Good afternoon, ladies and gentlemen. Welcome to SmarTone Telecommunications Holdings Limited interim result announcement and management presentation for financial year 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. The briefing will begin with a slide presentation by Mr. Allen Fung, 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 Mr. Fung, Ms. Lau, and Mr. Chau to begin with the presentation. Mr. Fung, Ms. Lau and Mr. Chau, please.
Before we start the presentation, let me introduce Fiona. We welcome her to the SmarTone team to be the Chief Executive Officer. She only just came on board last week, so it is actually very new, but she is ramping up very quickly. Fiona actually has worked in quite a number of multinational organizations. She has also worked in a number of companies within the Sun Hung Kai Group, most notably SUNeVision. She has a very strong track record in terms of deliverance and also in terms of how to ensure we enable a very high customer satisfaction. So we are very pleased that Fiona is joining the team to lead the SmarTone team. She will also talk a little bit about later on about what she sees in the business and the outlook for the business.
Thank you.
Today, let us talk a little bit about the financial review for the last six months as well as the business outlook moving forward. I think the overall main theme is that SmarTone is clearly firmly on the trajectory of growth. Our reported profit for the last six months is HKD 256 million, which is up 2% from year on year. We have some growth and moderate growth in service revenue and ARPU, which is encouraging given how competitive the market is. Our service EBITDA and EBIT actually increased 2% and 12% respectively. In many ways, the past six months have not actually been easy due to multiple headwinds. Our spectrum costs, which we will talk about a little bit later, at its peak at HKD 272 million for six months. It will start to gradually come down.
But this six months is actually the highest we will ever have, is HKD 272 million. The market continues to be very competitive, and we saw some recovery of roaming, but by the end of this period, which is until December 2022, roaming revenue is still far lower than the pre-COVID period. But we see very encouraging signs starting in January. It's a totally different ballgame, and we'll talk a little bit more about that. There were quite a lot of headwinds. But even amidst such a situation, we're able to grow our revenue and profit. And because of a number of factors, one is we continue to our ARPU growth, higher 5G penetration. Right now, it's above 35%. Our churn rate is still low. We have some recovery in roaming. We have very strong growth in our 5G home broadband customer base and revenue.
We'll talk a bit more later. Our enterprise solutions continue to be additional growth driver. So we expect actually the second half of FY 2023 to have upside, especially because of the roaming recovery. We also continue to expect strong contribution from continuous uptake in 5G penetration as well as 5G home broadband. Our interim dividend will stay at HKD 0.145, same as last year. We expect to maintain payout ratio of 75% on a full year basis. Let's look at a few numbers. Firstly, on the left-hand side, you see our service revenue. You see that clearly we increased our service revenue. But you see that actually even without roaming, we have increased our service revenue, which is encouraging. Obviously, roaming has increased a little bit, but still at a low level.
In terms of our ARPU, we have increased by about 6%, which is industry leading in terms of ARPU number. Our 5G penetration has continued to be able to move up, and now is about 35%. We haven't seen a slowdown in 5G penetration. I think more and more of our customers say that we need higher speed, we need faster speed, we need low latency because there are more and more applications require that. So there's still a lot of strong momentum for 5G penetration. During this period, as I said, roaming has recovered. Overall for the period, it's around 50%. By December, it was 55%, but for the period from July - December, it was 50%.
But we will look at the numbers in January 2023, we already saw it jumping up to 68%, even though basically China reopening did not happen until I think the 9th of January. So we already saw that, and I think February is going to be even stronger. And I think there are a number of factors. One is the China reopening. China is a quite important market for roaming. Also, it's also because Hong Kong has scrapped 0+3. It's completely open now. We are open for business. So we saw increased roaming. And what is interesting is that we saw some changing patterns of roaming usage as well, and Fiona can talk a little bit more about that later on. We saw that also in some countries, such as U.K., the roaming usage patterns and roaming revenue is actually higher than pre-COVID already.
