Kenanga Research has foreseen compelling growth opportunities for Malaysian telcos, driven by the rapid expansion of digital infrastructure across ASEAN.

This is underpinned by investments from hyperscalers, internet giants, content application providers, and co-location (co-lo) data center operators in cloud regions, hyperscale data centers, points-of-presence (PoPs), and edge-caching infrastructure, the research house said in a note on Tuesday.

As ASEAN emerges as a digital infrastructure hotspot, it sees compelling medium-to-long-term growth opportunities from the continued expansion of digital infrastructure across ASEAN.

Key markets such as Singapore, Malaysia, and Thailand continue to attract investments from hyperscalers, internet giants, content application providers (CAPs) and data center operators in the form of cloud regions, hyperscale data centers, PoPs, and edge-caching infrastructure.

“Looking ahead, we expect sustained momentum as providers scale to meet surging demand for cloud computing, content delivery, and artificial intelligence (AI) workloads,

“ASEAN’s cost-competitive advantages—including affordable energy, land availability, water access, and robust connectivity—reinforce its status as a preferred regional digital hub. This is further supported by a rapidly growing digital population and pro-digital government policies,” it said.

Evidently, total maximum power demand from data centers in Johor of Malaysia alone is projected to more than triple beyond FY2025, based on the confirmed pipeline of projects.

In FY25, three new data centers are expected to come online, adding to the existing 18 to bring cumulative maximum demand to 2.8GW.

With another 22 projects in the pipeline (either under construction or with signed energy supply agreements), total maximum demand is expected to surge to 6.4GW, dwarfing the current operational capacity of 485MW.

Moreover, according to Knight Frank, Malaysia attracted $32 billion of digital investments in 2024, far surpassing its Southeast Asian peers.

“Against this backdrop of robust digital investments in Malaysia, we see significant demand for connectivity services that can be broadly categorized into: one-off infrastructure installation and commissioning, and recurring services, including provision of bandwidth and network maintenance,” said Kenanga.

It is noted that digital infrastructure assets require end-to-end, full-circuit connectivity to integrate them into the global digital ecosystem.

While Tier-1 hyperscalers (e.g. Google, Microsoft, Amazon) operate their own global internet protocoal (IP) backbones, Kenanga opined that they still rely on local carriers for international connectivity to ensure network redundancy and resilience.

The reliance is even greater for smaller hyperscalers (e.g. Oracle and Alibaba) which have limited investments in global subsea cables, thus requiring both internet access and backbone capacity.

Due to regulatory constraints and complexities in deploying terrestrial networks, it noted hyperscalers effectively form a captive market in Malaysia as they rely on local telcos for middle- and last-mile connectivity to link their digital assets to internet exchange points, international submarine cables and the global digital ecosystem.

Thus, proxies to hyperscalers’ connectivity needs, providing offerings such as managed wavelength, Indefeasible Right of Use (IRU) agreements, hot standby bandwidth allocation (HSBA), global IP transit, co-location at submarine cable landing stations, and fibre leasing (dark and lit), are expected to benefit.

Meanwhile, the proliferation of hyperscale co-lo data centers in Malaysia is likewise driving strong demand for connectivity among enterprise tenants (e.g. banks, government agencies, multinational corporations [MNCs]).

Based on Knight Frank data, international co-lo providers currently operating large-scale data centers in Johor include: K2 Data Centers (K2): 120MW, Bridge Data Centers (BDC): 126MW, and DayOne: 115MW.

“Looking ahead, these operators have ambitious expansion plans in Malaysia,” said Kenanga.

According to the research house, they require secure, high-speed private connections to link their co-lo data center sites, nationwide branches, and cloud environments.

It also highlighted that both fixed line players and mobile network operators (MNO) offer comprehensive connectivity solutions to fulfil these needs that include metro ethernet, metro private line, IP-VPN, SD-WAN, and cloud onramps will benefit from the trend.

For network deployments, it said that specialist contractors are potential candidates to secure contracts for network design, ducting and trenching, and fibre installation etc.

“We expect earnings contributions from hyperscaler connectivity contracts to materialize from 2026 onwards, coinciding with the ramp-up of cloud regions in Malaysia,” it said.

These contracts typically span 10–20 years, supporting capex recovery and long-term recurring revenues.

Meanwhile, enterprise contract tenures often run three to five years, offering MNOs greater earnings visibility compared to the 1–2-year consumer mobile postpaid plans. 

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