Good afternoon, ladies and gentlemen. Welcome to SmarTone Telecommunications Holdings Limited Annual Results Announcement and Management Presentation for financial year 2022 and 2023. First, may I introduce you to the executives here with us today, Mr. Allen Fung, Deputy Chairman and Executive Director. Ms. Fiona Lau, Executive Director and Chief Executive Officer. Mr. Stephen Chau, Executive Director and Chief Technology Officer. Mr. Vincent Tung, General Manager, Finance. The briefing will begin with a slide presentation by Ms. Fiona Lau and Mr. Stephen Chau, followed by 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. Thank you for joining us on a typhoon day. I am pleased to be presenting to you together with Allen, Stephen, and Vincent, our annual results for the financial year 2022 and 2023. Overall, despite a challenging macro environment and continued intense competition, our mobile business has been very resilient. The service revenue has grown 1% year-over-year. Underlying profit has grown 4% year-over-year to HKD 470 million, supported by promising roaming recovery with a 49% growth, especially in the second half of the financial year, as well as continued growth in our 5G home broadband business. You see that it delivers a 100% growth. Despite continued price competition, our post-pay ARPU has been steadily growing to HKD 224. It represents a 5% growth year-over-year. We have benefited by continued 5G penetration, which is now up to 37%.
I also want to highlight that enterprise solutions have seen double-digit growth, although this is still a small part of our business today. We see strong growth potential, which I will talk more about later. Over the years, SmarTone has a proven track record for delivering a very stable business, thanks to a diversified set of products and services across our retail and business markets, and a solid base of loyal customers. Year-over-year, we have seen a 1% service revenue growth. During the year, our roaming revenue registered 49% growth to HKD 424 million for the full year. Most of the growth comes from the second half of the year, where we see a more significant uptick in travel footprint. This trend has accelerated in the last couple months.
As you can see, the roaming revenue increased from 47% to 55% from June to December, but now has reached 83% versus pre-COVID level as of July. While personal travel recovered quickly, especially in the second half of the year, business travel has experienced a somewhat slower recovery. But we do see an uptrend month-over-month as business activities increase. Our 5G home broadband business continued to perform strongly during the year. Over the last two and a half years, it has proven to be a successful addition to our portfolio of products, and it is a truly incremental revenue stream. Our customer numbers, I am very happy to report, has reached over 100,000, and the revenue for last year has increased by 100%.
This is something we are only able to do because of 5G, and it also opens up a new avenue for us to tap into the household market. We are confident that the growth will continue. In terms of our core base, the mobile post-pay ARPU has been resilient. It has grown 5% year-over-year to HKD 224. Intense price competition continues, and we are working hard to sustain this by giving customers a differentiated network and surface experience. You see that 5G penetration is still growing nicely and steadily up to 37%, which is a nine percentage point higher from last year. The penetration is roughly in line with the market, but still relatively low. We believe that this will continue to go up as the requirements on speed and data usage go up. This will grow together with the use cases and the ecosystem of 5G technologies.
On the cost side, we see challenges coming from high electricity costs and labor cost. While some savings were achieved from cell site rental, which is reflected under the depreciation on the right-to-use assets. Our principle is that we will keep a tight cost control and manage the overall cost level. We will invest responsibly into key growth areas such as 5G home broadband and enterprise solutions. We aim to keep an overall stable operating expense level, but better resource allocation as well as operational efficiency improvements. CapEx has peaked last year and has started to come down as the bulk of our 5G network investment has already been made. We expect a steady level going forward. Likewise, looking at our Spectrum Utilization Fees schedule, it has peaked at HKD 542 million in the past financial year, and looking ahead, it will be kept roughly at a steady level.
On the balance sheet, we maintain a very strong balance sheet. During the financial year, we have generated HKD 1.6 billion net cash from our operating activities, which represents a 17% growth year-over-year. Therefore, this brings us to our net cash position to HKD 1.1 billion. It gives us a very solid foundation to run our business and invest in where we see growth, and to improve and evolve our platform that suits the needs of our customers. Out of abundance of caution and prudence in reflecting the latest market situation, we have, in this financial year, made the provision of the potential loss of certain debt securities that the company has intended to held to maturity. Such provision will not affect our cash flow and will not affect the dividend payout.
