U Mobile inks $567M fiber backhaul deal with TM
U Mobile has chosen Telekom Malaysia (TM) to supply leased fiber backhaul connectivity for its nationwide 5G network in an agreement valued at 2.4 billion Malaysian ringgit (US$567 million) over the next 10 years.
The deal was officially signed in Kuala Lumpur on Monday with Malaysia's Minister of Communications Datuk Fahmi Fadzil attending the ceremony.
Under the agreement, TM will supply U Mobile with a comprehensive suite of backhaul infrastructure services. These services include a fiber leased line access to U Mobile's 5G Radio Access Network (RAN) and data center, as well as leasing of TM Edge facilities for points of interconnect (POIs), and a trunk leased line for inter-regional connectivity.
U Mobile CEO Wong Heang Tuck noted that the company's partnership with TM will accelerate its 5G deployment by using TM's extensive 740,000km fiber infrastructure, the widest fiber backhaul coverage in Malaysia.
"Together with TM and other partners, we are committed to reaching 80% coverage of populated areas within 12 months, while ensuring a superior 5G experience that is highly reliable, supports massive capacity and delivers ultra-fast speeds to benefit enterprises and consumers across Malaysia," Wong said in a statement.
U Mobile was awarded the contract to build Malaysia's second nationwide 5G network in November last year as the government pushed through with its dual 5G network model. The model aims to create healthy competition for Digital Nasional Berhad (DNB), the country's first wholesale 5G network operator.
Two weeks ago, U Mobile announced its exit from the DNB by selling its 16.28% stake in the company to fellow shareholders CelcomDigi, Maxis and YTL for MYR100,000 ($23,113). The sale is expected to close by next week.
Minimal impact on TM's earnings
Industry analysts have reportedly expressed positive views about the latest partnership between U Mobile and TM. However, they noted that TM's earnings will only be minimally impacted by its role as U Mobile's fiber backhaul partner.
Citing projections by TA Research, local news outlet The Star reported that the U Mobile partnership will contribute 1.8% to TM's total annual revenue forecast for fiscal year 2026. The research firm left its earnings forecasts for TM unchanged for FY 2025 through FY 2027.
The report added that UOB Kay Hian Research similarly did not adjust its earnings forecast for TM following the signing of its fiber backhaul agreement with U Mobile. The company predicted that the annual revenue and net profit impact of the partnership on TM is approximately 2% and 1% respectively.
According to The Star, UOBKH Research based its prediction on TM's earlier contract with DNB to supply fiber backhaul services. That contract was valued at approximately MYR2.5 billion ($590.56 million).
On the other hand, CIMB Securities have raised TM’s FY2026-FY2027 core earnings per share (EPS) estimates by 2% to 4%, according to the MalayMail.
CIMB Securities told the news outlet that the U Mobile contract implies TM will generate an average annual revenue of MYR240 million ($56.70 million) once fiber connectivity is fully established. However, the company predicted that TM would generate only MYR100 million ($23.62 million) in revenue in the 2026 fiscal year.
"This is because U Mobile may want to start the fibre backhaul leases closer to the commercial launch of its 5G services in the second half of 2026 to minimize expenses and given that it has prepaid MYR233 million ($55.04 million) for 5G wholesale leases DNB," the research house said.
"Thereafter, we expect TM’s revenue from the contract to climb to MYR230 million ($54.33 million) in FY2027 and to the full MYR240 million per annum from FY2028," it added.
CIMB Securities noted that TM is expected to incur capital expenditures (capex) of MYR430 million ($101.58 million) over the 2026-2027 financial years, representing 18% of the 10-year contract revenue, to roll out fiber backhaul services for Malaysia's second 5G network.
