SmarTone profits drop as price war takes toll

PUBLISHED : Wednesday, 10 February, 1999, 12:00am
UPDATED : Wednesday, 10 February, 1999, 12:00am

Sharp tariff reductions and volatile interest rates dragged down attributable profit at mobile-phone operator SmarTone Telecommunications Holdings by 4 per cent to $480 million for the six months to December compared with the same period of 1997.

The company was also hit by a price war which intensified as its customer base shrank.

Chief executive Hubert Ng Ching-wah said the fierce competition and frequent price battles had hurt the company's top line.

The group would strive to minimise operating costs and cultivate new sources of income, he said.

'It is undeniable that promotions have become more frequent during festivals such as Valentine's Day,' Mr Ng said.

'However, I don't think there is room for further tariff cuts in the long run.' The number of customers, including GSM, PCS and rechargeable SIM card users, had fallen to 512,000 on December 31 last year from 523,000 in June.

There were no rechargeable SIM card users in the first half as the cards were launched in the second half.

Mr Ng said the company had not launched any large-scale promotions for its PCS service division, Extra, formerly known as P-Plus, which was bought in April.

He said the company was focusing on upgrading Extra's network.

'We are now fully geared with a developed network and are very aggressive in promotions and more customers,' Mr Ng said.

To fend off competition, SmarTone reduced tariffs twice during the period by as much as 32 per cent in October.

Average monthly spending per customer slipped to $437 from $547 year on year. However, operating costs improved 8 per cent to $103 per customer.

Mr Ng said interest income decreased by more than one-third to about $55 million in the first half.

He said the company had amassed more than $1 billion in cash, but had not yet finalised any plans for acquisitions.


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