Supported by a healthy balance sheet and a resilient business operation, the board proposed a final dividend of HKD 17.05, representing a 75% payout ratio of the profit attributable to equity holders. This brings the full-year dividend to HKD 0.32 per share. Stephen and I will now begin the business review section. I would like to start by saying that our network is really core to our business, and SmarTone is renowned for our exceptional network performance. I am pleased to announce that SmarTone has recently been recognized by OpenSignal as a leader among Hong Kong mobile operators in both coverage and consistency. OpenSignal is the leading global provider of independent insights and data integrating network experience and market performance across converged, wireless, and broadband operators. In addition, other influential media has also recognized the wide coverage and stability of our network.
We are extremely proud of the recognition and will continue to invest in our network to deliver an even better experience for our customers. With this, I'd like to pass to Stephen, our CTO, to give you an update on the innovation and the network enhancement that we've been working on. Stephen, please.
Thank you, Fiona. Good afternoon, everybody. We are of course very pleased to receive this recognition and endorsement from both global and local industrial bodies. I would say it's always SmarTone DNA to provide best-in-class, customer-centric, all-around user experience to meet people's daily need and, of course, their demand for ever-increasing good quality of communication service. Over the years, we continue to invest in new innovations to lead the mobile industry to a new standard with our world-class 5G network. We have embarked on a new initiative leveraging on AI, machine learning, and utilizing the big network data analytic. This implementation enable us to better understand customer experience and utilize their experience and scoring in our network performance platform, which will be able to help us to optimize our service and performance. We've introduced AI power automated network optimization tools.
By analyzing customer demands and usage pattern, we can allocate our network resources to optimize network coverage and capacity automatically. It will ensure our network meet the specific needs of our customers, providing them with a seamless experience across the network. We also implement smart real-time network resources management. This unique dynamic resources allocation mechanism enable us to prioritize and allocate network resources in real time, ensuring an optimal customer experience across different platforms and applications. Whether it is streaming, gaming, or browsing, our network will automatically deliver the best experience. We have also taken a proactive approach to service experience assurance. By capturing every single individual user experience in some of our mostly used applications, we've gained really useful insight into the performance and identify the potential issues and address them before they actually impact our customers.
Our goal is actually to ensure every single customer enjoy consistent and superior network experience, both locally and also when they travel abroad. Next, please. I would say in SmarTone, we aim at providing exceptional network performance where it matters most for our customers. We understand that staying connected is essential as a daily life as people navigate their busy life and rely on seamless connectivity during their daily commute. To address this, we have taken the lead and deployed our exclusive 850 MHz frequency band to expand our network capacity in all of the most busiest stations and interchanges in MTR. We've also expanded our 5G coverage to encompass all highways and tunnels. I would say, in fact, we are the only operator in Hong Kong to achieve this, allowing customers to enjoy seamless connectivity wherever their journey, whenever they take.
Recently, we also partnered with KMB, Kowloon Motor Bus, to provide 5G Wi-Fi on buses, enhancing convenience and keeping people connected. As social life has resumed normal post-COVID, people are embracing outdoor gatherings and concerts. The demand of instant sharing creates the need of much quicker network capacity. SmarTone has placed at a critical location on all these 5G small cells in all these events to ensure sufficient network capacity and also a very smooth user experience. As well, people are increasingly going outdoor while engaging in activities like hiking, cycling, and exploring in all the country parks. Our widest coverage, utilizing our available mid-band or low-band frequencies, will enable seamless connectivities during their outdoor activities, especially during an emergency situation.
Having customer centricity in mind and taking the customer feedback seriously, we are we would continue to lead the market in offering the best network performance in people's ever-increasing expectations. With this, I would like to end my part of the presentation and hand back to Fiona. Thank you.
Thank you, Stephen. Building on our exceptional network as well as our excellent customer engagement over the years, we're recognized by Kantar, which is a global independent brand agency, as a top 10 brand in Hong Kong, alongside other leading brands in the other industries. I'm happy to report that we are the only mobile operator receiving such recognition among the top 10 brands. In the report, it says, quote, "30 years on, SmarTone still leads the market in consumer fundamentals such as customer experience, convenience, and trust." This speaks well into our mission that we commit ourselves to and the customer-first mindset that we embrace. If you look at our roaming products, I talked about it as a growth driver. In preparation for the travel resumption, we have taken, over the last nine months, a number of initiatives that improve our customer experience.
We relied not only on what our roaming partners tell us, but we actually sent our staff to the popular travel destinations to test the network and to study how we can improve on-the-ground experience for our users. We also offer 24/7 free of charge hotline for our customers using our products. We want to make it easy and want to make it better. In addition to the network, we have also listened to our customers' feedback, and we're now able to convert many customers who, in the past, will only use other ways for roaming, such as Wi-Fi egg or prepaid cards. What we see is that, given cybersecurity is of increasing concern, and that convenience and reliability of being connected is really critical when you travel. We have launched a series of products, for instance, multi-day pass.
