Good afternoon, ladies and gentlemen. Welcome to SmarTone Telecommunications Holdings Limited interim result announcement and management presentation for financial year 2023 and 2024. 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. And we have Mr. Vincent Tung, General Manager Finance, with us. The briefing will begin with a slide presentation by Ms. Fiona Lau and Mr. Stephen Chau, followed by a Q&A session. If you would like to ask a question during the Q&A session, please submit your question through the text box under the video screen. Now, may I invite Ms. Lau and Mr. Chau to begin with the presentation, please.
Good afternoon. Welcome to SmarTone's 2024 financial year interim results presentation. For today's presentation, I will first take you through the financial review. After that, Stephen and I will take you through the business review section of the presentation together. After this, I will discuss the outlook of SmarTone and then we'll open up for questions. Overall, SmarTone delivered a set of resilient results despite a challenging operating landscape. Service revenue, excluding MVNO, SMS, and prepaid, was up 3% year-over-year. Our mobile post-paid ARPU also grew 1% to HKD 224. During the period under review, roaming revenue increased 64% year-over-year due to increasing roaming penetration and strong demand for data roaming products. Our SmarTone 5G Home Broadband product continued to perform strongly, with revenue increasing 40% year-over-year and EBITDA rising 80%. 5G penetration continued its steady uptrend and has reached a new high of 38%.
Finally, due to the success of our various enterprise solutions offerings such as SmartHome and Smart Construction, our enterprise solutions revenue registered a 20% growth over the period. First, I'd like to talk about the service revenue. Excluding MVNO, SMS, and prepaid, our revenue has grown 3% year-over-year to HKD 2,039 million. During the period, price competition has been very aggressive and has put pressure on our MVNO market, which is the low-tier market, highly sensitive to price. SMS revenue also declined significantly as many COVID-related SMS services are no longer required. Despite these challenges, our business showed a high level of resilience as service revenue excluding MVNO, SMS, and prepaid, rose by 3%. You notice that including the MVNO, SMS, and prepaid, our service revenue actually dropped by 1%.
If you look at the gap in terms of the difference in our MVNO, SMS, and prepaid, more than half of which comes from SMS. I now provide an update on ARPU customer number and 5G penetration. During the period, ARPU has increased by 1%. As mentioned before, intense market competition has put pressure on local mobile business, particularly on the MVNO business, which is price sensitive. Nonetheless, the growth in our roaming, increasing roaming penetration of our customer base, and strong demand for data roaming, has helped alleviate the pressure on the local ARPU. SmarTone is very fortunate to possess a premium customer base, which is highly loyal and values SmarTone's customer service and superior network. Therefore, despite intense market competition, our customer base still rose by 1% year-over-year. During the same period, 5G penetration rate continued to grow and reached 38% as of December 2023.
As industry 5G penetration increases beyond 40%, competition and price pressure are expected to grow. Nonetheless, through SmarTone's commitment to provide excellent customer service and exceptional network performance, we will be able to maintain ARPU at a premium level as we have done over time. In first half of the year, our roaming revenue was up 64% and reached 86% of the pre-pandemic level. In fact, recovery as a percentage of pre-pandemic was close to 90% in January 2024. This robust uptrend was driven largely by the increasing roaming penetration. Encouragingly, the proportion of customers opting for SmarTone's roaming services have more than doubled compared to pre-pandemic period. Our strong demand for data roaming products also contributed to the robust uptrend. If you look at the bottom chart, recovery reached 86% of pre-pandemic level, and it represents a consistent quarter-over-quarter increase since the resumptions of travel.
If you look at the other growth engine, our 5G Home Broadband business. During the period under review, our 5G Home Broadband business emerged as a material growth driver, as revenue increased 40% and EBITDA increased over 80%, while customer number rose close to 40%. We have launched this product for about two and a half years by now. We would have expected a slower growth. However, if you look at the numbers, year-over-year, quarter-over-quarter, we still maintain a very strong growth, both in terms of revenue and customer number. As this becomes a more scalable business, you notice that our EBITDA has grown even more due to efficiency as well as scale effects. I will now take you through a review on the operating expenses. High inflation in a challenging macro environment continue to put pressure on operating expenses, especially on electricity and labor.
