2C revenue grew 5.1% year-on-year to RM1.6 billion, the strongest year-on-year growth among our three clusters. The quarter-on-quarter movement reflects normal seasonality. Unified IFO rose to RM132, up by circa 4% year-on-year. Our fixed broadband subscriber base reached 3.23 million with 44,000 net ads year-on-year. The conversion rates improved to 39.6 with quarterly uptick accelerating. Quarterly net ads came in at just over 1,000 against a more competitive market backdrop. Our priority remains the quality and stickiness of the base. Four points frame how we are managing this business. The first one, the subscriber base is stabilizing at 3.23 million amid intensifying competition. Second, our convergence strategy continues to gain traction and is supporting our full growth. Third, our device-led strategy is delivering measurable retention with margins managed deliberately. Fourth, our unified business segment is gaining traction in digital solutions, improving the overall revenue mix. The strategic priorities shown on the right reinforce where we are taking the business forward. convergence leadership, smart home adoptions, next generation TV, MSME digital empowerment, and customer experience. Let me now move to our B2B performance. Turning to B2B, a segment rebuilding momentum with growth returning across both government and enterprise this quarter. B2B revenue came in at $672 million, up 0.4% year-on-year. The 11.7% quarter-on-quarter decline reflects the usual seasonality. Fourth quarter is structurally our strongest quarter on project completions and year-end revenue realisation. The year-on-year risk is the meaningful one and the segment has returned to growth. Government led the growth this quarter, underpinned by stronger connectivity demand for both fixed and mobile together with our ICT solution. This was supported by expanded recurring connectivity and continued project delivery across key government accounts with additional contribution from cloud and mobile under national strategic project. Enterprise recovery is anchored by data center and improved recurring services with Nihong Core emerging as the growth engine of the strategic shift. Recent wins illustrate the breadth a cloud offering for a broadcasting customer, ICT solution for a multinational plantation company, and a breakthrough Vision AI deal for an agricultural customer. On the broader new core portfolio, cybersecurity, cloud, and digital services, these represent a modest portion of B2B revenue, but are growing at double digit rates. The mix is still moderate, but the trajectory is what matters. And importantly, These services sit at the higher margin end of our portfolio, particularly cybersecurity and managed cloud. This is where the future margin profile of B2B will come from. The direction travel is clear. We are building momentum on higher quality, more recurring revenue base, with new core driving the strategic shift into the verticals that will define the next phase for growth for B2B segment. C2C revenue came in at $776.6 million up by 2.1% year-on-year. As usual, the 21% quarter-on-quarter decline reflects the seasonality from project completion and capacity realization. On the domestic front, growth was driven by aggressive 5G mobile backhaul rollout. We have now installed more than 8,000 cumulative sites, reinforcing our position as the backbone of Malaysia's mobile network. We also successfully delivered more than 800GB of additional capacity for mobile network operators' point-of-interest-run connectivity and continue to expand as a connectivity partner for high-speed broadband under the TOP2 project. International is where the structural story is most compelling. Data center revenue continues to grow, driven by rising demand from OTG carriers and hyperscalers for digital infrastructure solutions. Dedicated cross-border and DC-to-DC connectivity services now have more than 20 TDPS subscribed, and our submarine cable investment remains on track, supported by strong regional demand and long-term capacity expansion. increasingly the segment that positioned TM as nature's regional hub for region. The combination of submarine cable, cross-border tri-style network and hyper-connected data centers together with our imaging GPU as a service offering for cloud native and AI workloads places us at the center of the regional data economy. In summary, C2C is no longer just a connectivity business. It is becoming the platform layer for regional digital infrastructure and that's where the durable growth will come from. Moving on to the next page, revenue by product. Looking at the product mix, all product categories recorded year-on-year growth except for voice revenue. Data increased by circa 1% year-on-year, mainly contributed by mobile backhaul, revenue following aggressive sites roll-off. Internet remains our largest revenue contributor, $1.12 billion, growing 1% year-on-year. This was achieved amid an increasingly competitive broadband market, supported by continued traction in our convergence bundle strategy. Other revenues strengthened 15% year-on-year, and this was driven by high contributions from growth of ICT and smart services, data center co-location at C2C, and contribution from our bundle service offering. As the previous quarter, voice revenue continued its structural decline, but at a manageable pace. The quarter-on-quarter decline across data, internet, and others primarily reflect seasonality from fourth quarter 2025. Turning to our cost performance, Total operating costs came in at $2.5 billion, up about 8.7% year on year. Cost to revenue rose to 86.3% from 81.7% in the prior year and increased about 4.5% each point. The headline movement is largely explained by the one-off breakdown of our unutilized 5G Moken prepaid capacity. which sit down within infrastructure and customer operation. Scripting this out, our underlying cost-to-revenue ratio is stable at 81.9% compared to the previous quarter. Sorry, compared to the previous year. Let me take you through the main movement. Our direct cost rose about 13% year-on-year in line with our higher conversion and device bundle revenue. This is a deliberate trade-off where we are absorbing higher subsidy costs to lock in contracted customers, higher ARPU customers, and