Telekom Malaysian

Assalamualaikum and a very good evening everyone. Welcome to TM2026 First Half Analyst Briefing hosted by our Managing Director and Group CEO, Dato' Ahmad Huzaymi, together with our Group CFO, Encik Ahmad Fairuz. I'm Delano from TM's IR team, and if you're in our distribution list, you'll receive a copy of the analyst briefing presented to you by email earlier. The slides are also available on our IR website under quarterly results and will be shown during this session. Before we begin, I will kindly remind everyone to keep your microphones muted. We'll open the floor for Q&A session after the presentation. Without further ado, I would like to hand over the briefing to Dato' Amar. Over to you, Chief.

Thanks, Delano. Assalamualaikum and a very good evening. Thank you everyone for making the time to attend this briefing. As usual, I will start with an overview of our latest highlight and performance before handing the session over to our Group CFO, Firuz, to elaborate on the financial and operational details. I will be back at the end of the presentation with some concluding remarks before we proceed with the Q&A session. Let me begin by thanking football fans across Malaysia for their tremendous support during the recent FIFA World Cup 2026. We were proud to have jointly brought the excitement of the world's most anticipated sporting event to Malaysians. For TM, this went beyond broadcasting a major sporting event, as it provided an opportunity to enrich our customers' experience. The encouraging response significantly increased the visibility of UniFi TV, strengthening its position as a trusted platform for premium live content and reinforce the value of our broader convergence portfolio. Turning to B2C, our focus remains on strengthening UniFi's convergence proposition and delivering greater value to customers. Through our latest Unify Home Pro campaign, customers can upgrade to faster internet at a more affordable price while assessing a broader range of convergent services including premium content and mobile, all within one ecosystem. We are also seeing encouraging traction in smart home AI solutions, particularly the smart camera introduced under Unify Home Shield earlier this year. This solution provides customers with greater security and peace of mind at home, while extending unified proposition beyond connectivity and creating further growth opportunities within our existing broadband base. For B2B, we continue to build momentum across both core and new core portfolios. Our core connectivity growth is supported by stronger adoption of enterprise solutions, while our new core portfolios are progressing across cloud, cyber security and digital solutions. As demand for secure, nationally hosted digital services grows, TM1 is well positioned to capture these opportunities across enterprise and the public sector. Our strategic collaboration with TNB further opens up opportunities to apply these capabilities into smarter and more sustainable solutions, including the application of AI. We will soon launch the TM Cyber Defence Centre , which will further strengthen our ability to address evolving cyber threats, expanding cybersecurity portfolio, and contribute to Malaysia's broader cyber resilience agenda. For C2C, we are strengthening our international connectivity and data center ecosystem to support growing demand for AI, cloud and data intensive workloads. IPDC Block 2 has been fully taken up, reflecting healthy demand for data center capacity. We also completed the landing of the Asia Link cable in Sedili, Johor, adding another strategic route into TM international connectivity portfolios. Domestically, TM Global continues to reinforce its role as a key 5G backhaul provider with more than 9,500 sites deployed, supporting over 80% of coverage nationwide. Together, this initiative reinforced TM's role as the nation's digital ecosystem orchestrator while advancing our Digital Powerhouse 2030 aspirations. We have now passed the midpoint of the year, and I'm pleased to report that TM continues to sustain a positive revenue trajectory across all our customer segments. So this is driven by continued traction in our convergence offering, enterprise digital solutions, and regional digital infrastructure. Profitability for the first half reflected several non-recurring items that are specific to the period. This includes the $127 million write-off of unutilized prepaid capacity under the current 5G Moken Agreement, which was recognised in the first quarter, and other one-off costs including the FIFA World Cup 2026 forecasting rights. The World Cup investment delivered the visibility and customer engagement I mentioned earlier. The bold and strategic actions taken during the period will strengthen TM's operating efficiency, competitiveness and profitability in the long run. For the quarter under review, profitability improved sequentially, with both EBIT and PATAMI recording a double-digit quarter-on-quarter growth. Reflecting this performance, the Board has declared a second interim dividend of $0.07 per share for the financial year of 2026. So this brings our total dividend for first half 2026 to $0.135 per share, or equivalent to 75% of reported PATAMI, higher than the same period last year. This is in line with our commitment to deliver optimal shareholder value, aligned to our enhanced dividend framework announced recently. We continue to balance disciplined capital management with investment targeted at our growth priorities, while sustainability remains integral to how we run and grow the business. MSCI recently upgraded the TMESG rating to AA from just a single A, and has placed us in the leader category among global telecommunication peers, reinforcing our continued commitment to sustainable growth and long-term value creation. Overall, our second quarter results highlight a clear path forward as we continue to improve the quality of our earnings, maintain disciplined execution across all customer segments, and deliver sustainable returns for all shareholders. This brings us closer to our aspiration to become a digital powerhouse by 2030, while positioning Malaysia as the digital hub for the region. With that, let me now hand over to our Group Chief Financial Officer, Fairoz, whom will take you through the financial performance in greater detail. Fairoz?