Nonetheless, due to a tight control over costs, we have reduced operating expenses, including staff cost, cell site rental, and backhaul costs. Besides operating expenses, we have also reduced depreciation on the right-of-use assets by 2% through negotiation on the base station rental. So despite the high inflation environment, and despite the fact that we have salary increment, I am pleased to say that we have been able to maintain a very stable service EBITDA margin, with the cost discipline as well as our resilience of our core business. As always, we are committed to maintain a stable level of operating expenses through enhancements in efficiency as well as productivity. In terms of CapEx, the core CapEx is down 14%. As mentioned in our last results announcement, we expect core CapEx to be relatively stable following the peak of 5G investment.
Similarly, our spectrum costs have peaked in 2023 financial year and is expected to decline in the future. We finished the July to December 2023 period in a strong position with net cash standing at HKD 984 million. This places SmarTone in a great position in the current high interest rate environment. Based on this, the Board has declared an interim dividend of HKD 0.145 per share, consistent with last year. Just a quick recap. On the back of intense competition and a challenging economy, we have yet emerged to be a resilient, stable business with resilient and stable results. Service revenue overall has dropped 1%, but excluding SMS, MVNO, and prepaid, that has grown 3%. Our ARPU still stand as the highest in the market.
Our steady customer number proves that we have sticky base of premium customers whom we absolutely treasure, and we do all we can to serve them well. 5G Home Broadband grows 40% year-over-year. Although market share in household is still very low, meaning that we still have a lot of room to grow. Our roaming grows 64% year-over-year. Although this is still below our expectation. If you look at the business sector, we see that the roaming is not yet fully recovered. We expect that to grow more. In terms of CapEx and OpEx, CapEx is down 14%, OpEx is down 3%, and as a result of that, we are able to keep to a 53% service EBITDA margin. That concludes the financial update. We will now move on to the business review. I will first pass on to Stephen to talk about our network.
Thank you, Fiona. I am going to walk through you on the network side. At SmarTone, we pride ourselves in delivering superior 5G coverage and excellent network performance. What does this mean to our customers? From our regular network performance testing, we deliver the best performance in 80% of MTR stations, including all major interchange stations. With our dedicated 850 MHz spectrum, that will enable us to deliver the most consistent and reliable 5G experience during even busy hour when people commuting within MTR. It also means SmarTone delivered outstanding performance while commuting, as we have all 5G coverage in all the tunnels in Hong Kong, and we place dedicated 5G small cells at the most busy public transport interchanges that can serve the need and expectation from our customers.
With aggressive massive MIMO and 5G small cell deployment in the traffic hotspot and utilizing AI and advanced traffic steering capability, we managed to achieve more than 2x data speed compared to other operators during the high traffic events. For example, concert, countdown Fireworks, et c. With our maximum holding on the lowest frequency band, our network actually provides the best indoor coverage, best indoor reception, and the most comprehensive territory-wide 5G coverage, including the high-rise buildings. With this, I hand back to Fiona.
I would like to highlight to you that we have got, yet again, two awards over the last half year. Leading operator in our premium customer market segment. SmarTone is consistently recognized as a company with a superior network, excellent customer service, as well as a top brand of choice. In December 2023, SmarTone received the award for Best 5G Mobile Network Operator by the Communications Association of Hong Kong. The award recognizes our outstanding performance in providing reliable, fast, and innovative 5G network services, superior user experience, as well as our dedication towards advancing the development of 5G technology. In January 2024, SmarTone won the Gold Award of the 2023 Service Talent Award, organized by The Hong Kong Retail Management Association in both supervisory and junior frontline levels. We are the only telco in Hong Kong winning in both categories.
Also, the SmarTone Online Store was the only mobile eShop operator recognized as among the top 10 quality trusted eShop. All these reflect our commitment and outstanding performance in providing exceptional customer experience. I'd also like to talk about some VIP events, which we have put in tremendous effort in doing over the last half year. As you are aware, launching flagship devices are one of the most important events in our industry. I think this is where we build trust and relationship with our longstanding customers. Those of you who are familiar with us know that we work very closely with our device partner. Not only are we enabling our customers to use the device most effectively, we also let them experience the device. We also let them to have the priority in getting these devices.
We have a record high number of our customers getting their preferred device during the first two days of launch. We delivered that with a very seamless store experience. It's all pre-booked, and it's all prepaid. This is one of the best experience our customers that we have delivered over the last many years. In terms of roaming, one of our core customer proposition is exceptional experience. It applies not only to our local mobile services, but also extend to roaming. We always look for ways to deliver the best roaming experience. For instance, we have dedicated teams conducting speed tests in overseas locations. We do this consistently and persistently. We have 24/7 free roaming hotline in case customers need help overseas. We also closely monitor customer feedback to identify ways to improve our service.
