HK telcos post tepid results as slow economy takes its toll

Stronger enterprise and broadband numbers and a rebound in roaming have not been enough to salvage Hong Kong operator earnings, filings from HKT and SmarTone reveal.

Both operators delivered tepid results Thursday. HKT, Hong Kong's biggest telco, described it as a year of "tight monetary conditions, slower than expected economic recovery and ongoing geopolitical uncertainties."

It reported full-year earnings up just 2% to 4.99 billion Hong Kong dollars (US$640 million), with revenue 1% higher and EBITDA (earning before interest, tax, depreciation and amortization) advancing 3%.

The mobile business was weighed down by an 18% drop in handset sales, "due to weak overall sentiment and lack of new features to entice upgrades," the company said. Mobile service revenue rose 5%, boosted by 176% growth in roaming as borders re-opened, with consumer outbound roaming reaching 95% of pre-covid levels.

HKT also enjoyed a 10% boost in its local data business from enterprise services including smart city and digital transformation solutions. