Telekom Malaysia Berhad ($TM)

Good evening, everyone. Welcome to TM's 2026 First Quarter Analyst Briefing, hosted by our Managing Director and Group CEO, Encik Amar Huzaimi, together with our group CFO, Encik Ahmad Fairus. I'm Delano 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 e-mail 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 Amar Huzaimi. Over to you, Chief.

Thanks, Deno. [Foreign Language] and a very good evening. Thank you, everyone, for meeting the time to attend this briefing. I will start with a step-up of our quarter performance before handing the session to our group CFO, Encik Ahmad Fairus 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 3 clusters, B2C, B2B and C2C. Group revenue rose 2.9% year-on-year to RM 2.9 billion with 6 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 hyperscaler demand for regional connectivity. Second, our reported profitability this quarter 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 EBIT and PATAMI. That distinction is important, and Fairus 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 remain 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 RM 0.065 per share. This is in line with our revised dividend policy of a minimum 75% payout of reported PATAMI. At 78% this quarter, we are delivering above that threshold. The revised policy reflects our confidence in the sustainability of TM cash generation and our commitment to delivering consistent and predictable returns to shareholders. Overall, TM enters the rest of '26 with a clear strategy, a resilient balance sheet and a strong execution momentum across the organization. Fairus will now take you through the details. Fairus?

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 3 nonrecurring items. First is the 5G Morgan write-down. Second is our foreign exchange losses on operations, and last one is the pre-hedging contributions. Revenue stands at RM 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 rate. Underlying EBIT is at RM 593.3 million, up 6.3% year-on-year and 9.8% quarter-on-quarter. It represented 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 RM 436.3 million, up by 9.3% year-on-year and 20.1% quarter-on-quarter. The PATAMI growth is faster than EBIT, supported by lower net finance cost with the effective tax rate broadly stable at 23.9%. Let me now walk through each of our customer segment, starting with our consumer business, Unify. B2C revenue grew 5.1% year-on-year to RM 1.6 billion, strongest year-on-year growth among our 3 clusters. The quarter-on-quarter movement reflects normal seasonality. Unifi ARPU rose to RM 132, up by circa 4% year-on-year. Our fixed broadband subscriber base reached 3.23 million with 44,000 net adds year-on-year. The convergence rates improved to 39.6% with quarterly uptick accelerating. Quarterly net adds 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 ARPU 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 in force where we are taking the business, 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 RM 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 realizations. The year-on-year read 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 and the national strategic project. Enterprise recovery is anchored by data center and improved recurring services with new core imaging as the growth engine of the strategic shift. Recent wins illustrate the breadth, a cloud offering for our 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 portions 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're 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 RM 776.6 million, up by 2.1% year-on-year. As usual, the 21% quarter-on-quarter decline reflects the seasonality from project completions and capacity realizations. 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 mobile network. We also successfully delivered more than 800 gig of additional capacity for mobile network operators point of interest on connectivity and continue to expand as the connectivity partner for high-speed broadband under the POP 2 project. International is where the structured story is most compelling. Data center revenue continues to grow, driven by rising demand from OTT players and hyperscalers for digital infrastructure solutions. Dedicated cross-border and DC to DC connectivity services now have more than 20 TPS subscribed. And our submarine cable investment remain on track, supported by global -- supported by strong original demand and long-term capacity expansion. C2C is increasingly the segment that position TM as Malaysia's digital hub for region. The combination of submarine cable, cross-border network and hyperconnected 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 not only just a connectivity business. It is becoming the platform layer for original digital infrastructure, and that is 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 rollout. Internet remains our largest revenue contributor, RM 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 revenue strengthened 15% year-on-year, and this was driven by high contribution from growth of ICT and smart services, data center colocation at C2C and contribution from our bundled service offering. As the previous quarter voice revenue continued structural decline, but at a manageable pace. The quarter-on-quarter declines across data, Internet and others primarily reflect seasonality from fourth quarter 2025. Turning to our cost performance. Total operating costs came in at RM 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 percentage -- 4.5 percentage points. The headline movement is largely explained by the one-off write-down of our unutilized 5G Morgan prepaid capacity. We sit down within infrastructure and customer operation. Stripping 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 costs rose about 13% year-on-year, in line with higher conversion and device bundle revenue. This is a deliberate trade-off, where we are absorbing higher subsidy costs to log-in contracted customer, high ARPU customer and the retention economic support this. Main power cost declined circa 3% year-on-year, reflecting a better head count. Infrastructure and customer operation is where you see 51% increase. As I noted earlier, 5G write-down is the primary driver. Excluding these, the underlying movement is modest and reflects normal excess cost dynamic. 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 percentage point increase in cost to revenue is overwhelmingly driven by a single one-off item that we have been transparent about. Excluding this, our underlying cost discipline remains intact. We continue to manage costs rigorously across manpower operational and depreciation lines. And we expect cost to revenue ratio to normalize as the one-off effect washes out in subsequent quarters. Moving on to the next slide on CapEx. CapEx For the first quarter is circa RM 212 million, about 7.2% of operating revenue, well within our financial year 2026 guidance. Of this, 60% was allocated to excess, 20% to core network and 10% for digital infrastructure with remaining to -- for our support system investment. We continue to access our strong capital management discipline with more than 80% of our CapEx is allocated to growth initiatives, including 5G backhaul and fiber expansion to support fiber revenue streams and position the group for demand ahead. As of 31st March 2026, the group has RM 2.1 billion of approved capital commitments for property, plant and equipment. This give 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 continued to maintain a disciplined execution and a resilient balance sheet. Operating cash flow improved by RM 216 million compared to RM 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 maintained investment -- disciplined investment spending with CapEx remaining within guidance. Free cash flow stayed healthy at RM 500 million, supporting both our growth investment and shareholders' return. From a balance sheet perspective, our gross debt to EBITDA improved further to 1x from 1.3x 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 -- sorry, 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 capacity, underlying ROIC would have been higher at 12%. Overall, we remain focused on disciplined 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 and Chairman. Over to you, Chief.

Thank you, Fairus. Let me close where I began. In -- we have strengthened our position as Malaysia's convergence champion, anchored by higher content uptick, meaningful traction from our mobile bundle campaigns. Our exclusive HBO content and unified TV streaming offerings are deepening customer engagement, while our integrated quarterly 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 the digital partner. And in C2C, we are scaling as the regional hub for the region, capturing rising hyperscalers 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 is relevant to the regional data economy will be defined, and TM intends to lead it. On guidance, we are on track on our revenue, EBIT and also CapEx. While the external environment remains dynamic, geopolitical development 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'm sure you have heard about the charges on TM 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, pharmacy specialists and continue to cooperate fully with the relevant U.S. authorities. Based on our current assessment, there is no material disruption to operations, no material financial impact to the group. TM has also strengthened internal controls and governance measures following the incident. We cannot deliver it further as the case is currently under purview of the U.S. Department of Justice. On another note, 2026 marked a significant milestone for TM. It's our 80th Anniversary. 80 years ago, we began as the connector of a younger mission. Today, we stand as a 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 loads 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 has always been, and that is the TM continue to build for the years ahead. Thank you. I will now hand over back to Delano.

Thank you, Chairman and Fairus. We will now begin with the Q&A session.