[RAM] RAM Ratings affirms TM Tech's sukuk at AAA

RAM Ratings has affirmed the AAA/Stable ratings of TM Technology Services Sdn Bhd’s (TM Tech) following sukuk facilities:



The ratings reflect Telekom Malaysia Berhad’s (TM or the Group) superior credit profile and TM Tech’s integral role as its core operating and earnings entity following an internal reorganisation in 2023. TM Tech, a wholly owned subsidiary of TM, now houses the Group’s core operating businesses and remains its main earnings contributor. Given the high degree of financial and operational integration, RAM assesses TM and TM Tech on a consolidated basis, aligning TM Tech’s sukuk ratings with the Group’s credit standing. While TM’s position as the national fibre infrastructure provider and its government linkages warrant a rating uplift, none has been applied in view of its strong standalone credit profile.

TM leads the retail fixed broadband market, with an estimated 64% market share and 3.22 mil subscribers as at end-March 2026 (end-2024: 3.18 mil), while its average monthly revenue per user was RM132, above that of rated peers. Its business-to-business (under TM One) and carrier-to-carrier segments (led by TM Global) afford earnings diversification, together contributing about half of the Group’s top line. Demand for connectivity and digitalisation is expected to remain favourable, although competition may limit margin expansion. TM continues to expand into adjacent businesses including data centres, electric vehicle charging and solar energy solutions Its joint venture with Singapore Telecommunications Limited’s (Singtel) subsidiary – Nxera My Pte Ltd, to develop a Tier-3 data centre in the Johor–Singapore Special Economic Zone adds longer-term earnings potential, with Phase 1 expected to commence operations in 3Q 2026.

In FY Dec 2025, TM recorded marginally higher revenue of RM11.87 bil, while operating profit before depreciation, interest and tax declined to RM3.9 bil owing to higher staff-related and network costs. Pre-tax profit fell to RM354.9 mil in 1Q FY Dec 2026 despite a higher revenue of RM2.9 bil (+2.9%) due to the write-down of unutilised capacity under Digital Nasional Berhad. Nevertheless, its gearing ratio continued to improve to 0.34 times as at end-March 2026 and funds from operations debt coverage ratio was higher at 1.05 times in FY Dec 2025. TM’s credit metrics are anticipated to remain robust over the next few years despite higher capital expenditure and dividend payout expectations. TM’s capex reached 16.1% of revenue in 2025 and is projected to hit 20% in 2026, while its dividend payout was recently increased to a minimum of 75% of profit after tax and non-controlling interests (PATAMI).

TM has announced plans to exit its 5G access agreement with Digital Nasional Berhad, subject to regulatory approval, and pursue a partnership with U Mobile as part of its cost optimisation strategy. The country’s push toward fiberisation (and 5G) and digitalisation seeks to drive wider technology and connectivity use cases adoption across the telecom landscape. However, high rollout costs, monetisation challenges and uneven adoption rates remain key hurdles.

 

Analytical contacts
Lee Jo Yee
(603) 2708 8261
joyee@ram.com.my

Davinder Kaur Gill
(603) 2708 8220
davinder@ram.com.my

Media contacts
Sakinah Arifin
(603) 2702 8212
sakinah@ram.com.my