Good afternoon, ladies and gentlemen. Welcome to SmarTone Telecommunications Holdings Limited Interim Results Announcement and Management Presentation for Financial Year 2024- 2025. First, may I introduce you to the executives here with us today. Ms. Fiona Lau, Executive Director and Chief Executive Officer. Mr. Stephen Chau, Executive Director and Chief Technology Officer. Mr. Danny Ho, Chief Financial Officer, newly on board, joined us earlier this month. The briefing will begin with a presentation by our management, followed by Q&A. If you would like to ask a question, please submit your question through the text box. Now, may I invite Ms. Lau to begin the presentation, please.
Good afternoon, and welcome to SmarTone's FY 2025 interim results presentation. For today's presentation, Stephen and I will first take you through our business review, and will pass to Danny on the financial results. During the period, despite intense competition in the market, SmarTone's business performance has remained resilient. Service revenue remained stable at HKD 2,303 million. Within service revenue, roaming revenue has continued to grow, increasing 6% YoY, after enjoying close to full recovery since four to five quarters ago. Our ARPU remains industry leading at HKD 222. 5G ARPU is double that of 4G, while 5G penetration continued its steady increase, reaching 40%. Our two key growth drivers continue to grow strongly. 5G Home Broadband revenue and EBITDA grew 18% and 20% respectively during the period. While the profit contribution of our enterprise solutions business increased by 13%.
Overall, our service EBITDA has increased by 2% year-over-year, and profit after tax increased to HKD 256 million, representing a 4% growth year-over-year. The board has declared an interim dividend of HKD 0.145 per share, consistent with last year. SmarTone continued to deliver strong business performance throughout the period, with sustained growth in customer number. By December 2024, our total customer base reached 2.87 million, marking a 9% YoY increase from a year ago. As mentioned before, our 5G penetration continued to grow steadily and reached 40% as at December 2024. In fact, if we lower the price of 5G, we can easily achieve a much higher 5G penetration rate, but we choose not to do that.
Despite a highly competitive market, our ARPU remained at a largely stable level and maintained its premium position in the industry, reflecting our focus on delivering exceptional network performance and outstanding customer service. 5G ARPU is double that of 4G, underscoring the distinct benefits of 5G in high bandwidth applications like video streaming, gaming, and AI applications. SmarTone is setting the benchmark for roaming performance and customer experience. We are providing customers with an optimal roaming experience by leveraging customer feedback and real-time monitoring of our roaming partners' network performance. In other words, we aim to deliver SmarTone quality for customers even when they are outside of Hong Kong. We do not want to leave our customers' experience only in the hands of our overseas partners. In addition, we understand the importance of immediate and convenient assistance while traveling overseas.
Our SmarTone CARE app now provides a full range of self-serve capabilities, as well as real-time, 24/7 support to customers who are in need. Trustworthiness is key to our brand. We have taken measures to protect our customers from accidental overspend, so they are paying for what they need. In addition, we have enhanced transparency in our roaming charges to strengthen customer confidence in our services. We drive real differentiation by focusing on customer experience, and we proactively collect customer feedback on the roaming experience to identify ways we can improve our service. For every customer, we ask them to rate our roaming service every time they come back to Hong Kong. We are doing all these to ensure that roaming with SmarTone is the preferred choice. In fact, we have substantially increased the proportion of customers who use our own roaming service to 50%.
By enhancing our roaming offerings and user experience, SmarTone has continued to grow its roaming revenue. During the period under review, roaming revenue increased by 6% year-over-year, reaching HKD 317 million in the first half of FY 2025. Our commitment to outstanding roaming experience has led us to a significant rise in customer adoption of our roaming services. As of December 2024, as I mentioned, the proportion of customers utilizing SmarTone's roaming services has grown beyond 50%. This underscores the growing reliance on our customers on SmarTone's seamless roaming connectivity while traveling. The chart at the bottom left shows the recovery of outbound data roaming revenue, which is now at 98%. If you look at only the consumer segment, this number has now reached over 130%.
