Good afternoon, ladies and gentlemen.
Good afternoon, and welcome to SmarTone's FY 2026 annual results presentation. For today's presentation, Stephen and I will first take you through our business review. After that, Ada and I will take you through the financial review and outlook. In FY 2025, 2026, SmarTone delivered profitable growth despite an intensely competitive market. Our performance reflects disciplined execution, a more diversified revenue base, and our continued focus on delivering quality growth. We are reporting stable revenue with a 10% growth in profit after tax. Mobile post-pay ARPU decreased slightly by 1% to HKD 220. Importantly, our 5G ARPU remained two times that of our 4G, demonstrating the value customers continue to place on our premium network and service experience. Our key growth drivers maintained good momentum. Consumer outbound data roaming revenue increased by 6%, while 5G Home Broadband revenue grew by 10%, and EBIT increased by 31%.
At the same time, operating expenses decreased by 6%, and capital expenditure declined by 21%. Service EBITDA margin improved by 0.5 percentage point to 55%, demonstrating the benefits of disciplined cost and capital management. Our full-year dividend per share is HKD 0.32, same as last year. SmarTone total revenue increased by 5.6% to approximately HKD 6.6 billion. Market competition remains very intense. Our underlying service revenue remains steady, while growth from more diversified revenue streams, including enterprise solutions, 5G Home Broadband, strengthen the overall revenue mix. We will continue to make progress in scaling growth areas beyond traditional mobile connectivity. We continue to focus on growing a high-quality customer portfolio rather than pursuing volume at the expense of value. Our mobile post-pay customer base increased by 2% year-on-year. Mobile post-pay ARPU was HKD 220, representing a modest decrease.
This was achieved by both strengthening the proposition of our SmarTone PRIORITY premium customers at the top end, as well as offering value-for-money bundles to retain and acquire new customers. Our 5G stays at a premium to 4G. It proves that what we are offering as a superior network experience and service are well valued by our customers. Our strategy is not to compete on price alone, but to give customers clear and tangible reasons to move to higher value plans. During the year, we introduced targeted propositions, including our 5G Family Sharing Plan and Gen SmarT AI Plan to address the different connectivity, lifestyle, and digital needs of our customers. This value-driven approach paid off, effectively doubling our year-on-year 5G plan upgrades. By translating our network strengths into clear service tier benefits, we provide reasons for customers to upgrade.
This supports ARPU resilience, deepens customer relationships, and creates potential for more sustainable revenue growth over time. We also revamped our premium membership program to SmarTone PRIORITY, which contains more personalized service designed around customers' evolving digital connectivity and lifestyle needs. All SmarTone PRIORITY members are supported by dedicated relationship managers who can provide timely and customized solutions together with more personalized and attentive services. For customers traveling overseas, we have curated premium 5G roaming services across 23 destinations, covering more than 95% of our customers' travels traffic. We work with leading overseas network providers to provide reliable connectivity and consistent SmarTone quality experience. We have strengthened emergency support for customers who lose their SIM card or mobile phone while traveling. Our systems include SIM replacement and loan phone delivery in Tokyo and in mainland China, helping our customers restore connectivity quickly when it matters the most.
Together, these initiatives create a scalable premium service platform. They strengthen engagement and differentiation. Beyond individual customers, we are developing a more integrated proposition for the entire family. The SmarTone Family Plan consolidates household connectivity under one account, allowing family members to share high-speed 5G data while simplifying account management through a single monthly bill. Customers can allocate data flexibly across connected SIM cards and upgrade to the Family Lite Plan as their household requirements grow. This has been one of our most successful propositions and customer acquisition channels. This will be a strength that we'll continue to build on. We further expanded our family connectivity ecosystem with Kids Watch, a SmarTone exclusive solution that combines secure communication, seamless connectivity, and greater independence for children. With a built-in SmarTone eSIM, children can stay connected at home, on the move, and while traveling.
