SmarTone targets 3G sector as fall in roaming business hits profits

As SmarTone's roaming business declines and interim net profit slips, it looks to boost its business in the 3G network sector to make up

PUBLISHED : Tuesday, 19 February, 2013, 12:00am
UPDATED : Tuesday, 19 February, 2013, 4:58am

SmarTone Telecommunications, which saw its interim net profit decline by 3 per cent, aims to target more lower-spending 3G network users to offset falling roaming revenue and stiff price competition in Hong Kong's 4G mobile market.

"We're targeting customer segments previously underserved by SmarTone," chief executive Douglas Li said yesterday.

SmarTone, a subsidiary of Sun Hung Kai Properties, posted net profit for the six months ended December 31 of HK$459.4 million, down from HK$475.3 million a year earlier. It attributed the fall in profit to a significant reduction in international mobile roaming traffic caused by sluggish global economic activity. In addition, the costs of depreciation and handset subsidy amortisation rose significantly during the period, the company said.

Despite those factors, SmarTone's interim revenue grew 16 per cent to HK$5.89 billion from HK$5.06 billion the previous year. Earnings before interest, tax, depreciation, and amortisation (ebitda), a measure of a company's operating profitability, climbed 9.2 per cent to HK$1.54 billion from HK$1.41 billion, despite local competitors cutting their prices on high-speed 4G mobile services and lower roaming revenue.

SmarTone's total customer base swelled 7 per cent to 1.74 million at the end of December. "About 60 per cent of subscriptions during the period represented new customers, while 20 per cent were customers upgrading from lower-priced plans," Li said.

SmarTone managed to boost its market share on healthy demand from subscribers on its lower-priced, speed-capped, integrated 3G voice and data plan, Li said.

4G networks provide theoretical internet download speeds of up to 100 megabits per second, while the fastest existing 3G networks run at 42Mbps.

He said he expected the international roaming business to remain "challenging" because of global economic uncertainty. The drop in roaming traffic resulted in a HK$76 million decrease in SmarTone's ebitda during the period.

SmarTone's share price rose 1.32 per cent to close at HK$13.78 yesterday.

Macquarie Equities Research had earlier forecast that for the full financial year to June 30, SmarTone's revenue would reach HK$13.02 billion.