We are encouraged by this momentum, and we are confident to grow even further as we maintain a high quality of experience at a reasonable price level. On to 5G Home Broadband. A key growth driver is our 5G Home Broadband service, which has experienced consistent growth over the last three years. Our 5G Home Broadband continues to take a leading position in the market with unmatched performance and customer satisfaction. We hold the largest market share, and we are also proud to be the number one best preferred provider, a testament to the customer trust and loyalty. Its success is driven by speed, significantly faster than non-fiber networks, affordability, and the ease of installation.
We have seen particularly strong adoption among newly arrived talents and immigrants in Hong Kong, and it is something we work closely with our Sun Hung Kai Properties Group on in order to ease the settling in. This proven product is ideal for those living in older buildings without fiber assets, talents and immigrants settling into Hong Kong, and those seeking flexible home connectivity options when moving homes. As the first in the market to launch the cutting-edge 5G enabled Wi-Fi 7 home broadband, we aim to deliver a superior whole-home Wi-Fi experience. In fact, Wi-Fi 7 supports a much faster connection. To enhance convenience, we have also introduced a SmarTone Mobile plus broadband bundle to provide customers with a total connectivity both at home and on the go. Our product offering has proven to be very popular, and our customer base increased by 17% during the period.
Enhancing customer satisfaction remains a top priority. To enhance customer experience, we have upgraded our service with a dedicated app that optimizes Wi-Fi connectivity and a 24/7 support hotline. Over the years, SmarTone's 5G Home Broadband has developed into a core profitable business with high growth potential. In the first half of the year, revenue increased by 18% YoY, while EBITDA grew by 20%, highlighting the business' strong growth potential and the benefits of economies of scale. To further accelerate the expansion, we are partnering with our parent company, Sun Hung Kai, to drive broader adoption and to expand further into the smart home solutions. On enterprise solutions, to give you a bit of a background, we established the enterprise solutions business a number of years ago to capture the true potential of 5G, as many enterprises are now embracing the digitalization journey and the adoption of AI.
This is essentially the backbone for a more connected smart city and to support Hong Kong in taking the role of a leading innovation and technology hub. Over the years, we have expanded our portfolio to cater to different industries. Our solutions now include smart home, smart mall, smart hotel, smart property management, smart construction, and smart transport. To capture on the trends such as Hong Kong smart cities development and mega events, our enterprise solutions business is well-positioned to ride on this growing trend. In particular, our smart home solutions achieved significant growth, and we are now expanding beyond the group to serve the broader market as smart living solutions become increasingly essential. Our enterprise solutions business has delivered growth over the years. During the period, the business' profit contribution increased 13% YoY.
In addition to the more established verticals, we expanded into capturing opportunities for mega events and the healthcare sector. Our 5G-Advanced network has demonstrated unmatched performance at large-scale events such as The World Games Series 2024 held at GO PARK. Our superfast ultra-low latency network enabled real-time processing of the Swiss Timing scoring. It also enables video playback and live broadcast, reaching 211 TV channels across 51 countries and five continents. It also provides a seamless connectivity for event attendees managing peak traffic in a crowded location. Our extensive coverage in country parks and outdoor sports leisure sites such as GO PARK offer citizens peace of mind to stay connected while they enjoy nature. In the healthcare sector, SmarTone played an important role transforming hospital connectivity with 5G.
We are collaborating with Princess Margaret Hospital and Gleneagles Hospital Hong Kong to build a 5G public-private hybrid network that will enable industry-specific applications to boost productivity and drive innovation. Over the years, the competitive landscape of the industry has changed, and our customers are now looking for broader suites of products that can address their needs. While mobile connectivity remains a core part of our business, we have strategically branched out to more business lines and grown our revenue streams in the 5G Home Broadband space and the enterprise solution space, which, as you can see, contribute to a substantial share of the profit contribution. Even for roaming, as we all know, IDD costs are naturally diminishing over time.