And so we do actually have somewhat different patterns and positive patterns, I would say. Some destinations, at least for our customers, are still quite low, like Taiwan and U.S. But Taiwan, with the opening for individual travel, we expect it to rise as well. So overall message is that, up till December, the number is moderate, still at a low level, but we see quite rapid uptake since then. As I talked about, spectrum cost is a very heavy cost for us. This number is the number which includes both the spectrum fees plus the associated financial cost accretion. You see that basically our cost, basically when compared two years ago, has increased substantially by more than HKD 100 million over six months. But the good news is that it has stabilized and it will only come down.
We are at, as I said, the peak spectrum for six months, and it will gradually come down. So that's an important factor for us. If you look at our operating expenses, we have increased a little bit, for a couple of reasons. One is there is inflationary pressure, there's no doubt about that. We have salary increase, which is important to retain people. Also, there are some of the costs that we incur, like electricity, has increased quite a lot. So that actually add to the cost. In addition, we also actually made additional investments into our network, our 5G home broadband and enterprise solutions. So we made some investments. All of this increase is not just cost escalation, but actually we made some increases. The increase is manageable, but we obviously will need to be very vigilant in monitoring and managing our costs.
We have already put in place efficient programs to minimize our cost pressure and really deploy the savings to growing revenue streams. If you look at some of the things we have done, especially in the depreciation of right-to-use assets, which is essentially our cell sites and our stores, you can see that we have actually a substantial decrease since 2020 financial year. Because we negotiate with our landlords and we negotiate on less expensive cell sites, have no impact on quality. But actually we are able to achieve quite considerable savings. So we are looking at cost quite carefully. We are also, when that increase in cost, we try to make sure that this is actually for future revenue growth and not just simply cost escalation. When we look at our core business, our core service EBITDA, our EBITDA, there's handset EBITDA.
Handset EBITDA clearly is lower in the first six months of this year because some of the phones rolled out are not as popular. That's a fact. But our service EBITDA, you can see, is still growing. So this is good. We are able to continue to do that. We hope that, as we said, multiple things like upgrading people to 5G and our 5G home broadband and enterprise solutions can continue to help us to grow our service EBITDA. We are very careful with our CapEx. We manage it very well. So far, if you have seen, our core CapEx for the network has basically been on a very steady trend, about HKD 600 million. We are very careful on how to invest, but we have actually invested more than previously to ensure that our network has the best coverage and the best quality.
But we are very careful in terms of how we spend our CapEx. So with that, we have completed the financial side. I will talk a little bit more on the business side and business outlook together with Stephen, and what we are planning, what our focus will be, and Fiona will talk a little bit about our outlook. One of the things we are very, very big on is the network quality. I think I can be reasonably objective to say that over the past six months, there were more actually before the last six months, but over the past six months, many influential journals and media do rank us as number 1, especially in 5G. And we have worked very, very hard to ensure that our 5G quality is high.
Now, we have actually opened up a lot more channels for any user to complain of network gaps. Basically, we will have an engineering team to deal with all the gaps as much as we can. So if you feel that there are blind spots here or there, let us know. We welcome you to give us feedback because you help us to make it better. We actually commit to invest to improve those areas. So this will continue to be a major priority. We pride ourselves to have the best network, and I think because if you do not have a best network, if you do not have a good network, what is the point of having mobile communication? That is critical. We understand that is what customers want. So we are working very hard on that.
We feel that the other thing which is obviously very important is about roaming. There is a clear tourism rebound. Even though actually, as I last looked at it, the number of flights to and from Hong Kong is only at about 30%-40% of pre-COVID, so there is a lot of upside. But already there is a lot of resumption of cross-border travel through land as well as air, and also international travel. A lot of people ask us what is our proposition. I think one of the major proposition is that we have a superior offering. What does that mean? The first thing is that in roaming, the quality of the networks is important. So we are very careful. Obviously, when we are roaming outside, we rely on our network partners. Everyone does.