With that, we are able to convert quite a number of travelers to switch to our own roaming products. On 5G home broadband, I am pleased to say that our service is growing from strength to strength. We have, by now, accumulated quite a substantial mass of customers who like our service. Despite the fact that COVID has ended and work from home has largely ended in Hong Kong, we are still seeing very steady growth. We continue to improve in terms of our products and our service. We have launched applications, which make it easy for our customers to install and find the best locations at their home, for which to install the Wi-Fi. Today, we are on a typhoon session. Even I am using this home 5G broadband product. I think it gives a lot of people the peace of mind as a complementary Wi-Fi connectivity solution.
For those who liv e in buildings where there is no fiber access, this is a much better product and much cheaper. Next, I will provide a brief update on our smart home solution. I talked about enterprise solutions as a fast-growing segment, and we see a lot of potential in that. We are partnering with Sun Hung Kai Properties, our parent company, to offer a smart home solution which allows residents to control their home through their mobile devices, such as lighting, air condition, and curtains. These can be extended to other applications they see fit within their households. While we originally offer this to the Sun Hung Kai Properties group, we want to build a scalable platform and want to extend it to other developers as well.
Going forward, we want to make sure that with this and with our 5G home broadband product, we will be able to come up with a true home proposition to tap into the household market, which we were not able to do before the 5G connectivity. On the Smart Construction. Also through our enterprise business solutions, Smart Construction offer a number of solutions that actually tackle the pain points of construction workers at the construction sites. The solution offers various features such as Smart Helmet and Smart Health Station to enhance worker safety while enhancing operational efficiency through SmartWorks, which is a one-stop integrated platform for construction companies. Through our longstanding partnership with our parent company, we are able to tap into many businesses opportunities, especially when the solution was first launched in 2019.
I am pleased to say that, thanks to this, we have been able to build a strong brand around this, and we are known for this Smart Construction proposition that we are offering. As of now, Smart Construction is now protecting workers at over 100 construction sites, bridges and tunnels, drainage and sewage systems and will continue to grow this ecosystem. We think there is a lot of potential in this area. Finally, on ESG, we would like to highlight some initiatives that bring about our care for the community. Number 1, on cybersecurity. In recent years, there is an increasing trend of cybersecurity and crime impacting society as a whole. In response to that, SmarTone has set up a cybersecurity training program for our staff and cybersecurity awareness education for our customers as well.
Through our own app, we want to make it easy for our customers to distinguish whether a message set to be sent by SmarTone, whether or not it is really SmarTone. We want to make it easy for them by making use of our app that is available on their mobile devices. Number 2, on energy efficiency initiatives. Through the modernization of our network equipment and application of AI-based network solutions, which Stephen talked about, we have improved energy consumption efficiency by double-digit percentage in the past year. Number 3, connecting the community. We have undertaken a number of initiatives, including supporting our senior citizen home safety associations, elderly locating and health monitoring services, as well as hosting smartphone workshops and SIM Card Real-Name Registration talks to the elderly. We will continue to work on our ESG initiatives.
Caring for the community is core to what we do and speaks well to our vision and mission. With that, I would like to conclude. All in all, we are seeing a very resilient core business. While competition remains intense, I will work with my team to critically review what we are really good at and where we see long-term growth potential, and invest our resources and our effort in them. The short-term challenges on competition, cost, and inflation are no surprises, and these are just factors we need to tackle with caution and with prudence. We will be taking the opportunity to simplify our platform. This will not only alleviate our operational burden, but also allow us to provide a much better customer experience. The key growth drivers are solid, and they fit well into our core proposition.
Again, on roaming, many of our premium customer base in both retail and business segments are frequent travelers. We will continue to improve and evolve our product sets that fit their needs and to provide them with the convenience and reliability by using the built-in roaming products. We believe growth will come not just from the return of travel, but a higher penetration of the roaming usage on our platform. On 5G home broadband, it goes without saying that being a mobile-only operator, this new proposition made possible by 5G fast connectivity, brings true incremental value to our business, and we will continue to grow that. While we will maintain tight cost control with a solid and healthy balance sheet, we will not be shy to invest in key growth areas such as enterprise solutions and tap into the smart home segment, which we have started.
Being a premium brand, we will also continue to invest in various digital initiatives to bring better customer experience overall. With that, it concludes our presentation for our financial year results. Thank you.
Thank you, Ms. Lau and Mr. Chau. Now, we will have the Q&A session. Please raise your question through the text box right under the video screen. Our management will answer your questions. To make the best use of time, similar or repetitive questions will be grouped together for management to answer, and we will read out the questions. Now here comes the first question: How much has roaming recovered over the past few months?