But the fact that we can deliver 120% of roaming revenue recovery in the consumer segment, inclusive of IDD, means that we have successfully launched products that meet the needs of customers and diversify the revenue into those products. The new growth engines strengthen our resilience in a competitive market and positions us for sustainable growth. As we move forward, we will continue to innovate, and we will continue to expand beyond the traditional connectivity, ensuring that SmarTone stays ahead in the digital era. I shall now pass the time to Stephen to touch upon our network development, AI, and cybersecurity initiatives.
Thank you, Fiona. We are committed to allocate resources towards network investment to continuously enhance our network quality through strategic investments and optimize base station deployment. We maximize network performance, efficiency, and value. With the adoption of AI, we are actually dynamically reallocating resources to ensure seamless experience even in the high traffic areas. During the recent spectrum auction, SmarTone successfully reacquired our exclusive 850 MHz spectrum at 80% lower cost than the previous auction, as well as 100 MHz of the new 6 GHz spectrum. Going forward, we expect the spectrum cost will significantly lower upon renewal. We are very pleased to be the only operator to own the 850 MHz spectrum, which ensure unmatched coverage and exceptional signal penetration. This exclusive spectrum, combined with the 6 GHz spectrum, lays a robust foundation for the evolution of 5G-Advanced and the future 6G mobile networks.
During the period, in the support of Hong Kong government's infrastructure blueprint, we deployed our 3.5 GHz and 4.9 GHz 5G Golden Spectrum across all the key locations such as GO PARK, Kai Tak Sports Park, and 24 of the busiest MTR stations, as well as the third runway system at Hong Kong International Airport. We appreciate the government's recent policy for operators, including permitting us to install the base station in new buildings without rent, and also the proposed subsidies to extend the 5G coverage to rural and remote areas. These policies will undoubtedly aid us in enhancing our network coverage further and contributing to the development of Hong Kong into a smart city.
Furthermore, with the addition of 200 MHz at the 28 GHz band, we have a total of 600 MHz in the millimeter wave, which allow us to provide an ultra-high speed 5G-Advanced network. We have applied it at The World Games Series 2024 at GO PARK , and it works excellent. We also offer the highest spectrum per user in the industry, ensuring the best customer experience everywhere, including all the traffic hotspots. In summary, the level of convenience, reliable coverage, and the superior speed we experience in Hong Kong set a high bar among international cities, underscoring Hong Kong as a leading international hub for innovation and economic growth. Equally important, investment has been made to ensure the network infrastructure interconnects seamlessly with adjacent locations in Greater China, Greater Bay Area, bringing convenience to frequent travelers, enabling further technological exchange between the cities.
As discussed in this slide, as usual, we have consistently demonstrated over the years we remain fully committed to invest into the long-term growth and success of Hong Kong's future. On this slide, I would like to spend a bit of time to walk you through how we adopt AI in our digital transformation journey, where we leverage cutting-edge technology to enhance customer experience, optimize efficiency, and drive innovations. Our strategy is built on four key pillars. First, data is always at the core of our transformation. We harness huge customer data from multiple customer engagement touchpoints to create a 360 view with more than 500 insightful attributes of our customers, enabling us to enhance service quality and efficiency. Second, our customers are at the heart of everything we do, and we use AI-driven solutions to create personalized and meaningful offers to improve customer loyalty.
Internally, we integrate AI power solutions to streamline our development process. We also use AI to enhance cybersecurity protection to safeguard our customers from digital threats. Last, we continue to push the boundary of network innovation with our AI-powered mobile network. By harnessing the power of AI, we can optimize network resources allocation to achieve cost efficiency, and the pilot results have already shown at least 10% improvement. In today's digital landscape, cybersecurity threats are consistently evolving. As part of SmarTone's philosophy of addressing our customers' evolving pain points, we are protecting our users through a comprehensive range of advanced cybersecurity solutions.