Although these network are not owned and maintained and operated by us, we keep our partners very close, in terms of the feedback that our customer get. As a result of that, we believe that our customers have an excellent experience overseas. We also provide tips on how to ensure smooth roaming experience. We understand that we have the widest 5G coverage of all the key roaming destinations. In terms of our 5G Home Broadband, as I talked about, this remains a very material growth driver for SmarTone. We remain the player with the largest market share. We're recognized as the number one best preferred 5G Home Broadband operator. Our subscriber base has continued to grow. We are seeing a growing number of individuals as well as SMEs with existing broadband services subscribing to our 5G Home Broadband.
The revenue and EBITDA has grown, as I talked about. What I think is very promising is that, despite all the growth, our market share is still on a very low single digit, given the vast amount of households who has this broadband needs. So we would put in even more effort in growing this segment. We believe that this is a true incremental to our book of business. If you attend our last results announcement, remember that we talked about enterprise solutions as a new growth driver. You remember that one of the highlights that we want to show you is that we have launched the SmartHome Solution officially this year in collaboration with Sun Hung Kai Properties. I'll pass on to Stephen to talk a little bit more.
Thank you, Fiona. By using the latest technology, integrating with different innovative technology, our SmartHome service actually provides unparalleled convenience and potential for smart living. Utilizing our already pre-installed SD-WAN 5G network, SmartHome platform, and in-wall Wi-Fi 6 network system, homeowners now can enjoy unmatched smart living experience by connecting various plug-and-play smart home devices and using them to customize their lifestyle modes based on, for example, temperature, humidity, and brightness. Users can simply use a mobile phone. They can control different scenarios that they like. Moving forward, we will continue to collaborate with our parent group to grow the smart home market potential. I would also like to conclude my session by discussing some of our ESG initiatives, which we are focused on contributing towards a sustainable future and the society. At SmarTone, we understand the importance of energy efficiency.
By modernizing our base station hardware and software and utilizing the AI-based solution to dynamically adjust power consumption based on traffic pattern, we have delivered an impressive overall energy efficiency improvement of over 30%. Our 5G innovation program brings 5G technology into school campus to nurture students' awareness of environmental protection. For instance, students can enjoy an innovative learning experience through the 5G smart hydroponic planting system, which utilizing multiple sets of 4K cameras and a three series of sensors through our 5G network to enable students to monitor plant on live stream while the AI analyzes water condition, humidity, and temperature. Also, we understand the importance of cybersecurity, which is why we always go to the last mile to protect our customers. Our security product provides comprehensive protection for customers, while scam call blocking, SMS and phishing link filtering, and hacker attack blocking.
In addition, we also keep communicating with our customers on the tips that they can be aware to protect themselves from all these cybercrimes. Recently, we also just launched a service when our servicing staff call to our customer. They can actually, through our SmarTone CARE App, to validate our staff identity to make sure the calls are genuine and trustworthy. We are also among the first operator in Hong Kong to support the government-registered SMS sender ID initiative. Through that, the customer will be for sure the SMS they receive from SmarTone are trustworthy. This, I would like to end my session and pass back to Fiona.
Again, in conclusion, I think the industry is no doubt very challenging, and the competition remains very intense. That put pressure on our service revenue, as you have seen. Yet, we have strong recognition on our excellent service and superior network over the years, and it has translated into a sticky premium customer base and resilient, steady results. We talked about we have two strong growth drivers, 5G Home Broadband. This is the market we will continue to penetrate. Despite a very high growth, we still see lots of opportunity to penetrate into the broadband market, especially in households. Roaming, despite a strong recovery, and the fact that we have managed to double the proportion of our customers opting for our roaming products, hence resulting in very strong revenue recovery.
We still see that there is further growth, especially from our business segments, which has yet to recover in terms of the traveling footprint. These two drivers will continue. Our enterprise solutions, this is an area where we believe eventually will truly bring out the benefits of 5G, but it has yet to take off. Now, in collaboration with our group, we are able to launch SmartHome, as Stephen talked about. We believe that there is real opportunity there. By collaborating with our group, we are able to do this at scale. This is the beginning of the many possibilities we can explore. At the end of the day, we want to go beyond to become not just a connectivity provider, we want to be a trusted partner in our customers' digital life. Thank you.
