Hong Kong operator SmarTone’s net profit jumped 50 per cent in its fiscal H1 ending 31 December as handset and accessory sales expanded 58 per cent, thanks to huge demand for the iPhone 6.
SmarTone CEO Douglas Li said its “bumper results” were driven by the popularity of the larger-screen iPhone 6 and 6 Plus, which have given the entire industry a boost.
He told Mobile World Live that it’s seen tariffs rising slowly. “Recent tariff increases are beginning to take hold, but requires continuing discipline of all carriers in upgrading existing customers to new tariffs. This is necessary to mitigate rising costs arising from the increase in government imposed spectrum fees.”
Revenue increased 33 per cent to HKD8.67 billion ($1.12 billion), with handset and accessory sales of HKD5.92 billion dwarfing its mobile service revenue, which fell 2 per cent to HKD2.74 billion.
Its profit rose to HKD466.3 million year-on-year and more than doubled from the previous half. EBITDA increased 11 per cent to HKD1.469 billion.
The operator, Hong Kong’s fourth largest mobile player with a 15 per cent market share, attributed the mobile service revenue decline to the migration of customers to SIM-only plans, which lowered ARPU but had little impact on its profitability. It noted that a 25 per cent drop in handset subsidy amortisation more than offset the fall in service revenue.
A 4 per recent rise in subscriber numbers to 1.95 million during the half, the company said, was largely due to the takeup of 3G-speed capped plans.
Postpaid ARPU held steady at HKD293 ($37.80) as the lower-priced 3G-speed plans diluted customer revenue. Excluding those 3G customers, postpaid ARPU increased 3 per cent over the previous half and 1 per cent compared to the same period last year. Average mobile postpaid churn was stable at 1 per cent.
Overall operating expenses rose 2 per cent, while staff cost were up 4 per cent. SmarTone said the lower cost of services provided offset increases in network operating costs, rental, and general administrative expenses.
The operator acquired additional 2.1GHz spectrum and renewed one-third of its existing 2.1GHz spectrum at close to the reserve price at the auction in December.
The renewal of the 2.1GHz spectrum at the new spectrum utilisation fee represents a 36 per cent increase from the existing fee, and together with the additional block of spectrum acquired, will represent an increase in spectrum cost of approximately $50 million per year, said Li.
He said it has nearly completed the refarming of its 2G 900MHz spectrum for 4G. “Use of this low-band frequency has further improved indoor 4G coverage. Rollout of 4G at 2.6GHz has commenced at high traffic locations, and together with the implementation of LTE-Advanced, will provide further improvements in network performance and capacity.”
It reduced its capex guidance for fiscal 2015 from HKD850 million to HKD800 million.