Through our proprietary applications, families can create a private communication circle without relying on open social media or third-party messaging platforms. Calls, conversations, and photo sharing remain within an approved group of family members. This gives children greater freedom while providing parents with more control and peace of mind. Together with our other family services, Kids Watch strengthens SmarTone's differentiated family proposition and creates a scalable platform for our future connectivity, safety, and digital lifestyle solutions. We also have Kids CARE. This proposition is complemented by helping parents manage their children's digital health across different devices and operating system, across both iOS and Android. Through one application, parents can stay connected with and protect their children, even when the family members are using a mix of iOS and Android.
The service supports up to 20 devices, allowing parents to manage digital assets across the family in a simple and a coordinated manner. Customers also have access to expert support when assistance is needed. Together, Kids Watch and Kids CARE enable us to serve families beyond basic mobile connectivity, supporting safer digital habits, closer family connections, and greater peace of mind. Building upon our kids-related services, our family segment becomes much more complete when we expand our ecosystem to support elderly care. We recognize that modern household manage multigenerational needs, so we have to build a comprehensive safety and wellness network for seniors. Through our smart home solutions, we enable the older family members to stay connected with their loved ones anywhere. To address critical safety concerns, the platform features automated emergency response triggers for physical accidents, paired with continuous remote health monitoring to detect health risks.
Lastly, intelligence location mapping provides a dependable safety net if they ever get lost. By covering both childcare and elderly care, we deliver total household peace of mind and significantly deepen our value to the entire family unit. 5G Home Broadband remained one of our key structural growth engines during the year. Revenue increased by 10% year-on-year, while EBIT rose by 31%. The strong profit growth reflects the attractive incremental margins and scalability of the business. The segment benefits from the accelerating adoption of premium 5G connectivity, synergistic customer acquisitions through our existing subscriber base, and a capital efficient operating model. The strengths give us confidence in the continued growth potential of 5G Home Broadband. The sustained momentum was supported by continuous improvement in both our product and customer proposition. Wi-Fi 7 accounted for 45% of new subscriptions during the year.
This supported ARPU growth and demonstrated strong demand for premium home connectivity experience. We also expanded our home service portfolio by introducing AI Connect on 5G Home Broadband, enabling families to access ChatGPT or Claude without a VPN. Together with Disney+ Entertainment and HomePhone+, which is a fixed line substitute, this creates a more compelling and integrated proposition for the household. In addition, we deepen our strategic collaboration with Sun Hung Kai Properties through tailored mobile and broadband offerings, enhancing the overall customer experience and supporting efficient customer acquisition. Taken together, these initiatives reinforce the competitiveness of our home proposition and its role as a scalable and profitable growth driver. For mainland newcomer market, our strategy moves through three phases. We build awareness before departure by engaging especially students at the mainland orientations and highlighting our Call Guard anti-scam protection as a key differentiator.
Second, we strengthen post-arrival engagement by providing Mandarin language in-store support and launching dedicated cross-border plans catered for this demographic. Furthermore, we expand our strategic partnerships by deepening ties with student housing operators and leveraging our Group Sun Hung Kai synergies across the properties to offer exclusive onboarding privileges. Roaming. Our roaming business continued to deliver solid momentum during the year. Consumer outbound data roaming revenue increased by 6% year-on-year, while the consumer roaming penetration rate reached 72%, representing an increase of five percentage points. This performance was driven by our continued focus on effortless subscription and meticulous services designed around customers' changing international travel needs. Our objective is to support the customer throughout the entire travel journey rather than provide connectivity alone. For frequent and long-stay travelers, we introduce larger multi-day roaming passes, reducing the need for repeated purchases and making the experience more convenient.
We also created a more complete travel proposition by combining roaming with year-round travel insurance, payment benefits, and airport food and beverage privileges. This provides customers with greater value throughout their journey. When an expected incident occurs, our support teams also help customers restore the connectivity quickly. At the same time, we accelerated the expansion of our VoLTE roaming footprint in response to the retirement of 2G and 3G networks in the overseas markets. This helps safeguard voice service continuity and to maintain a reliable experience for customers while they are aboard. These initiatives demonstrate our commitment, taking end-to-end ownership of the customer's roaming experience.
Beyond connectivity, we are driving digital adoption by bringing top-tier AI right to our customers' fingerprints. With AI Connect, users enjoy seamless high-privacy access to leading tools like ChatGPT right over our network. To complement this, our one-on-one AI consultation service provides personalized guidance, while our information hub provides and delivers real-world use cases for AI, making it truly accessible, safe, and actionable for everyday life. I will now pass over to Stephen to take you through the enterprise solutions initiatives and our latest network developments. Thank you, Stephen.