One of our key initiatives is Hong Kong's first Staff Verification Code, enabling our customer to verify SmarTone representative when they receive a call by requesting our staff read to the customer a four-digit code, which the customer can check in the SmarTone CARE app or via SMS. If the verification match, then the call is legitimate. Our Guardians of Network Security and network protection services shield customers from SMS fraud and phishing, ensuring a safer mobile experience. Our Data Guard solution provides professional-grade data protection for consumers, while Call Guard identifies and blocks fraudulent calls. Furthermore, our Add-on Numbers service enable a new number to be generated on demand without changing SIM or phone to get calls or messages. We believe this provides both convenience and an extra safety net for customers in dealing with uncertain circumstances.
On top, we have established a dedicated WhatsApp hotline where customers can consult our expert team if they suspect their phone have been hacked or targeted by scams. Finally, we continue to educate customer about the risk of public Wi-Fi and unbranded SIM card, which can expose users to data interception and unauthorized access. From SmarTone, we offer solutions that provide secure, reliable, and protected network, ensuring our customers stay safe online. We are also committed to fostering innovation, community, and sustainability. Here's how we are actually making an impact. We actively support local sports and community initiative. Through our 5G-Advanced network, we are providing seamless connectivity for local sports events and ensuring our Hong Kong team athletes have reliable data roaming service as they compete on the global stage, including the last year, Paris Paralympic game.
Next, we are empowering the younger generation by supporting programs that spark interest in technology and encourage their personal development. By investing in the next generation, we are maturing tomorrow's leaders and innovators. Our environmental protection, we are excited to introduce our recycling program aimed to protect the environment from electronic waste. Under the scheme Live SmarT ∙ Rebirth Our Planet ∙ Together for Change, recycling boxes will be placed in our stores to collect unwanted mobile phones, power banks, charging cables, chargers, and phone cases. All collected items will be sent to a professional recycler for proper processing or turning into resources. Cybersecurity is always a key priority. Our Guardians of Network Security and the network protection services protect customers from SMS fraud and phishing, ensuring a safer mobile experience.
Lastly, staff is always our most important asset. We prioritize our employees and engagement and wellbeing through sport events and wellness programs designed to promote a healthy work-life balance. Together, all these effort showcasing our commitment to creating a brighter, more sustainable future for all. Thank you. I will now pass to Danny for the financial review session. Thanks, Danny.
Thank you, Stephen. Good afternoon, everyone. I will now take you through the financial review. Despite a challenging operating environment, SmarTone has delivered a resilient set of results. Let's take a closer look at our key financial highlights for the period. Our service revenue remains stable at HKD 2,303 million, similar to the same period last year and reflecting our ability to sustain revenue despite intense competition. Service EBITDA increased 2% to HKD 1,253 million, while margin rose from 53%- 54% this period, reflecting our continued focus on value, operational efficiency, and cost management. Total EBITDA was HKD 1,279 million, a 3% increase year-on-year, while EBITDA margin remained stable at 37%.
Reported profit for the period was HKD 257 million, up 4% year-on-year, while underlying profit, excluding one-off items, was HKD 256 million. Without compromising on network quality, core CapEx was reduced by 36% to HKD 122 million, while net cash reached HKD 1,588 million as at 31st December 2024. The board declared an interim dividend of HKD 0.145 per share, consistent with last year. While serving the evolving needs of our customers, we have strategically expanded our revenue streams, and this has helped to strengthen our resilience and unlock growth opportunities. As a result, total service revenue has remained stable. These growth areas include, firstly, roaming revenue that has seen continuous growth in the past three years.
The proportion of customers utilizing SmarTone's roaming services now exceeds 50%, and recovery of outbound data roaming against pre-COVID is now at 98%. Secondly, 5G Home Broadband continues to deliver impressive results, achieving 18% revenue growth alongside a 20% increase in EBITDA. As a leader in the 5G broadband space, SmarTone stands to benefit as an increasing number of households embrace 5G Home Broadband as a viable solution. Its success is driven by its speed, affordability, and ease of installation. We have seen strong adoption, especially among apartment renters and new immigrants. This service enables many Hong Kong residents to enjoy high internet speed, when in the past they struggled with poor Wi-Fi. Thirdly, the profit contribution of our enterprise solutions business has increased by 13% during the period as we expanded our footprint into new sectors.