As you can see, our roaming recovery is on a very healthy trajectory. Not only has travel resumed, especially among the retail segments, our penetration has also increased. We want to offer our customers an affordable, easy to use, and convenient roaming product. As a result of that, our roaming recovery has resumed close to 90% of pre-COVID. We see that on the business side, it is a little bit slower. I think that ties to the overall business activities. But on a month-on-month basis, we do see that it is growing. We are confident that in the coming year, on a full year basis, there will be continued growth.
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[Non-English content] Fiona. Next question, with the pandemic has ended, do you expect there is any impact on the growth of 5G home broadband?
As I mentioned, I think what we are seeing in the last two and a half years is a very steady increase in our 5G home broadband business. This is really possible because of the fast 5G connectivity. Even after the return to office and school, we still see steady growth. I think that is because there is a lot of demand among those who live in buildings where there is no fiber access, in the more remote areas, or people who simply want an additional or complementary Wi-Fi backup solution at home. I think it has proven to be quite a strong proposition. The fact that we only have a mobile business means that we will invest resourcefully into growing the business.
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[Non-English content] Mr. Tung. Next question is, how is your deployment of network slicing so far, and any applications? How advanced you are in deploying 5G standalone?
Thank you, Dominic. Maybe I can try to give you a quick answer on this. Our network already SA ready. We are ready to promote any sort of SA-enabled applications. But so far, one of the obstacles is the device. The device is still not yet really mature to support a smooth end-to-end SA environment. So, right now, we are doing a few pilots with different industries. For example, in the live broadcasting, how to guarantee different video quality, different performance on uploading a high demand video transmission. This is, I would say, quite encouraging and quite successful. We can slice the network and provide an end-to-end sort of QoS. But so far, still very early stage. As I said, we are working on the whole ecosystem, not just on the network, but also on the device.
I will say by next year, when more and more SA-enabled devices are ready, with also the new features on the, for example, the URLLC, that will enable more sort of opportunity and also real industrial trial. Hopefully, we can figure out how to go to market in a much bigger scale. Hope this will answer your question.
Thank you, Mr. Chau. The next question is: The market competition is very intense, and there is no killer app on 5G so far. Do you think ARPU will drop in the coming future?
As I mentioned, I think the market has been very intense. There is a lot of price competition, and we, at the high end of the market, obviously face immense pressure in terms of our ARPU. However, as you can see, over the many years, we are able to maintain our ARPU at a premium level, and I think that is made possible by our superior network performance as well as our excellent customer service. We also continue to evolve our product sets. We have launched various different add-on products that tailor to the needs of our consumers. For instance, some cybersecurity products that block the calls from people whom we know that are potentially scam calls.
We also have launched a new service that gives you an extra number that you can give to, say, your online shopping or your loyalty program, where you don't want to disclose your personal numbers. Just on the application, we're able to actually let you have an extra number to give to people whom you do not want to disclose your personal number to. I think what we're saying is that price pressure will continue, but we want to differentiate. We want to make sure that our products are delivering the quality that we commit ourselves to, as well as the differentiation in terms of the features.
Thank you, Ms. Lau. Next question is, what is the CapEx outlook, or if there's any guidance on this?
Maybe I can take this. I think as Fiona mentioned in the earlier presentation, the core network CapEx actually coming down. Actually, our 5G network already more or less substantially built. However, we are still looking into a new investment, for example, how to digitizing our internal workflow, how to better utilize AI and generative AI, for example, to enhance our capability to understand our customer interest, and also allow us to have a much effective way to look into the different data scenarios. With that in mind, I would expect the overall core CapEx will probably remain flat in the medium term, and over the long term, I would expect it will be going down really.
Thank you, Mr. Chau. Now we will take the last question before concluding the briefing today. How does SmarTone's 5G broadband differentiate from its competitors? Any room to reduce price?
As a mobile-only operator, I think, as I said, this new product is really a true incremental to our business. We ride on our exceptional 5G network, and I think from a network experience perspective, we are superior. We are also speaking to a lot of our existing customers who are already our mobile users, and we are able to convert quite a number of them into using both the mobile as well as the home broadband product. I think from that perspective, we want to make it easy for our customers to use both, and if they subscribe to both of our products, we do offer attractive pricing.
Thank you, Ms. Lau. This will conclude today's briefing. Thank you very much again for joining us on a typhoon day. Stay home and stay safe, everyone. Goodbye.
Thank you. Bye-bye.
Thank you.