Thank you, Fiona. I will now walk you through our latest progress across enterprise solutions and the network developments. During the period under review, enterprise solutions revenue increased by 17% year-on-year, reflecting growing demand for integrated connectivity and smart technology solutions. Building on our network capabilities, SmarTone Solutions continue to support the digital transformation of enterprises across Hong Kong. Leveraging on 5G, AI, as well as IoT technologies, our enterprise solutions team continues to unlock the digital potential of Hong Kong industry. This is essential to support digital transformation and help to position Hong Kong as a leading innovation and technology hub. Over the years, we have expanded our enterprise solution portfolio to different sectors, ranging from smart home, smart mall, smart transport, to smart constructions.
Tapping into this smart living trend, our smart home solutions bring automated convenience to everyday living, while our smart mall applications drive footfall and customer engagement for commercial clients. In the construction sector, our 5G-enabled Smart Site Safety System, what we call 4S, allows site teams to monitor workers' equipment and environmental conditions in real time, upholding strict safety standards without compromising operational efficiency. This versatility allows us to address specific industry demands while deploying scalable capabilities across the wider market. During the year, we deployed these capabilities around diverse sectors, enabling telemedicine in healthcare, upgrading hospitality with smart guest experiences, power boosting residential developments, and bringing 5G monitoring to critical infrastructure and primary industries. As shown in the slide, our solution continue to empower enterprises and transform city operations.
For the Pui O project, SmarTone Solutions deploy an end-to-end 5G smart monitoring setup to overcome harsh environmental and power constraints along the South Lantau Road. This solution delivers secure, high-speed connectivity and real-time video oversight, ensures continuous operational resilience, faster response time, and effective risk management. In hospitality, we partner with The Bauhinia Hotel in Central to blend luxury with smart technology. SmarTone Solutions build a carrier-grade Wi-Fi backbone that powers high-speed guest connectivity while running critical operations like PMS and CCTV surveillance. We also allow guests to seamlessly control lighting and curtain with a single touch while optimizing energy efficiency behind the scenes. In the healthcare sector, we newly launched the TeleCare SmartHub, serving as the technology enabler to support Gleneagles Hospital Hong Kong's telemedicine services.
These projects demonstrate how our network, IoT, and digital capabilities can be adapted to different sectors and improving customer experience, operational efficiency, safety, and service accessibilities. Going into AI, and to complement AI Connect individual users, we developed SmarTone AI Workspace specifically to meet the needs of our SME operations. It integrates top international and mainland multi-model LLMs with powerful content creation and document tools. Designed for seamless access across web and mobile, it caters to everybody from individual power users to commercial and enterprise operations with the added convenience of direct telco billing. By delivering target solutions for both individual power users and SMEs, we solidify SmarTone as a complete technology enabler, which clearly differentiates us from all our competitors. Our network strategy is purpose-built around the locations and moments where performance matters most to customers.
During high-demand occasions such as fireworks over Victoria Harbour, the Lunar New Year fair at Victoria Park, and major events at Kai Tak Main Stadium , customer activity uploading photo and live streaming at once. Having a fast, stable, and seamless network during this moment is extremely critical. Therefore, we have deployed our exclusive SmarTone small cells at critical hotspots and high traffic venues to strengthen capacity and service assurance. Supported by our advanced 5G capabilities and intelligent network operations, this targeted investment allow us to deliver best-in-class performance and reliability even during peak demand periods. This is how we translate network leadership into a consistent and differentiated customer experience. Our collaboration with Sun Hung Kai Group continues to create unique opportunities across its flagship developments.