We are now making significant inroads into the mega events and healthcare sectors by leveraging our 5G technology to provide unparalleled connectivity solutions. Now let's take a look at our operating expenses and EBITDA margin performance. Despite the challenges posed by high inflation, our vigilant cost management and efficiency initiatives have enabled us to reduce operating expenses by 2% year-on-year without compromising on our services or quality, and after investment in core areas. We have reallocated resources to network improvements, customer experiences in key growth areas such as 5G Home Broadband and enterprise solutions. Encouragingly, our EBITDA margin remains stable at 37% despite intensely competitive market. Looking ahead, we remain committed to operate under a highly disciplined, zero-based cost management framework, controlling expenses through operational efficiency and productivity improvement, and again, without compromising on service quality and network investment. Turning to capital investment.
Our core CapEx decreased by 36% year-on-year this period, partly as costs have stabilized following a five-year rollout. In addition, as mentioned earlier, through strategic investment and by leveraging AI technology to optimize resource allocation, we enhanced network performance while minimizing expenditure. Despite this, over the past two years, we have invested more than HKD 200 million to advance our digital transformation and enhance customer experience across all touch points. While we are starting to reap some of the returns from this investment, we will continue to invest in our future growth. Accordingly, depreciation and amortization declined 2% year-on-year, reflecting this careful CapEx management in recent years. This concludes the financial review. I will now pass back to Fiona for the future outlook.
Thank you, Danny. As we conclude, I want to highlight that despite a persistently competitive operating environment, we have delivered a resilient set of financials by expanding our product portfolio and keeping a tight control of operating costs. We are grateful of our premium, loyal base of customers. We undertake a commitment to always maintain a high level of service and superior network. There are further growth opportunities in our 5G Home Broadband, roaming, and enterprise solutions, and we look to expand further into providing products that meet the needs of customers, such as anti-hacking solutions, scam call filtering solutions, as well as educating how our customers can make use of AI in their daily lives. We believe new talents moving to Hong Kong will provide a positive window for us to further expand our customer base.
In collaboration with Sun Hung Kai Properties, we strive to assist as much as possible with their settling into Hong Kong. We believe a world-class 5G network is the backbone to building a world-class smart city. We will continue to invest into our network, because to interconnect seamlessly with GBA and internationally, will be an important pillar for Hong Kong. This ends our presentation today. Thank you.
Now, we will start the Q&A session. Please raise your questions through the text box. We will read out the questions. To make good use of time, we will group similar or repetitive questions together. The first question. Does 5G Home Broadband have further room to grow? How will you grow market share?
Thank you for the question. In the 5G Home Broadband market, we essentially are capturing the home fiber network market, which has approximately a total of 2.3 million households. At this point in time, our penetration is still in single digits percentage point, which means the room to grow is high. We have seen very strong uptake, especially from the mainlanders, immigrants moving to Hong Kong. I think they look for flexible connectivity solution. We also see a great uptake from students or those who are renting apartments. Again, I think the flexibility and the quality of service actually appeal to them as a product. As a result of that, we have seen 18% revenue growth and 20% EBITDA growth in the last period, and we foresee that trend to continue.
Next question. Do you foresee further growth in roaming? How will you grow roaming penetration? Right.
Our roaming has been growing quite substantially ever since the reopening of Hong Kong. In fact, four or five quarters ago, our roaming recovery has already reached over 90%. Over the last period, it is at 98%. We do feel that the growth can continue. We have also increased, quite substantially, the penetration among our customer base who use our roaming product. As I mentioned, right now it is well above 50%. I think this is a testament to the fact that we are tailoring our roaming products to suit the different needs of travelers. Some of them are frequent travelers to GBA. Some of them are occasional leisure traveler. I think they all have different needs for roaming. We will continue to make sure that the quality of the roaming experience is there, and we believe that we can still grow in this domain.
