SmarTone Telecommunications Holdings has warned investors that it expects to post a 35 per cent to 40 per cent year-on-year decline in net profit for the year to June, which showed how lethargic the city's mobile market has been in the past 12 months. In its regulatory filing yesterday, SmarTone said the downswing was mainly caused by "lower handset business profits, and an increase in operating expenses and depreciation" from its 4G mobile network build-out. [The downswing was mainly caused by] lower handset business profits SMARTONE TELECOMMUNICATIONS The company's share price fell 1.95 per cent to close at HK$11.04 on news of the profit warning. Its recent fiscal year earnings will be announced next month. SmarTone chief executive Douglas Li pointed to a bearish industry outlook in February, after the company recorded a 32 per cent year-on-year decrease in net profit to HK$311 million for the six months to December. Li said the industry awaited the arrival of a new "hero" smartphone, such as Apple's iPhone with a bigger screen, which could give a much-needed boost to the city's mobile market. That sentiment was echoed on Tuesday by Hutchison Telecommunications Hong Kong chief executive Peter Wong King-fai, who said new smart devices to be launched later this year "are expected to bring new excitement and growth back to an otherwise stagnant mobile market". A Barclays report yesterday said the recent merger between HKT and CSL New World Mobility should bring "higher pricing power and better cost controls" to the mobile network operators. "We believe this should then drive brighter prospects for SmarTone," said lead author Anand Ramachandran, Barclays' head of telecommunications, internet and media equity research for Asia, excluding Japan.