From International Commerce Centre in West Kowloon, Cullinan Sky and Cullinan Harbour in Kai Tak, to GO PARK and Sierra Sea in Sai Sha, as well as Yoho West. We are integrating all the advanced connectivity into the next generation of living and working environments. Our 5G advanced solution provides comprehensive coverage across the entire properties, from car park, deep lobbies, office, clubhouse, to all the private residences. SmartConnect 5G Wi-Fi also offers fast, stable, and cable-free access, allowing every user to connect immediately without the limitation of traditional wiring. At the same time, 5G Smart IoT enables real-time security management and automated fault detection while connecting devices such as lighting, climate control system, cameras, and smart mirrors through one intelligent ecosystem. We continue to expand our 5G footprint across the infrastructure and development areas that will shape Hong Kong's future.
We deploy the golden spectrum, 3.3 GHz and 3.5 GHz in the key urban locations and all the transport hubs to maximize capacity and ensure faster download and upload data speed for our users. Across MTR station, we prioritize high-capacity 5G spectrum at 24 major stations, strengthening coverage and performance, as well as sufficient capacity to accommodate their daily need. We also expand coverage across major developments, including, again, GO PARK, Hong Kong International Airport, Kai Tak Sports Park, and also the Lohas Park. In parallel, AI-enabled network operations allow us to monitor the network around the clock, predict potential issues, and optimize performance dynamically. Our investment approach remain targeted and disciplined, focusing resources where they have the greatest impact on customer experience and Hong Kong future's connectivity needs. To further expand our network leadership, we are empowering the future by unlocking more 5G capacity.
By reallocating spectrum from our 3G sunset directly into our 5G network, we maximize spectrum efficiency to deliver superior data speeds, lower latency, as well as enhance overall customer experience. To ensure service continuity and safeguard customer retention, our dedicated team are proactively guiding clients step by step through the device and SIM upgrade via targeted communication channels. Ultimately, this transition will allow us to deliver seamless, high-speed network experience for our customers. Looking ahead, this migration set the foundation of a next stage of network evolution, pioneering AI-native technologies to deliver an unmatched hyper-optimized experience to our customers. We also continue to advance our ESG efforts with a focus on responsible technology, community inclusion, employee well-being, and environmental protections. Cybersecurity remain a priority.
Through the Anti-Scam Consumer Protection Charter 3.0 and adaptive machine learning models, we are strengthening our ability to identify and block cyber threat, malware, and network intrusions. In the community, we support youth development through the Strive and Rise Programme mentorship program. We also promote digital inclusion and safety among senior citizens through training on smartphone use and scam prevention. For our employees, we continue to foster an inclusive and supportive workplace through various wellness and ongoing health awareness initiatives. This year, we organized sport events to bring our team together alongside health seminars to support everyone's physical and mental well-being. We also use high-speed connectivity and smart technology to support sport, art, and cultural activities, helping to strengthen connections across the community. This effort with our commitment to applying technology responsibly and creating sustainable value for the communities we serve.
At the core of our business, our ultimate goal is to continuously provide premium service to our customers. We strive every single day to give our customers the absolute best experience, whether they are interacting with our frontline staff or using our network services. At the same time, we know that a premium experience requires complete peace of mind. We deeply concern ourselves with cybersecurity to ensure our customers and their data are fully protected in an increasingly complex digital landscape. We're incredibly happy and humbled that our ongoing effort across customer service, team excellence, and cyber safety have been recognized by the industry. It gives us, our stakeholders, clear confidence that SmarTone remains a trusted premium brand in the market. I will now pass the presentation to Ada for the financial review.
Thank you, Stephen. I will now take you through the financial performance for the fiscal year 2026. SmarTone reported a growth in both revenue and profits. Total revenue increased by 5.6% to HKD 6.6 billion, excluding the prior year one of income from our Macau operations. Underlying revenue increased by 6.5%, driven by our diversified products portfolio that is mentioned in the beginning of our presentation, as well as increasing demand on the handsets. Underlying EBIT increased by 6.9%, reaching HKD 749 million, while the underlying EBIT margin remained stable at 11%. Reported profits after tax increased by 9.6% to HKD 525 million. Capital expenditure decreased by 20.9% to HKD 464 million, reflecting our disciplined and targeted approach to investments. At the same time, net cash increased by 29% to HKD 2.5 billion, further strengthening our financial positions.