Third question. How will SmarTone seize AI opportunities, and how will AI benefit SmarTone's business?
Thank you for your question. Now, I think regarding AI, this is a very hot topic, especially with DeepSeek recently and ChatGPT in the past. When we look at AI, we are positive. We think that it is very helpful in many areas. For example, if you talk about SmarTone ourselves, in the use of AI, we have many different tests in different areas. In some cases, it is already in use. For example, in customer service, we are using AI so that we can answer customers' questions in a more precise way. For example, some customers ask questions about summaries of products. Then with AI, our colleagues can get key points about products in a faster way, and the answer can be better consolidated. The interpretation and translation can be more accurate.
In product development, we use AI to look at customers' use of products and related data. This is done in a more accurate way, so we can better predict what products will suit customers' needs more. So in relation to customers' degree of satisfaction, I think AI can help enhance it. When it comes to software development, as you know, AI helps coding a lot in terms of day-to-day work. In a pilot, we can see that in developing a software, there is efficiency gain of 30%. So I think we can actually get even more benefits in the days to come. In terms of network, as I said earlier, we have been using AI for some time. In different pilots, we have seen that at least there is 10% or even 20% improvement when we use AI in network resources allocation.
So this is a big benefit. Besides, we can see that in terms of enterprises, more and more customers are interested in AI, especially about how AI can be integrated with 5G. If we look at different domains, for example, just now, Fiona talked about the healthcare segment, and we began to see that there are a lot of interests on how to make use of 5G private network and also AI application, how these can be combined. So I think this is a big trend of development in the future. Besides, we have also talked about smart transport, smart mall. So AI has been used together with our network development to offer a total application. So in the enterprise market, how do we combine AI and 5G so as to develop more domain-specific applications?
Recently, regarding AI and people's knowledge and interest in AI has been higher, so I think this development is going to be faster.
What is the outlook for CapEx?
Thank you for that question. I will take that one. As I mentioned before, we saw that during the period, our CapEx was reduced by 36%. I cannot emphasize enough that that is despite the fact that we have invested over HKD 200 million over the past couple of years into our digital transformation into the customer experience journey, and we continue to do that. For those of us who have traveled abroad, me included, you cannot help but notice the quality of the network that we provide in Hong Kong versus some of the leading cities globally. We offer the highest spectrum per subscriber in Hong Kong. We are extremely proud of the network that we have. We remain committed to investing and maintaining that quality 5G network.
At the same time, we touched upon earlier that we do leverage AI to manage our costs, and increasingly we do so. Bringing that back to the financials, for the full year, we anticipate that the CapEx spend reduction will be in the high teens. I will pass to Stephen maybe to provide some color on the spectrum costs and how that is trending as well.
Yeah, thank you. I think as we said earlier, based on the latest auction, the pricing, we actually envisage on an ongoing basis, the spectrum cost will be substantially lower. I think that is also another point I want to make.
We will now take the last question before concluding the briefing today. Overall, post-pay ARPU seems slow in reflecting the rising 5G penetration and higher 5G ARPU. Why is this so?
Right. I think if you look at the market, it has consistently been quite competitive. ARPU remains under intense competition. As I mentioned, I think our 5G ARPU is twice as high as our 4G ARPU. If you look at our 5G penetration, it is right now at about 40%. Despite that, we are able to maintain a relatively stable ARPU, which means we have chosen to essentially differentiate our 4G and 5G network provisions and quality, as well as the pricing. If we choose to lower our ARPU of 5G, in fact, we can migrate every of our 4G customers into 5G. We do not want to do that. We do believe that that is a true differentiation, and we want to tailor our products to different segments of customers based on their needs.
This will conclude today's briefing. Thank you very much for joining.