You need your network partners to do that, but we really keep them in check. We have sent our dedicated crew running speed tests and try to find whether there are blind spots where Hong Kong people like to go. Example, we have a team which went to Japan lately, Tokyo, Kyoto, to really try to measure whether they deliver it. We have actually worked with our partners to address where there is blind spots. So it is not like, well, we pass you to the overseas operator because actually it is even more frustrating when you find there are blind spots overseas. So we actually take quality well, not just in Hong Kong, but also when you roam. So that this is not a service that cannot be, the people who give you the Wi-Fi egg or other people can give you.
We want to ensure that if it's not working, we'll fix it for you. We want to ensure that you have basically good quality. The other thing is that, I experienced it myself and I think many of you experienced it, is that when you are abroad and roaming, when you have problems, you don't know where to call and who to call. It's actually very difficult and cost. We have provided for our customers a 24/7 free roaming hotline. You can call it, and you can tell us the problem. You have the same thing worry about. Cost is free, so that it takes away the worry. The third thing which you may not know is that we also have the widest 5G roaming coverage for all major destinations. For instance, in Australia, basically, us and only one other operator has 5G roaming.
Other people only have 4G roaming. We charge the same actually for 5G roaming and 4G roaming. So you enjoy 5G speed without additional cost if you have 5G at home. So that's what we provide, and there are more countries which are like that. So we think our offering is actually compelling. We are offering some other services as well, which is, many of you actually need a China local number. For instance, you want to do WeChat in China, you need a China local number. So now we can actually have a product called China Easy SIM. So you can actually go online or go to our app, and you can order it. We'll immediately assign a China number for you, which is actually very useful. Many of us do need a local China number. We'll give it to you.
Obviously, our roaming is very convenient. You just need to turn it on. You don't need to switch cards. You don't need to use a Wi-Fi egg and so on and so forth, drain up your battery. So, there's just no reason why people would not use it more in our view. I will turn over also to Stephen to talk a little bit more about our network, what have we done, and explain what are the investments were made. Stephen.
Thank you, Allen. I would like to give you update on what we are doing on our network. First of all, as a leading mobile operator in Hong Kong, we are always very committed to bring the best network quality and a consistent user experience to our customers. The question is, how could we do that? We have the largest amount of low band spectrum from 600 - 900 MHz, which is extremely important, provide excellent in-building penetration. We also have already fully deployed the two blocks of golden 5G spectrum, 3.5 GHz and the 4.9 GHz. Which will allow us to provide sufficient capacity to meet the future traffic demand and also provide excellent speed performance. We are also utilize big data network analytic to track individual customer user experience in our network and identify area for improvement.
All together, I'm very confident that we are actually delivering the best in-class network experience in Hong Kong, especially in all the Sun Hung Kai Properties buildings, including all the residential, commercial, and shopping malls. In anticipating of the new development, for example, in the Northern Metropolis and the surroundings, we are actually taking the lead to invest and build a digital infrastructure around our area that will be part of the future digital infrastructure for the whole development. We are also working with Heung Yee Kuk to improve the coverage in underserved village area. You may notice that in many of these area, people there still suffering from a good internet connectivities. With our infrastructure brought to this area, we will bring the true broadband experience to all the users, and they will also facilitate the smart village development.
Of course, our 5G coverage already extend to all the country paths, also the new transport infrastructure. For example, the new Shatin to Central Link and the Tseung Kwan O South. Also making use of the network upgrade to support SA mode that will give us a new feature slice, like network slicing and edge computing that will be important for us to develop very low latency, ultra reliable, secure service for different enterprises. With that, I'm confident with our continuous investment and a focus in customer experience, we will continue maintain a best network in Hong Kong. On this slide, I would like to spend a bit moment to share with you what we are doing in managing the energy consumption. We are always very mindful of energy consumption and its impact to the environment.
Indeed, it's one of our major focus and as one of our key ESG initiative that we are working very hard. With the modernizing all the base station with the latest generation of hardware and software, as well as utilizing AI-based network solution. All together actually help us to bring down the energy consumption by 33%, which is important. While we are roll out 5G network, we actually manage to maintain and keep the increase on the energy consumption to the minimum. This is important to the company as it is one of our key ESG initiatives, and also it's very important to us to keep the energy costs down. Thank you. With this, I would like to pass back to Allen.