Thank you, Ms. Lau and Mr. Chau. Now, we will have the Q&A session. Again, please raise your question through the text box right under the video screen. Our management will answer your questions. We will read out the questions. To make the best use of time, similar or repetitive questions will be grouped together for management to answer. [Non-English content]
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Thank you, Fiona. Next question is what is your outlook on costs?
Costs. As I mentioned, as you have noticed from our presentation, we have managed to keep our costs down. This is both from an operating cost perspective across a number of dimensions, including staff costs, including cell site rental, as well as including marketing. I think the fact that we are working under a very challenging landscape means that we have to be very tight in terms of where we spend our money. We will spend it on the most efficient way. We will keep improving our productivity. We believe that our cost level is relatively low compared to a couple of years ago, but we will continue. We believe that there are still opportunities for us to improve on our productivity.
Thank you. The next question is, why did ARPU only increase 1% year-on-year? Given the growth on roaming, does it mean your core ARPU has decreased?
Right. Our ARPU has only increased 1% despite a strong roaming recovery. Again, this is, to a large extent, we are hurt by the highly competitive market in the low-tier segment. That includes the MVNO market. For our own postpaid ARPU, I must say that we are also under immense pressure. If you do the math, you notice that our local mobile postpaid ARPU has also come down by low single digits. This is the market reality, but we will continue with our excellent customer service and exceptional network.
We believe that there are a lot that we can do to cross-sell our service to increase the penetration of our various products, like roaming, 5G Home Broadband, as well as some new propositions that we are looking to roll out. For instance, some cybersecurity protection products, which we hope that we can increase our ARPU, especially among our premium customer base.
Next question is, what is the turnover of 5G Home Broadband?
Our turnover of 5G Home Broadband is relatively stable. What we are seeing is that it has a higher retention rate than our mobile postpaid business. We believe that those who choose our 5G Home Broadband actually have a real reason of doing so. As we mentioned, we provide 5G Home Broadband to a lot of the areas where there is no good quality fiber access or that the price of which that they are paying currently to fixed broadband operators are high. Therefore, we think that we have a real proposition. Increasingly, we are also seeing people adopting two different means of connectivity at home. One is fixed, and the other one could be a 5G Home Broadband, either as a backup or as a segregation between members of the households. We expect that to be a relatively stable business overall.
Next question is, what is SmartHome's margin? I see you have launched SmartHome in collaboration with the Sun Hung Kai Properties Group. Is your plan to solely work with them?
This is a relatively new business. As I mentioned, it has just been launched in December 2023. Obviously, because of the strong relationship we have with our mother group, Sun Hung Kai Group, we want to first pilot these ideas. We are aware that people talked about this segment for a long time, but still it is very early in its adoption stage. Through the collaboration of Sun Hung Kai Group, we want to make it scalable. We want to learn from various experiences, and we also want to get feedback from the actual users. I think with that, then we can look into rolling it out further.
The next question is, what exactly causes profit to drop when sales are growing and OpEx decreasing?
Service revenue has dropped by 1%, if you include the MVNO and prepaid as well as the SMS. Our OpEx has decreased, that is for sure. As I mentioned, we are investing into our enterprise solution business. That has a different economic profile than our other recurring business, and also a different payback period. It is something that we believe are worth investing into. But if you look at our overall numbers, I think our overall profits are still relatively steady despite a very challenging macro environment. [Non-English content]
We will now take the last questions before concluding the briefing today. What is the company's views regarding the excess cash on the balance sheet? Other companies in your peer group have paid special dividends. Is this something that the board is considering? What about buybacks as a way to return capital given the low valuation of the stock?
Thank you for the question. We have, I think over the course of the last three to five years, kept a very steady dividend payout arrangements. We have a strong cash position and I think we need that resilience in terms of in our book to make sure that we can invest where we need to. We want to continue to improve our network. We want to continue investing in areas where we see growth. I talked about enterprise solutions, which is very nascent, and enterprise solutions being in the future, I believe there is enormous opportunities in there. So we will be consistent to what we have done. We have no plan to buy back.
Thank you, Miss Lau. This will conclude today's briefing. Thank you very much for joining us today. Goodbye.