SmarTone profit up 36% on mobile data demand

Fiona Chau
05 Sep 2012

SmarTone said Tuesday its net profit surged 36% year-on-year to HK$1.02 billion ($131 million) for the year ended June, thanks to strong demand for mobile data services.

The Hong Kong mobile operator grew its total revenue by 50% to HK$9.952 billion, while mobile service revenue rose 24% to HK$5.71 billion, driven by the growth in customer number and increase in ARPU.

SmarTone's customer base grew 7% to 1.64 million, of which 69% were higher-spending postpaid customers. APRU rose 11% to HK$277.

Yet handset subsidizes spiked by nearly 67% to HK$1.02 billion, as the company tried to acquire more customers amid the city’s highly competitive mobile market. Average postpaid mobile churn rate rose 1.3%, with the increase largely confined to lower-ARPU customers.

“Hong Kong mobile market has always been competitive. In the last year the competition has been intensified and this has been partly reflected in our customer takeup, which has seen a slowdown compared to a year earlier,” Douglas Li, CEO of SmarTone, said at an analysts meeting.

Li anticipated that there will be a major shift of traffic to its 4G network, as more 4G handsets with much better performance reach the market this year.

That said, SmarTone has raised its capex budget substantially to HK$1.2 billion for the financial year 2012/2013, up over 28% from HK$936 million last year, as the company continues to expand its LTE network coverage and to enhance network quality in order to accommodate the anticipated shift of traffic.

“There will be a massive swing to 4G when the right products and services come along. That’s what we expect to happen. That’s why we need to build up 4G in a big way to absorb that traffic” Li said.

The company, which launched commercial LTE 1800 services last week, has also introduced a lower priced (HK$68), speed capped 3G plan to capture subscribers at the low-budget end of the market, while marketing 4G as a premium service.

Li expected that the new strategy would have a positive contribution to the company’s revenue, though it might affect APRU.

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