Let me spend a few minutes to talk about some of the growth initiatives that we are engaging. The first one is about 5G home broadband. I think we have actually grown very healthily. According to our research, we are by far the top player in the 5G home broadband service. I think because we are one of the few who are truly mobile only, we don't have baggage in terms of worrying about cannibalizing our fixed line. We don't have that worry. So we are able to provide very good service wholeheartedly. I think multiple magazines have voted us as the best 5G home broadband service, and we have been ranked in terms of network performance also as number one. What we have seen in the last 6 - 12 months is that, there are different customer segments for 5G home broadband.
The most obvious one is what we call the narrowband people. Your place does not have fiber connectivity. There are probably around 200,000 - 250,000 of those households, which currently only have ADSL, which is actually very slow. Our proposition actually is very, very strong because we are much cheaper. We are probably 10 - 20 x faster in reality, and we are much easier to install. In fact, we actually see that this is kind of one of our ESG initiative for such a segment. Because for these segments, if they want to watch kind of super high definition TV, they cannot. If they have multiple people trying to use the internet for watching movies, they cannot. So many things they cannot do. Actually the fast internet can help them to access content much easier.
For the narrowband people, actually the proposition is very high and we are making very good progress at that. What is actually quite encouraging is that we found quite a lot of our customers actually do have a fixed line, a fiber fixed line already. They are getting an additional line as our 5G broadband because they want additional service so that they can use in their bedroom or sometimes to take it back to the office for their personal use. We see quite a lot of that. Some people are also kind of saying, "Well, your 5G home broadband is actually much cheaper than my fiber." Because, for some areas, especially into those areas where there is only one operator, the cost of a fiber connection can be HKD 300, HKD 400 or even HKD 500 for your broadband. 5G home broadband is as good but much cheaper.
We see that actually even people with broadband, with already fiber broadband, are using us as an additional broadband or switching to us. We see that as actually quite encouraging signs. That is on the 5G home broadband. The other area which we are working on is what we call enterprise solutions, which is helping companies to use 5G and technology to bring more efficiency to the company and to serve customers better. We have been working with quite a lot of companies on that. Some of them actually we talked about before, like in construction. I will give you one more example this time, which is with Kowloon Motor Bus.
If those of you who take Kowloon Motor Bus would know that there is already an app developed some time ago, which allows you to know what is the next bus, when does the next bus come? Which is arrival information, very useful. But what we have found out in the Kowloon Motor Bus is that many people also want to know some other additional information. For instance, is the bus going to be full? For instance, if I am waiting for a bus and this bus is full, should I wait for the second one? Because I do not know whether the second one is full or not, or the third one. With 5G, we are able to provide that transparency. We are able to provide that transparency to customers immediately to say, "Oh, is the next bus full?" Or if it is not full, I will wait for it.
If not, I'll go for it. If you are planning a journey, you see where all the buses are full. Actually, then you may actually need to budget more time before you travel. That's one side of whether the bus is full. An additional feature which will be launched is that we'll have an indicator of number of people in the upper deck, and hence basically whether there are seats upstairs. If basically it's full upstairs, you don't need to go up. We basically want to minimize your using the staircase if not needed, the effort. Then if there's space, obviously if you want to, you want to go up. The plan for KMB is to roll it out in Q2, and we'll serve around 2,500 buses, which is basically more than half of the buses of KMB.
That's one example, but there are many others in construction, in healthcare and so on, which the team is working with. Everybody is talking about digitization. Everybody is talking about how to use technology to help customers and help efficiency. This is a good opportunity, and we are tapping into that. We talk about enterprises, but we should talk about consumers. For those of you who are SmarTone users, if you do not already know, actually starting from December 1st, you can already automatically earn the points from The Point program, which is a loyalty program of SHKP. You can earn points for every dollar you have made at The Point and also, obviously, at the SHKP malls. Then you can redeem it through The Point app.
