CelcomDigi’s Operational Mastery Positions It for Telecom Leadership in Malaysia

CelcomDigi Berhad’s first quarter of FY2025 results underscore a company navigating near-term headwinds with a disciplined focus on operational excellence and strategic execution. While tax expenses surged temporarily, the core business demonstrated resilience through postpaid growth, stabilizing prepaid metrics, and a thriving Home & Fibre segment. With cost savings on track and a shareholder-friendly dividend policy intact, CelcomDigi is positioned to capitalize on structural shifts in Malaysia’s telecom landscape.

Operational Efficiency Through Network Integration
CelcomDigi’s integration of its former Celcom and Digi networks remains its most critical lever for long-term profitability. As of Q1 2025, network integration stood at 80% completion, with six states fully integrated and 28 of 50 IT systems harmonized. This progress is materializing in quantifiable savings: the company reaffirmed its target to achieve RM700–800 million in annualized cost savings by 2027, driven by reduced operational complexity and streamlined infrastructure.

The network overhaul—decommissioning 7,000 redundant base stations while adding 2,000 new sites—is projected to slash network operating costs by RM5.5 billion over three years. Meanwhile, Capex fell 83% year-on-year to RM108 million in Q1, reflecting the transition from capital-intensive expansion to optimization.

The financial impact of these efforts is clear. Excluding one-off merger costs, adjusted EBIT rose 4.0% year-on-year to RM2,797 million, and adjusted PAT surged 11.6% to RM1,748 million in FY2024. Even in Q1 2025, with higher depreciation from integration, the core business grew: postpaid revenue climbed 3.2% to RM1,066 million, fueled by prepaid-to-postpaid conversions and data-heavy convergence plans.

Subscriber Dynamics: A Shift Toward Higher-Value Customers
While prepaid revenue dipped 5.7% year-on-year, the segment’s subscriber base stabilized at 12.98 million, signaling a strategic pivot toward postpaid and enterprise segments. The postpaid base expanded 6.2% to 5.84 million, driven by device contracting and convergence plans. Meanwhile, the Home & Fibre segment exploded, with revenue up 48.1% and subscribers growing 65.3% to 205,000—highlighting demand for fixed wireless access and bundled services.

The total subscriber base grew 190,000 year-on-year to 20.6 million, a testament to CelcomDigi’s ability to retain customers while shifting the mix toward higher-margin segments. This strategy aligns with global telecom trends, where data-centric postpaid and enterprise customers increasingly dominate revenue.

Tax Headwinds: A Transient Challenge, Not a Structural Issue
The tripling of tax expenses in Q1 2025 compared to the prior year was largely due to a prior-period tax provision reversal in 2024, not a permanent increase in tax rates. Despite this, net profit still rose 1.9% to RM384 million, underscoring the robustness of the core business. Management emphasized that tax normalization will occur in subsequent quarters, allowing profitability to reflect operational performance more accurately.

The declaration of a first interim dividend of 3.7 sen per share—tax-exempt under Malaysia’s dividend policy—reinforces the company’s financial health and shareholder focus. With a track record of consistent dividends, CelcomDigi is signaling confidence in its ability to navigate temporary costs and deliver cash returns.

Why Now? The Case for Immediate Investment
CelcomDigi is executing flawlessly on its integration roadmap, a process that typically drags down telecom stocks during the transition phase. Yet the company has already realized:
1. Cost discipline: Capex cuts and network simplification are reducing drag on profits.
2. Revenue diversification: The Home & Fibre segment’s 48% growth and postpaid’s stability create a moat against price competition.
3. Shareholder returns: The dividend declaration aligns with a sustainable payout policy, even amid one-time costs.

Analysts’ Smart Scores reflect this bifurcated view: a Momentum score of 5 highlights growth potential, while Resilience and Dividend scores of 3+ suggest stability. The overall score of 3.2 points to a stock primed to outperform as integration benefits materialize.

Risk Factors & Catalysts
- Near-term risks: Ongoing Capex reductions could strain network expansion, but management has prioritized maintenance over growth spending.
- Catalysts: Full network integration by 2027 will unlock RM800 million in annual savings, while Home & Fibre’s momentum could accelerate as Malaysia’s digital economy expands.

Conclusion: A Telecom Play with Upside
CelcomDigi is a rare telecom stock combining operational execution, structural growth, and shareholder-friendly policies. While tax noise and integration costs may pressure near-term results, the RM700–800 million savings target and postpaid/Home & Fibre tailwinds position the company to deliver 15-20% earnings growth by FY2027.

For investors seeking a leveraged play on Malaysia’s digital transformation—and a dividend-paying stock with margin-expansion potential—CelcomDigi’s valuation multiples are still undemanding. The time to act is now: the integration is 80% done, and the payoff is in sight.

Invest with conviction in the operational mastery of CelcomDigi.