Telco

FY26 Outlook: Sustained Mobile Momentum and Upside from Fiber Transformation

• We forecast FY26 sector revenue/ EBITDA growth of 5.8%/7.1% yoy, led by mobile amid continued price-repair execution by MNOs.
• We see fiber asset restructuring as an additional catalyst, aimed at improving FCF, enhancing asset utilization, and unlocking value.
• We maintain an Overweight on the sector, supported by resilient mobile momentum and selective catalysts from ongoing fiber transformation.

FY26: Entering the sustainable yield upcycle phase

We expect MNOs to enter a more rational growth phase post-consolidation in FY26, with lower churn following starter-pack rationalization and further ARPU improvement (following +6.1% qoq lift in 3Q25). We expect price-repair efforts to continue through 4Q25-2026F as operators shift focus from subscriber acquisition to renewal monetization. With data yields still 9-15% below their 3-yr average and Indonesia’s data cost remaining highly affordable, we believe the sector has clear headroom for yield uplift. Meanwhile, upcoming 700 MHz and 2.6 GHz spectrum auctions and rising 5G investment needs should further reinforce pricing discipline in 2026F.

Traffic may moderate amid price repair and FWA adoption

We expect 2H25-2026F to represent a turning point for the industry as MNOs begin to restore data yields through deliberate pricing actions. On the flip side, we expect mobile data traffic growth to ease to ~6% yoy in FY26, reflecting a natural elasticity response as prices normalize. Evidence from India shows a similar pattern, where data consumption remained resilient but grew at a slower pace following tariff adjustments. The introduction of low-cost 5G FWA solutions may also divert some high-bandwidth usage from mobile networks, adding to the moderation in traffic growth.

Entering the fiber restructuring phase

We see MNOs to be pursuing different fiber-restructuring strategies but with a common objective: lowering capital intensity, enhancing network reach, improving cash flow, and unlocking value. TLKM is taking an ecosystem-driven approach by spinning off InfraCo and selling a 20-30% minority stake at 9-12x EV/EBITDA. ISAT is targeting a value-unlocking transaction through the planned sale of a 70% stake in its ~92,000km fiber at an estimated US$1bn (~12.7x EV/EBITDA). Meanwhile, EXCL is progressing toward a full exit from fiber infrastructure following the ServiceCo–InfraCo split of LINK and recent divestments in MORA.

Maintain OW: Mobile-led re-rating with selective fiber catalysts

We maintain Overweight rating on the sector at the current 5.3x EV/EBITDA (+0.4 vs. 5-yr mean) with projected 7.1% EBITDA growth, supported by solid mobile momentum as MNOs prioritize ARPU monetization. Fiber restructuring offers selective catalysts, with ISAT offering tactical upside from potential dividend proceeds, while TLKM presents a more structural opportunity through utilization-driven EBITDA growth over the medium term. Key risks are: renewed price war and pressure on FTTH’s ARPU.

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