the retention economy supports this. Main power costs declined circa 3% year-on-year, reflecting a better headcount. Infrastructure and customer operation is where you see 51% increase. As I noted earlier, Fagi-Moken write-down is the primary driver. Excluding this, the underlying movement is modest and reflects normal excess cost dynamics. Operational costs rose by 5%, mainly from foreign exchange movement. Depreciation and amortization declined by 2%, in line with our CapEx trend. The cost structure of our business has not deteriorated. The 4.5% increase in cost to revenue is overwhelmingly driven by a single one-off item that we are being transparent about. Excluding this, our underlying cost discipline remains intact. We continue to manage costs rigorously across land power, operational and reposition lines and we expect cost to revenue ratio to normalize as the one-off effect washes out in the subsequent quarters. Moving on to the next slide on CAPEX, CAPEX for the first quarter is circa $212 million, about 7.2% of operating revenue well within our financial year 2026 guidance. Of these, 60% was allocated to access, 20% to core network, and 10% for digital infrastructure with remaining for our support system investment. We continue to exercise strong capital management discipline with more than 80% of our capex is allocated to growth initiatives, including 5G backhaul and fiber expansion to support the future revenue streams and solution the group for demand ahead. As of 13th March, 2026, the group has 2.1 billion ringgit of approved capital commitments for property, plant and equipment. This gave us clear visibility on the second half spending ramp up and support our 18 to 20% full year capex guidance. Let's move to the group cash flow and financial ratio. On cash flow and financial positions, the group continue to maintain a distinct execution and a resilient balance sheet. Operating cash flow improved by $216 million compared to $113 million year-on-year, mainly driven by working capital timing movements during the quarter. While quarterly cash flow can fluctuate due to timing differences, the underlying cash generation of the business remains healthy. We also maintain investment, disciplined investment spending with CapEx remaining within guidance. Free cash flow stayed healthy at $500 million, supporting both our growth investment and shareholders' return. From a balance sheet perspective, our gross debt to EBITDA improved further to 1 times from 1.3 times a year ago, reflecting a stronger balance sheet positioning and continued financial flexibility. On returns, reported ROIC stood at 11.24%, continuing to exceed our cost of capital circa 9.3%. This indicates that the group continues to create positive economic value from its investment, excluding the one-off write-down related to the unutilized 5G remote capacity underlying ROIC would have been higher at 12%. Overall, we remain focused on discipline capital allocation, sustainable returns, and maintaining balance sheet strength while continuing to invest in long-term growth opportunities. That concludes the financial and operational highlights. I will now hand back the session to my Managing Director and GCO in KMR. Over to you, Richie. Thank you, Fairoosh. Let me close where I began. In B2C, We have strengthened our position as Malaysia's convergence champion, anchored by higher content uptake, meaningful traction from our mobile bundle campaigns, our exclusive HBO content and unified TV streaming offerings, deepening customer engagement, while our integrated quad-play proposition continues to strengthen customer stickiness and long-term value retention. In B2B, we are sustaining recovery momentum, supported by ongoing demand for internet and ICT services, while accelerating the shift towards a higher value digital solution in cloud, managed services, cybersecurity and also AI. We are not just defending our position in government and enterprise, we are evolving into their digital partner. And in C2C, we are scaling as the regional hub for the region, capturing rising hardware scalability demand, deepening our submarine cable footprint, and building the platform layer for DC expansion, AI workloads, and GPU as a service. This is where Malaysia's relevance to the regional data economy would be defined, and TM intends to lead it. On guidance, we are on track on our revenue, EBIT and also JPEGs. While the external environment remains dynamic, Geopolitical developments and competitive intensity continue to require close attention, and we remain proactive in managing this development. Our outlook remains measured and forward-looking, supported by the resilience of our domestic business, disciplined execution, and continued demand for digital connectivity and infrastructure. I am sure you have heard about the charges on TMUSA former employees. I want to reiterate what we have released in our Bursa announcement yesterday. TM had initiated our own investigation pursuant to suspicion of misconduct involving the individual concerned. These individuals were terminated upon establishment of prima facie earlier this year. TM has engaged external legal counsel, forensic specialists and continued to cooperate fully with the relevant US authorities. Based on our current assessment, there is no material disruption to operations nor material financial impact to the group. TM has also strengthened internal controls and governance measures following the incident. We cannot deliberate further as the case is currently under purview of the US Department of Justice. On another note, 2026 marks a significant milestone for TM. It's our 80th anniversary. 80 years ago, we began as the connector of a younger nation. Today, we stand as the digital infrastructure of Malaysia and increasingly of the region. The platform on which homes connect, businesses transform, and the next generation of AI and cloud workloads will run. 80 years has taught us that enduring companies are not built in a single quarter or even a single decade. They are built through consistent execution, disciplined investment, and the conviction to make deliberate choices. Even when environment is uncertain, that is the TM we've always been, and that is the TM we continue to build for the years ahead.