I think some of the more popular users of those points, for instance, for free parking, and sometimes people use it for spending credit as well. This is actually any dollar you spend, it will be used. We feel that there's a lot of synergies between SHKP malls and SmarTone in terms of joint promotion, in terms of giving benefits to both sides, and we will continue to leverage that and tap into those opportunities. The previous 10 minutes, I've talked a little bit about our financials and also talked a little bit about when we look back, what are some of the things we have done. Pushing forward, I'll let Fiona talk a little about what she thinks is the outlook of the business, what are some of the challenges, and what are some of the upside we see. I'll hand it to you, Fiona.
Thank you, Allen. Good afternoon, everyone. Gives me great pleasure to meet you the first time after taking office as CEO since last week. I joined from our sister company, SUNeVision, where I spent the last five years. Now I'm going to talk about, at a high level, our outlook for the rest of the year and beyond. Now I expect the challenges that we experienced in the past six months to continue, and they include price pressure. Competition remains very intense, and the pressure is real. High spectrum costs. In addition to the spectrum cost, which itself is very high, the tax policy also has a substantial adverse impact to our numbers. Now, if you listened to the budget speech this morning, it seems to have taken note on this particular point. But we shall study the details further. Inflationary environment.
This macro backdrop will mean that our costs will continue to go up. We must maintain a strong cost discipline in tackling that. There will be tangible upside, especially on roaming. We are seeing promising recovery trend, especially since the beginning of the year. December last year, we see about 55% recovery versus pre-COVID. In the past weeks, we are already seeing close to 70%. In fact, last week, it exceeds 70%. The reliability of our roaming services will remain to be a key differentiator, and the ability to turn on roaming instantly will be, in my view, increasingly valued by our customers. On 5G home broadband, we have gained nice momentum since our launch, and we have the highest market share to date. As a mobile-only operator, this is an area where we're going to spend material resource and effort in.
Now taking a longer horizon, the 5G conversion will grow. The upcoming device launches in AR and VR will certainly be positive drivers. Likewise, the IoT adoption, it is still at a nascent stage, but the technology is there. I look forward to bringing more innovation to our customers, especially via partnerships with our Sun Hung Kai group businesses through our enterprise solutions team. Looking ahead, and in sum, with mobile services an integral part of everyone's lives, our mission is to enhance the connected experience by providing customers the highest convenience and reliability. Our unique position as part of the broader Sun Hung Kai group is that we have a platform on which to scale. We will deliver that by building a culture where we put customer first, and we will continue to innovate.
I look forward to meeting all of you in person in the near future, and thank you.
Thank you, Mr. Fung, Ms. Lau, and Mr. Chau. Now we'll have the Q&A session. Please raise your question through the text box right under the video screen. Mr. Fung, Ms. Lau, Mr. Chau, and Mr. Vincent Tung, General Manager of Finance, will answer your questions. We'll read out the questions. To make the best use of time, similar or repetitive questions will be grouped together for management to answer. Here's the first question from Damian Roberts. What is the competitive edge of SmarTone's roaming services in the market?
Hi, Damian. I think as Allen mentioned, there are a couple things that we think we're really, really strong in. I think for one's the reliability of our network. The fact that we have the widest 5G coverage in all key destinations. I think that's something that our customers will appreciate. We pay a lot of attention to how the customers actually experience that on the ground. We send people to do the test. We send people to make sure that when they turn on the roaming services, it's instant as they arrive at the airport. We all know that there's a high level of anxiety these days when you do not have a connection to your mobile phone. We pay a lot of attention to that. Our customer service, I think that's something we also spend resources in.
We make sure that if you have questions overseas, there will be people who can answer questions for you. Overall, I think the customer behavior is changing. I think they value the ability to turn on the roaming services instantly, as well as the reliability of our network overseas.
The next question is from Dominic Yang. How fast does management think roaming revenue will recover to pre-COVID levels?