Bearing in mind that we have committed obligations in spectrum cost of around HKD 2.6 billion. As a result, the board was pleased to propose a final dividend of HKD 0.175 per share, making a full year dividend of HKD 0.32 per share, which is consistent with last year. We maintained a strict cost and capital discipline throughout the year. Operating costs decreased by HKD 94 million or 6% to HKD 1.5 billion. This improvement was driven by targeted optimizations and AI-enabled efficiency programs across the organization. Importantly, these savings were achieved while we had continued to invest in customer experience, digital transformation, and future growth. Capital expenditure reduced by 21% to HKD 464 million. This reflects a more efficient and selective approach to investments without compromising the quality and consistency of our network.
Spectrum cost decreased by 2% to HKD 526 million. We also expect a further full year benefits in the coming year as these costs continue to decline. Together, these results demonstrate our continued focus on improving efficiency and directing capital towards areas with the strongest strategic and financial returns. As you can see, the benefits of these efficiency initiatives are reflected in our profitability. Our underlying service EBITDA margin increased by 0.5 percentage points to 55% in fiscal year 2026, and our profits after tax increased by HKD 46 million, or approximately 10% to HKD 525 million. This improvement was achieved while we continued to improve in network quality, customer experience, and our key growth platforms.
Operating cash inflow increased by 5% to over HKD 2.2 billion, supported by our core business as well as results from our diversified product portfolio and disciplined working capital management. This financial strength provides us with flexibility to sustain our network leadership and invest selectively in high return growth opportunities. At the same time, we keep in mind a prudent and strong balance sheet is important to meet the future spectrum obligations. Dividends amounted to HKD 352 million, which will be paid to the shareholders with a full year dividend of HKD 0.32 per share. I will now pass the floor back to Fiona to take us through the outlook.
Thank you, Ada. Looking ahead, the operating environment remains highly competitive. We do not expect market conditions to become any less demanding. However, we remain confident in our proposition, and we are clear about our priorities. On the growth front, we will continue to pursue value-driven growth rather than volume expansion. Our focus remains on delivering differentiated services and quality customer relationships, not competing on price alone. When it comes to operational excellence, we will maintain diligent cost discipline and deepen the adoption of AI to deliver further productivity gains and optimize CapEx. Furthermore, we will accelerate the growth of 5G Home Broadband by strengthening our premium home proposition and leveraging the scalability of the businesses. We will also continue to make targeted network investments that reinforce our market leadership through consistent quality, particularly in the locations and moments where performance matters most to our customers.
From a customer experience standpoint, we will advance AI-powered transformation across our operations to improve customer engagement, sharpen business insights, and enhance productivity. We will continue to tailor our product suite to serve emerging customer segments and deepen our relationship with the premium customer base. Finally, we will continue to leverage the strength and the ecosystem of our Sun Hung Kai Properties Group to deliver value to customers. SmarTone's strategies is built for durability, balancing growth, efficiency, and disciplined capital management. We are building a sustainable competitive advantage, and we remain committed to delivering consistent earnings and long-term value for our shareholders. This concludes our presentation today. Thank you for your attention, and we will now move on to the Q&A session.
Thank you, Ms. Lau, Mr. Chau, and Ms. Lam. Now, we will have the Q&A session. Please raise your question through the text box right under the video screen. Our management will then answer your questions. We'll read out the questions, and they will be answered in the language asked. To make the best use of time, similar or repetitive questions will be grouped together for the management to answer. [Foreign language]
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Second question is could you unpack the specific drivers behind your CapEx discipline?
Thank you for the question. From a cost perspective, I think as I just mentioned, it is one of our very important levers for our overall financial health and financial performance. We will continue AI adoption. I think this is one thing that is an enormous lever in terms of helping us to improve our productivity. We are not saying that we will replace human with AI. I think what we are saying is that we will increase the productivity of our staff in order to capture these cost saving opportunities.
One more thing, I think we have announced that we will be retiring our 3G network in October this year. So next month, we will be retiring our sunsetting, our 3G. It has now a very low single-digit percentage point of customer still using 3G. We are very confident that we will be able to migrate our customers to 4G and 5G respectively. I think with that, we will be able to capture better cost saving as well as to optimize the network efficiency.
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We will now take the last question before concluding the briefing today. [Non-English content]
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This will conclude today's briefing. Thank you very much for joining us today.