Net profit at Hong Kong’s fourth largest operator SmarTone jumped 74 per cent to HKD935 million ($120.6 million) for its fiscal year ending 30 June as demand for high-end smartphones pushed handset sales up 67 per cent.

Revenue expanded 41 per cent to HKD18.66 billion and service revenue inched up 3 per cent to HKD5.56 billion. But the surge in handset and accessory sales to HKD13.09 billion more than made up for the steady service growth. Equipment turnover accounted for 70 per cent of revenue compared to 59 per cent in fiscal 2014.

Service revenue net of handset subsidy amortisation was up 7 per cent over the previous year, reflecting healthy growth in underlying service revenue, said SmarTone executive director Patrick Chan.

But he admitted that growth from handsets in the next fiscal year would unlikely be as profitable as last year, which he said was a “bonus year”. “We’re expecting the iPhone 6S to still be very popular, but not as strong as last year.”

SmarTone’s customer base rose 4 per cent to 1.96 million year-on-year, two-thirds of which are postpaid. Postpaid ARPU fell 4 per cent to HKD294 (about $38).

Chan attributed the decline to its push to migrate customers off handset bundles and onto SIM-only plans, which of course has lowered handset subsidies. He noted, however, that the migration hasn’t made much impact on ARPU or margins, but has positively affected service revenue.

Roaming revenue fell by a high single-digit figure and now accounts for about 15 per cent of service revenue. Chan said the downwards trend in roaming turnover, therefore, won’t severely impact its top-line. Data roaming increased during the year but wasn’t enough to offset the decline in voice roaming.

Network rollout
Capex was down 26 per cent to HKD689 million from fiscal 2014. SmarTone CTO Stephen Chau, who took over as interim CEO today, credited the fall to the completion of its 900MHz network rollout last year and push for better pricing from its vendors. He said it would continue expanding its LTE-Advanced network, which has been enabled over 75 per cent of its network, while pilot deployment has begun on tri-band carrier aggregation to increase spectral efficiency.

Its capex guidance for next year is HKD650 million to HKD700 million. Despite high spectrum costs and moderate inflation, the company forecasts steady growth in service revenue. But Chan said the market “still needs a tariff adjustment”.

The company will need to spend HKD2.3 billion next August to renew its 2.1GHz spectrum holding.

The board raised its dividend payout to 75 per cent of its net profit, which increased its full-year dividend 94 per cent to HKD0.60. Chan noted that higher payout percentage would be the “new normal for the foreseeable future”.

This week sees SmarTone CEO Douglas Li step down after almost two decades at the helm (over two stints). Read our exclusive interview with him here.