I'll take that question as well. Hi, Dominic. If you look at our numbers, in the first half, our roaming recovery has reached 50%. If you look at December last year, it's 55%. If you look at January, it's 68%, and if you look at the last two weeks, it's 70%. We see a very nice and promising uptick of the overall roaming recovery, even though if you look at the flight coming in and out of Hong Kong is still at 30% and 40 percentage points.
I think there will be pent-up demand for Hong Kong people to travel outside. It's been three years since we haven't traveled, so there will be maybe quite a lot of pent-up demand to travel within this year. We are also seeing uptick in both our consumers, our direct customers as well as our business travelers. We actually see a consistent trend in that. How fast will we grow? It's hard to predict, but I think what we are seeing is that it will be quite positive.
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Next question is from John Mellon of KPM Investment. What is the network enhancement strategy?
Thank you, John. As I shared in my slide earlier, with the best mix combination of the low and the mid band, we continuously invest into the area that there's people move, there's a need. We also increasingly using network data to understand how the customer using our network, using the data, and also where they experience suboptimal experience, so as to enable us to identify area for optimization. That will put us in a much, much better understanding on how we should strategize and prioritize our network resources investment. We will continue to do that and make sure we deliver the best network in town.
Next question is from Joseph of Gate3 Capital. What is our view of ARPU in the next three to five years? If it will trend down, how can we offset cost inflation?
I think my view on the ARPU is that if you just look at the service element, excluding the roaming, I think it is stable. I think there is probably a small increase. The market is very, very competitive, but we have proven that we actually are able to raise ARPU if we do the right things, if we enhance customer quality. But obviously with roaming, if you include roaming in ARPU, obviously it would be in the rising trend, because as we said, the last six months results only reflect 50% of roaming revenue. So that is actually a major addition to that. From that, I am actually cautiously optimistic on that. I think no matter what the ARPU is, we need to be very, very vigilant in ensuring that we manage costs well.
I think if you compare our cost to pre-pandemic, we are substantially lower, despite the fact that electricity cost is so much higher, labor cost is so much higher. We have not actually had any problems with quality. Actually, our quality is higher rather than lower. I think it is more about more active management of our costs. We are able to reduce our costs for cell sites. We are able to reduce our costs for our backhaul. We are able to reduce our costs with a number of partners. So we are able to do that. Yes, there is in general cost inflation, but I think we have quite good confidence that we can actually manage our cost quite effectively as we have shown in the past few years, we have been able to do that.
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Coming up, a few questions from Gavin Lam of Yu Ming Investment. Question one, despite the mild rise in ARPU, it has still been down a lot from the year 2016. Why is it? Should investors expect the ARPU recovery to that level? Question two, has number of postpaid users been down because of the immigration wave? How to counter this problem? Number three, what is the impact of the Real-name Registration Programme for SIM Cards on the revenue?
[Non-English content] Why do I actually answer the first two question and maybe Stephen, you answer the third question on that. I do not have the numbers of 2016 with me. I think there are a couple of reasons for the ARPU, why it is down. Firstly, roaming is absolutely down a lot compared with 2016. That is one side of it. Secondly, between 2016 and 2019, we actually did encounter quite severe price pressure
Actually, that was another reason why that was down. You look at what happened since 2020, even discounting roaming, our ARPU had been steady and up a little bit, actually. Can it get back to the level of 2016? I do not have the numbers on 2016, but I can tell you that can we get back to the level of pre-pandemic? Absolutely. I think we have confidence that we can do that. We will work very hard to do that. The second thing is about, the core question is about whether postpaid users, as the number of postpaid users are down. Postpaid users are not down. Actually, you would think about the prepaid. If you see our numbers, total customers, we are down basically because of prepaid, and Stephen will talk about that. Our postpaid is not down.