Thank you, Datuk. Assalamualaikum and very good afternoon. I will start with an overview of the group's revenue and underlying profitability to provide a clearer view of our operational performance. Revenue for the first half stood at $5.9 billion, growing at 4.8% year-on-year and circa 1% quarter-on-quarter. Top-line improvement was seen across all customer segments, reflecting effective execution and contribution across the group's key customer segments. Our underlying EBIT for the first half of the year stood at RM1.2 billion. This excludes the one-off write-down of unutilised 5G Moken capacity, recognised during the previous quarter, as well as the Group Continued Pre-Hatin Initiative. Nevertheless, the underlying PATAMI was up 7% against the same period last year at RM843 million, on a lower net finance cost following further debt repayments during the year. As Datuk Ammar mentioned earlier, there were other one-off cost items during the period, including content costs for the World Cup broadcast. While these affected reported profitably in the first half, they are temporary in nature. On that basis, normalising for this item gives us a like-for-like underlying EBIT growth of circa 2% year-on-year. Let us now take a closer look at each of our business segments, beginning with our B2C Unify in the next slide. B2C delivered revenue growth of 5.2% year-on-year at $2.9 billion, led by continued momentum in higher value revenue streams, particularly from stronger adoptions of converged lifestyle devices and digital solutions. The unified broadband base held stable at $3.2 million despite the mature and competitive market, indicating a very effective campaign execution. smart home AI solutions continue to gain traction and improve the overall value proposition. Our FIFA World Cup 2026 broadcast drove close to 400,000 additional unified TV app downloads, bringing cumulative download base to circa 1.5 million, giving us a wider base to monetize in the future. All of the above have contributed to 4.8% improvement in our pool at about RM132. The positive performance demonstrates the adaptability of our core connectivity business and our continued ability to deepen customer engagement through bundled broadband, mobile content and smart home offerings, reinforcing unified positions as the only Malaysian convergence champion. In unified business serving MSMEs, we continue to expand relevant digital solutions to help businesses operate more efficiently, strengthen their security and grow their business. Our cloud and cybersecurity solutions are seeing encouraging demand, improving the overall unified revenue mix. The strategic priorities on the right continue to be the focus of B2C. As the market develops, we are increasing our focus on customer quality through expanded convergence offering, higher monetizations, and continued expansion of the B2C ecosystem. Turning to business to business, we saw a steady progress in the first half, with revenue improving circa 2% to $1.36 billion. This is supported by stronger demand and execution across both government and enterprise segment. For the government, GURUS was driven mainly cloud services for national digital initiatives, call center outsourcing for government agency, and including smart services solution for a property management company alongside renewal of key cybersecurity projects. This was complemented by recurring connectivity demand and project renewals to support national strategic projects reflecting the resilience of our core revenue base. These wins indicate continued demand for cloud, digital and cybersecurity solutions across the government sector. Enterprise demand remained healthy with major connectivity contract renewals and a new contract for data services in banking segment alongside continued momentum in data center services. We are also seeing encouraging progress in new core activities, including a notable mobile project, Secure, with a national automotive player leveraging on our M2M mission-to-mission eSIM technology to provide seamless in-vehicle connectivity. We remain on track in transitioning to higher-value new core digital solutions while maintaining our recurring core businesses. Carrier-to-carrier revenue grew 7%, circa 7% year-on-year, to $1.6 billion, driven by sustained momentum across data centres, international data, including our 5G backhaul services. Domestically, our mobile backhaul continues to scale. We now supported more than 12,000 sites, of which more than 80% are our 5G sites. This strengthened our recurring revenue base while supporting the accelerated rollout of Malaysia's second 5G network and growing mobile data demand across Peninsular Malaysia, Sabah and Sarawak. In our fixed wholesale, our HSBA customers are upgrading their bandwidth requirements in line with the growing demand. Our international revenue grew by double digits and two things that drove it. Firstly, our recurring revenue from OTT customer at IPDC alongside sustained hyperscaler demand for international connectivity. Secondly, the regional expansions by hyperscaler also driving demand for cross-border connectivity through managed wavelength and high capacity data services, including our IEPL. For your information, our IPDC Block 2 is now fully taken up 100% with our customer onboarding progressively throughout the year, reflecting healthy demand for our data center offerings. Meanwhile, our AI-ready data center, TM Next Era, remains on schedule to deliver scalable, AI-ready and green