SmarTone’s chairman has warned the company needs to reverse falling revenue and ARPU, despite boosting earnings by 10%.
The company Thursday reported a full-year net profit of 525 million Hong Kong dollars (US$67 million), with revenue up 6% to HK$6.60 billion ($840 million) and earnings before interest and tax (EBIT) 7% higher.
However, most of the revenue growth came from sales of handsets and accessories, which rose 29%.
The other factors in the higher profit were lower spending – with opex down 6% and capex slashed by 21% – along with higher finance income and the impact of a HK$50 million ($6.4 million) amortization write-off last year.
Service revenue across the core mobile and broadband businesses declined 3%, while postpaid ARPU dropped by HK$2 to HK$220.
By comparison, its rivals this year have increased service revenue. Hutchison Telecom hiked service revenue by 6%, mostly due to roaming, while HKT lifted its mobile service sales by 5%.
Chairman Raymond Kwok warned the positive full-year numbers “mask the severity of the challenges we face. Competition in our core consumer postpaid market remained particularly intense.”
Significant room for improvement
“For the long-term health and sustainability of the company, it is imperative for us to reverse the decline of our total services revenue. It is equally important for us to halt the erosion of ARPU,” he said.
He noted that six years since 5G launched, only half of the mobile customer base had upgraded, “leaving significant room for improvement.”
“These are all clear indicators that we need to take actions to substantially strengthen our business.”
Speaking to a results briefing Friday, CEO Fiona Lau issued a measured outlook.
“We do not expect market conditions to become any less demanding,” she said.
Lau said the underlying service revenue was steady, while generating growth from more non-mobile revenue streams, including enterprise solutions and 5G home broadband. Outbound roaming revenue had also grown 6%.
She said SmarTone would continue to make gains “in scaling growth in areas beyond traditional mobile connectivity” and focusing on growing a high-quality customer portfolio “rather than pursuing volume at the expense of value.”
“Our strategy is not to compete on price alone, but to give customers clear and tangible reasons to move to higher value plans.”