Even more importantly, what we call the MNO customers are not down, but up materially. MNO customers are the ones which are our customers. It excludes the MVNO offerings that we have through another player. Our MNO actually is up. The emigration wave clearly has some impacts, and in two ways. One way is that they would discontinue their phones, some of them do. Secondly, there are some people who move abroad. They still keep the phone, but they move down to a plan which is much cheaper. That is something which is not avoidable. What we do to counter this problem, there are multiple ways, is that we at least want to keep them as a customer, because some of them actually do come back to Hong Kong, and some of them actually have come back to Hong Kong as well.
We want to keep them a customer. We do not mind. Actually, we do not mind them basically continuing to be a customer, but actually having a slightly less expensive plan. We will try to help that. Obviously, we have other ways to increase our revenue as well. But so far, even with the emigration wave, we see many of our customers actually do keep their numbers. Do keep their numbers because you do need the Hong Kong card to do a lot of verification with your online purchase or banks and so on. That is a little impact, but it is not as big as we fear. There is a little bit, but not that much. I will hand over to you to talk about prepaid.
Well, Gavin, I try to answer your question on the real-name registration. In fact, we do not see the impact is big. It is actually quite limited. On the other hand, I think we are seeing actually quite encouraging trend. Our actually real-name registration rate is much, much higher than the market average. It might be because our prepaid user are more genuine user, so they are actually willing to take up the real-name registration. The process is very easy, very straightforward. We are also seeing increasingly many of them actually migrate to the postpaid customer, which is also a good sign. In fact, I personally think real-name registration to us is actually a positive sign, because we can then understand much better our user experience and better engage with them so that we can serve them better.
So overall, I see the impact from the Real-name Registration Programme for SIM Cards is very limited.
Next question is from Darren Lam of Adjudicator Capital. How is the competition landscape in 5G home broadband?
Thank you, Darren, for the question. I think what we find in the 5G home broadband actually is quite a different landscape. We feel that we are not as much competing with other offerings, to be honest. Obviously, this may have something to do with that we are the largest there. But it's really our growth is dependent on whether we can actually let customers try the service and experience it and use it. Because right now, the offering is actually very compelling. It's less than HKD 150. You can use it's very fast. You can basically take it anywhere you want. If you move houses, you can take it with you. When we talk to our customers, they actually don't mind whether it's HKD 150 or HKD 120. They say that if it works, then it's totally worth it.
Some customers say that, "I'm worried that it may not work very well." Sometimes they don't place the router in the right spot and so on and so forth. But I think once, for instance, in the housing estate, we show them how to use it and so on, the take-up rate is actually quite high. I think to use a cliché, we are competing with ourselves. There are a lot of our own mobile customers who want to use this. We need to educate our customers why that's great and why using it is actually very convenient. The people who have tried it, most of them will take it. That's a very good sign. We need to do a little bit better marketing, and let them know the service, because it is a compelling offering. It's very easy to use.
You can try it, and we have free trials for you. It takes you less than a minute, I guarantee you, to set it up. Immediately you can use it, and you say, "Oh, tomorrow I need to go to staycation," you can take it with you as well. The price is, I would say, roughly about three cups of coffee or four cups of coffee from Starbucks, and you can use it for a month. It's very good. We are competing with ourselves. Whether we can actually educate our customers and ramp up. We are ramped up very well, but I think we could do even much more.
Next question is from Michelle of CITIC. Could management share the customer numbers of subscribers of mobile and 5G broadbands respectively? What's your view on the competition dynamic in mobile and 5G broadband markets?
Michelle, I think we do share the number of mobile subs. We do share. We already shared it in our documents. 5G broadband subs, at this stage, we prefer not to share it yet. It's growing healthily. I think this question also is a little bit, I think mobile and fiber broadband is slightly different. Mobile, obviously, it is a very competitive market. I think what we are saying is that we have the best network and we are priced very reasonably, and we give you a very good service as well. I think that's where we are distinctive, and we have proven that even though some of our competitors can cut price substantially, our users value the fact that good network is actually worth that extra cup of coffee's money in a month. I think that's what we've shown.
Fiber and broadband, I already explained what the dynamics is slightly different. We are competing to engage and educate our users, and we think our proposition is very strong.
