SmarTone net profit expected to dip, revenue to rise

With the launch of its 4G network in August last year, SmarTone Telecommunications predicted a big shift in subscriber traffic to its new high-speed mobile service.

Apple's announcement in September last year that SmarTone would be its first 4G network partner in Hong Kong for the technology giant's then newly launched iPhone 5 certainly helped the operator's cause.

SmarTone saw its customer base swell 7 per cent year on year to 1.74 million in the six months to December, with new customers representing about 60 per cent of the subscriptions it signed during that period. Investors, however, are not expected to hear SmarTone report a substantial net profit gain on Wednesday, when it announces earnings for its financial year to June.

In a research note, Barclays said SmarTone would post an annual net profit of HK$889 million, down from HK$1 billion a year earlier. That forecast is 5.7 per cent below a HK$943 million consensus estimate from a Bloomberg poll of analysts.

Stiff local competition, higher handset subsidies and weaker international mobile roaming traffic caused by sluggish global economic activity are expected to have put pressure on SmarTone's profits.

Revenue was projected to reach HK$10.69 billion from HK$9.95 billion a year ago, according to Barclays, with equipment sales contributing HK$4.73 billion and mobile services generating HK$5.96 billion.

Earnings before interest, tax, depreciation and amortisation - a measure of a company's operating profitability - are forecast to stay flat at HK$3 billion from HK$2.99 billion previously.