MARC Ratings has affirmed its AAAIS/Stable rating on Celcom Networks Sdn Bhd’s (CNSB) Sukuk Murabahah Programme of RM5.0 billion. CNSB is a wholly-owned subsidiary of Celcom Berhad, which, in turn, is entirely owned by CelcomDigi Berhad. CNSB provides network telecommunication (telco) services to the group.
The rating reflects the credit profile of CNSB’s ultimate shareholder, CelcomDigi, given the strong operational and financial linkages within the group. CelcomDigi’s leading position in the domestic telco industry, solid margins, and strong cash flow support the rating, further underpinned by favourable industry prospects. However, rising competition may pressure margins and earnings.
CelcomDigi remains Malaysia’s largest telco, with about 40% market share and 20.4 million subscribers as of end-June 2025, down slightly from 20.6 million in the previous quarter. The decline was driven by a sharp drop in prepaid (-407k), which outweighed growth in postpaid (+75k) and Home & Fibre (+31k). Ongoing initiatives — including competitive plans, device bundling, broader 5G coverage, and service enhancements — are aimed at both attracting new customers and retaining existing ones. However, strong market competition and pricing pressures may temper future growth.
Financial performance in 2024 was broadly in line with expectations. Revenue held steady at RM12.7 billion, while EBITDA declined to RM5.8 billion, with margin narrowing to 45.7% (2023: RM6.1 billion; 48.5%) due to higher operating costs and one-off non-cash charges. In 1H2025, revenue and EBITDA remained steady at RM6.4 billion and RM2.7 billion, respectively. Management is guiding for low single-digit growth in service revenue and EBIT, with stronger gains expected after 2027 as merger synergies materialise.
Liquidity remains strong, supported by ample cash balances and solid cash flow generation. In 1H2025, cash flow from operations (CFO) of RM1.7 billion comfortably covered capex (RM499 million) and dividends (RM879 million). Borrowings stood at RM8.9 billion as of end-June 2025, but cash flow strength should support the current debt load and allow for gradual deleveraging. Leverage metrics remain healthy, with CFO-to-debt at 0.3x and interest coverage at 6.0x.
While the appointment of U Mobile as the second 5G network provider eased concerns over CelcomDigi having to incur significant capex to build its own network, the telco has injected an additional RM116.7 million in shareholder advances into Digital Nasional Berhad (DNB), bringing its total contribution to RM350 million, including RM233 million invested in December 2023 for a 14% stake. These ongoing commitments — and the likelihood of further funding once the 5G arrangement is finalised — could weigh on cash flow despite steady operating performance. It was also reported that all liabilities of DNB will ultimately be borne by its remaining shareholders once the Minister of Finance (Incorporated) completes its divestment, with the government expected to exercise its put option within one month after 12 November 2025, or on a mutually agreed date.