infrastructure. The Asia Link Cable has landed in Sedili, Johor and is expected to be ready for service in the first half of 2027, expanding our future international connectivity capacity to support the growing hyperscaler and cross-border data demand. Strategically, we are focused on strengthening Malaysia's position as the digital hub for the region, expanding domestic mobile backhaul, investing in submarine cable alongside cross-border terrestrial network in the Asian region. enabling higher cloud and AI-related workloads. Now let's go over the summary of revenue breakdown in the first six months of 2026, again the same period last year. In the first half 2026, our product recorded positive performance with voice broadly stable. Data revenue increased by circa 5% year-on-year, mainly from mobile backhaul rollout, and higher international connectivity deals. This remains an important growth area for the group, particularly as the demand for network capacity, data traffic, and regional connectivity continues to increase. Internet remains the group's largest revenue contributor, accounting circa 40% of total revenue. On a year-on-year basis, our internet revenue increased by about 20 million on additional 44,000 subscribers. This reflects continued demand for our broadband services and the effectiveness of our cash acquisition and retention efforts. Other revenue categories recorded strongest year-on-year growth of 22% with contributions from bundled service offerings. On a year-on-year basis, voice revenue remained broadly stable, consistent with the maturity of the products and businesses. Overall, the quarter reflects resilient demand across core connectivity businesses, complemented by continued growth in the high-value services such as mobile backhaul and international connectivity, further strengthen the quality and diversification of our revenue portfolio. Turning to our cost performance, total cost came in at approximately $5 billion including depreciation and amortizations and our cost to revenue ratio increased to by 4 percentage points from 81% in the prior year, impacted by strategic initiative, and this also includes largely from our 5G capacity breakdown recognized in the previous quarter. Stripping this out, our underlying cost-to-revenue ratio is approximately 82% compared to the previous year. On a specific cost segment, our direct costs increased 20% year-on-year, mainly reflecting revenue-funded costs, including those supporting our convergence offering and international growth. As for our manpower costs, increased by circa 4% year-on-year, mainly reflecting our perihatan-related costs during the period. On the infrastructure and customer operations, increased about 24%, and we have been telling this a couple of times due to our one-off RM127 million 5G market write-down being the primary driver. Excluding this, the overall cost is flat. With the transition to the second 5G network now completed, we expect to see a more efficient cost structure going forward. Operational costs rose to circa 7%, reflecting comparative movements in the selected cost items. As for depreciation and amortization, increased modestly by 2%, mainly from data center expansion and other investment completed last year. On a quarterly basis, the cost-to-revenue ratio improved by 2%. circa 3% and this reflects a normalized cost base following the prior quarter's one-off items together with better operating leverage from sequential revenue growth. Let's move to the CapEx. For the first half of the year, the group invested circa $560 million or 9% of our revenue and the intensity rose sequentially as investment activity accelerated in the higher revenue project. More than 70% of our first half investment went to revenue generating growth investment, while exceeding our hurdle rate, including fiber access and 5G backhaul, and building data centers, cloud infrastructure, and deploying submarine cable system. We also spent some $100 million for our network modernizations and network and infra modernizations. At 9%, we are tracking below full year guidance and expected catch up in second half of the year. For the group cash flow and financial ratio, the group maintained a very healthy cash generation in the first half of 2026, with operating cash flow of circa $710 million. Our free cash flow improved about 20% year-on-year to $955 million, providing sufficient capacity to fund the expected KPEX in the second half of this year. We ended the period with a healthy cash balance, providing sufficient flexibility to meet operating requirements and sustain our enhanced dividend distribution. Now, let's take a closer look at the financial ratio. Our balance sheets remain resilient, with improvements recorded across all leverage indicators, gross debt to EBITDA, improved to 1 times from 1.2 times and similarly gross debt to equity strengthened to about 0.4 times. The group also maintained a healthy liquidity position with the current ratio more than 1. Looking at our return metrics, the group recorded ROE circa 13.6%, ROE about 7%, and ROIC circa 11%. ROIC continues to accept our WEG, sustaining a positive spread, reinforcing our focus on value-accurative growth. Overall, our strong cash flow generation and healthy balance sheet provide the financial flexibility to execute our strategic priorities while delivering sustainable long-term value for our stakeholders. That concludes the financial and operational highlights, Dato'. And I will now hand back to you. Over to you, Dato'.