SmarTone H1 net down 32% on rising costs

Staff writer
17 Feb 2014

Hong Kong mobile carrier SmarTone saw its first half net profit tumble 32% as network operating and depreciation costs surged.

Net profit in the six months ended December 31 fell to HK$311 million ($40 million) from the same period a year earlier, while EBITDA fell 12% to HK$1.35 billion.

But total revenue grew 11% to HK$6.53 billion, thanks to a 24% rise in handset and accessory sales.

"Increased network operating costs from strongly rising data usage, higher depreciation from completion of the 4G network, and reduced handset margins affected profitability," SmarTone said.

Service revenue for the period decreased 3% to HK$2.79 billion, due to lower revenue from local mobile service amid tough competition, a fall in roaming revenue and the continuing scale-down of the company's wireless fixed broadband business.

SmarTone's mobile customer base rose 8% to 1.87 million during the period, of which 40% were using 4G LTE service. ARPU, however, shrunk 11% to HK$243. This is due to a shift by customers from handset-bundled plans to SIM-only price plans, and the increased acquisition of new customers with lower-priced 3G-speed-capped plans, SmarTone chief executive Douglas Li said.

“Handset models launched in the period have not met with the strong response as in the past and many customers have adopted SIM-only price plans, at lower price points, when their handset-bundled plans expired," Li explained.

Looking ahead, SmarTone will focus on cost control, in the face of general inflation and the costs of more data customers. The operator expected mobile data usage will continue to rise as customers come to rely on ever more broadband-delivered services and applications.

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