SmarTone FY17 profit falls 16%

Hong Kong mobile operator SmarTone has reported a 16% decline in group net profit for the financial year ending in June to HK$672 million ($858.8 million) as a result of falling revenue amid a challenging competitive environment.

Service revenue fell 6% to HK$5.16 billion as handset revenue declined due to increased migration to SIM only plans, as well as weakness in the prepaid segment and falling voice roaming revenues.

But without the effect of handset subsidy amortisation, underlying postpaid service revenue remained flat and local mobile postpaid service revenue increased by 2%. Roaming revenue declined due to ongoing OTT substitution, but its percentage of service revenue remained 14%.

SmarTone lifted its local customer base by 4% to 2.06 million. The operator reported a churn rate of 1% and mobile postpaid ARPU of $285.

As a result of the operator’s operational efficiency efforts, opex remained flat while capex fell by 14%.

“While it is clear that the environment has been challenging and our profitability has been impacted, we have taken proactive measures to reposition our business for future growth,” SmarTone CEO Anna Yip said.

“Active measures are in place to drive productivity improvements and we are taking a long-term view to investing in our business. Our focus remains on delivering the best experience for our customers.”

But the operator warned it expects the challenging operating environment to continue, due to factors including higher spectrum costs, ongoing declines in voice roaming revenues, lower handset costs and severe competitive pressures.

As a result, SmarTone is focused on improving productivity and accelerating growth of new revenue sources, such as IoT and M2M applications, AI and ICT services.