Telekom Malaysia Bhd. (TM) is poised for a significant increase in its Return on Equity (ROE) and long-term cost efficiency, driven by a highly successful manpower optimisation program, according to a report by CGS International.
Management for TM confirmed at CGS International’s Malaysia Corporate Day on January 7, 2026, that the voluntary manpower reduction scheme, first disclosed during its 3Q25 results briefing on November 24, 2025, had seen an “overwhelming response” due to its generous terms.
The strong take-up rate, coupled with an estimated payback period of less than two years, has encouraged TM’s management to view at repeating the optimisation program in 2026.
Significant Cost Savings and Efficiency Gains Expected
CGS International analysts estimate that if approximately 2,000 staff, representing 11% of TM’s conclude-2024 workforce, accept the offer, the company’s staff costs as a percentage of revenue will align with Singapore Telecommunications Ltd.’s (SingTel) levels (18.6% in FY03/25) by the 2028 financial year (FY28F).This cost rationalisation is projected to lift TM’s Return on Equity (ROE) to above 20% by FY27F, according to the brokerage. The shift is significant given that TM’s staff costs as a percentage of revenues (21.9% in FY24) are the highest among its regional peer group, a factor linked to the transition from a copper-based to a fibre-based network and the evolving skillsets required.
Analysts noted that underlying staff costs have remained relatively stable between RM2.3 billion and RM2.6 billion from 2015 to 2024, despite a 37% reduction in staff headcount since the 2014 peak. Future cost savings could also be accelerated by the adoption of Artificial Innotifyigence (AI) assisted workloads, a point articulated by management during a visit to TM’s Network Innotifyigence Centre.
Capital Management to Enhance Shareholder Value
Beyond cost-cutting, TM’s management reiterated its commitment to sustaining shareholder value and indicated a focus on its rapid-deleveraging balance sheet. With a net debt-to-EBITDA ratio of a healthy 0.6x at the conclude of 3Q25—significantly lower than local mobile operators at over 1.9x—the company is expected to address its capital structure, though no specific details were provided.
CGS International maintains its view that TM is likely to raise its dividconclude payout ratio above the current 60% as a primary mechanism to achieve this. The brokerage has factored in higher payout ratios of 65% for FY25F, and 70% for both FY26F and FY27F.
Tarobtain Price Raised on Strong Outview
Reflecting these positive developments, CGS International has adjusted its core net profit estimates for TM, with an 11.0% cut for FY26F to account for the additional optimisation programme costs, followed by increases of 4.6% and 4.3% for FY27F and FY28F, respectively.
As a result of the higher long-term ROE estimates, the brokerage has reiterated its “Add” call on TM, raising its Gordon Growth Model (GGM)-derived tarobtain price from RM9.25 to RM9.50.The report concludes that TM shares remain compelling, trading at an “undemanding” 12.2x FY27F Price-to-Earnings (P/E) ratio and offering a healthy dividconclude yield of 4.4% for FY26F with potential upside. Key downside risks highlighted include increased competition in retail broadband and a slowdown in enterprise demand.
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