MARC Ratings has affirmed its AA+IS rating on EDOTCO Malaysia Sdn Bhd’s RM3.0 billion Islamic Medium-Term Notes Programme with a stable outlook.
The rating affirmation continues to reflect EDOTCO Malaysia and its subsidiaries’ (collectively EDOTCO Malaysia Group) leading position in Malaysia’s telecommunications tower industry and resilient business model, which provides strong cash flow visibility. As the country’s largest independent tower company, the group is well positioned to benefit from sustained growth in mobile data usage, ongoing 5G deployment and government-led digital connectivity initiatives.
As at end-March 2026, EDOTCO Malaysia Group maintained its market leadership with 6,600 towers and 14,933 tenancies. Its tenancy ratio remained healthy at 2.26x, albeit lower than the 2.40x a year earlier, primarily due to tenancy rationalisation arising from a related telco’s network integration and modernisation programme. Cumulatively, 427 tenancies have been decommissioned following the exercise of contractual exit rights. Approximately 1,400 tenancies remain under discussion and within their contractual lock-in periods, with potential resolutions including retention, site swaps, new site rollouts and/or Rights of Use (ROU) arrangements. A substantial number of these tenancies are expected to be resolved in 2026.
Despite the ongoing rationalisation exercise, MARC Ratings notes that the group’s projections conservatively assume approximately 1,700 tenancy decommissions over 2026–2028, partly offset by built-to-suit and co-location additions from 5G network rollouts and expansion, as well as replacement sites. As the projections exclude potential tenancy retention, site swaps and ROU arrangements, they incorporate some buffer against the eventual outcome of the remaining rationalisation exercise.
Financial performance moderated in 2025, with revenue declining 6.9% y-o-y to RM981.3 million, slightly below the projected RM1.03 billion, mainly due to the lower tenancy base. Nevertheless, credit metrics remained strong, supported by an EBITDA margin of 68.4%, EBITDA interest coverage of 8.3x and cash flow from operations (CFO) of RM526.9 million. CFO interest and debt coverage ratios stood at 8.4x and 0.4x, respectively. Revenue remained soft in 1Q2026, declining 3.0% y-o-y to RM220.0 million, partly due to the group’s progressive exit from the managed services business. The remaining 128 managed sites as at 2Q2026 will be phased out upon expiry of the respective contracts. Nevertheless, the EBITDA margin remained robust at 67.3%.
Under the revised projections, revenue is expected to range from RM966.2 million to RM1.04 billion annually over 2026–2029, compared with RM1.08 billion to RM1.16 billion under the previous forecasts. EBITDA margins are projected to remain strong at around 72%, notwithstanding the lower operating base and the larger assumed decommissioning in 2028. Growth prospects remain supported by network expansion by 5G network operators, while potential contributions from JENDELA Phase 2 remain contingent on the final award and project scope.
Borrowings are projected to remain elevated at RM1.2 billion to RM1.3 billion following higher assumed sukuk drawdowns, compared with the previous projection of RM817.6 million by 2029. Nevertheless, leverage is expected to remain manageable, with debt-to-EBITDA and debt-to-equity ratios projected at 1.63x–1.89x and 1.0x–1.1x, respectively. Under MARC Ratings’ sensitised case, which assumes EBITDA margins of about 60% throughout the projection period, debt-to-EBITDA is projected at 1.96x–2.27x, remaining comfortably below the 4.0x covenant threshold and providing substantial headroom over the projection horizon.