Hong Kong-based Hutchison Telecom reported a 9 per cent increase in profit last year, as a sharp increase in smartphone sales offset a 10 per cent fall in mobile service turnover.

Its profit rose to HKD833 million ($107 million) and its consolidated EBITDA inched up marginally to HKD2.67 billion. Total revenue increased 28 per cent to HKD16.29 billion in 2014, with solid gains from its mobile and fixed businesses.

The operator, which also has mobile operations in Macau, is the third largest mobile operator in Hong Kong with a 25 per cent market share.

An almost 90 per cent jump in mobile hardware revenue fuelled a 35 per cent increase in mobile revenue to HKD12.63 billion. The surge in hardware turnover, which accounted for 63 per cent of total mobile revenue, was driven by strong sales of the iPhone 6.

Mobile service revenue fell 10 per cent to HKD4.64 billion. The operator said the decline was due to increased churn of lower-ARPU customers (2 per cent last year) as it focused on higher-ARPU data-centric customers, which partially offset the positive effect of higher tariffs after the launch of popular handsets in the second half of the year.

The company said the effect of the tariff recovery is expected to be more substantial this year.

Its strategy of targeting higher-ARPU customers led to its customer base in Hong Kong and Macau dropping to 3.2 million from 3.8 million in 2013. Postpaid customers account for 52 per cent of its user base.

Blended postpaid ARPU rose 4 per cent to HKD205 ($26.40) from the first half of 2014. Smart device penetration rose from 61 per cent in 2013 to 65 per cent last year.

Fixed-line revenue rose 6 per cent to HKD4.1 billion, with international and carrier market revenue also increasing 6 per cent and corporate and business revenue growing 11 per cent.

Total operating expenses, excluding cost of inventories sold, dropped 4 per cent to HKD7.22 billion, as a result of what the company said were “continuous stringent cost control and efficiency improvements”.

Total capex decreased 6.4 per cent to HKD1.19 billion, while mobile capex was up 1 per cent to HKD664 million.

Its EBITDA margin increased to 32 per cent from 31 per cent a year ago, mainly due to an improved operating performance of mobile and fixed-line businesses as well as efficient cost management.