SmarTone rings up HK$1b profit, boosts spending for 4G development

SmarTone Telecommunications broke through the HK$1 billion mark in net profit in its fiscal year to June.

It said yesterday that it would increase capital spending to support the anticipated growth in high-speed 4G mobile network users.

Chief executive Douglas Li said the carrier expected "a major shift in traffic to our 4G network" as more advanced 4G smartphones became widely available in the market from the next quarter.

SmarTone, a Sun Hung Kai Properties subsidiary, saw net profit rise 36 per cent to HK$1.02 billion from HK$754 million on improved service revenue brought by higher data usage and more subscribers.

Total revenue jumped 50 per cent to HK$9.95 billion from HK$6.63 billion. Earnings before interest, tax, depreciation and amortisation - a measure of a company's operating profitability - climbed 39 per cent to HK$2.99 billion from HK$2.15 billion.

Its total customer base swelled 6 per cent to 1.64 million, of whom 69 per cent are higher-spending post-paid subscribers. Service revenue was up 24 per cent to HK$5.72 billion, while handset and accessory sales grew 109 per cent to HK$4.23 billion.

"What was the biggest surprise in SmarTone's results was the growth in capital expenditure," said Lisa Soh, an analyst at Macquarie Capital Securities.

Capital spending hit HK$936 million, higher than the firm's previous guidance of between HK$750 million and HK$800 million.

Li said capital spending this fiscal year was expected to reach HK$1.2 billion, which will be used to further expand 4G network coverage and services.

SmarTone launched its 4G network last month, the last of the city's major mobile network operators to do so.

On 4G networks, users can get theoretical internet download speeds of up to 100 megabits per second. The fastest existing 3G networks run at 42Mbps.

Li said the expected growth in SmarTone's 4G mobile network users would free up capacity in its 3G network, enabling the carrier to start marketing to previously untapped lower-spending users.