Next question is from Themis Qi of The Standard. Will SmarTone increase the service prices with expected pricing pressure ahead?
Will we increase our prices? I think we'll play with the market to see what the market offering. And we offer a very strong product. Obviously, there's pricing pressure. But we want to control the cost ourselves much more and to give a very reasonable service for superior quality. So we play with the market to see how the market reacts. There's no definitive answer to this question.
Coming up, we have two questions from Robert Clark of Light Reading for Mr. Stephen Chau. Number one, how advanced you are in deploying 5G standalone? Is network slicing very far away? Number two, there's a great deal of talk about network cloudification and virtualization. Is that a priority for SmarTone in its network evolution, and if so, what are your plans?
Thank you, Robert. I think I mentioned in my slide, our network already 5G standalone SA ready. So we're actually trying out different SA applications. Network slicing, yes, we are piloting a few cases. I would say it still takes some time to have a really end-to-end mature and ready to go. But as a feature, it actually does give us additional mileage when we talk to different enterprise if they want to have secure resources. So that's actually something I would say interesting, together with edge computing. I see they are actually one of the few major feature from 5G SA that can actually offer to the enterprise. You talk about the cloudification and virtualization. It's my personal opinion, I think it still demand quite a bit of work to work on it. Especially if you are actually running a network in a huge territory.
But in our case, in Hong Kong, that is actually not too meaningful to us because we are very small in geographic area. So our focus is still make sure our network optimization, network quality are best in class. That is something that we promise to our customer. That is something that we need to deliver to our customer.
Next question is from Jeff Pang of Rise Staff Co. How much of the cost saving is permanent? Which cost items are likely to revert to pre-COVID level?
Just to illustrate a little bit about our cost structure. I think some of the major costs, there is basically one of the major costs is about our cell site rental. Cell site rental costs are coming down. They are pretty permanent. Actually, in fact, we are working very hard to drive it lower. So that is pretty permanent. There is labor cost. Labor cost, if you compare with 2020, we are a leaner organization. We have slightly fewer people. It will stay that way. We might at selected points add some people in the areas where we can have high revenue growth. But it will not go back to the number of headcount because we have basically made it a leaner and more agile organization. So that is permanent. If you look at backhaul cost, which is another one. It is going down and should go down further.
Actually, I am quite confident it will go down further because there is total excess capacity in terms of backhaul provision in Hong Kong. So it will further go down. I think the only area where it is slightly less permanent, but it is a small item in our cost, is in terms of our store rental. It has come down quite a bit, but it is more. Given the locations of our store, I do not expect actually drastic increases in the rental and so forth. But that is actually a small item anyway. But the big items is really around cell site rental, our backhaul costs, and also our labor costs. I would say, if you cover a timeline, all of them are pretty permanent. In fact, I think there are actually quite a bit of room to drive for further cost savings without impacting quality.
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We will now take the last question before concluding the briefing today. This question is from KC Lee of MAP Capital. Are there costs involved in converting a customer from 4G to 5G?
Actually, now, there are two ways we convert our existing customers, I think this is what the question is, from 4G - 5G. One is that when they are up for their renewal cycle. So we will call them or they will reach out to us to do that. The other is we proactively go out to say that these are good packages, do you want to consider to move to 5G? The costs are minimal, right? We will have call center people calling them up. We will give them some goodies. We will ensure that we give them some value-added services, sometimes for free for packages. But in terms of cost, there is not really any in terms of converting a customer from 4G - 5G. Many of the 5G customers will basically use more data. But our 5G network, we have a lot of capacity.
And obviously, most of them pay more. Actually, all of them pay more. From a financial point of view, it's good for us. From a usage point of view for the customer, it's good for them because they have more data and they can enjoy much higher speed. It's a win-win. In the process of converting a customer, the cost is minimal.
Thank you, Mr. Fung. This will conclude today's briefing. Thank you very much for joining us today. Goodbye.
Thank you.
Thank you.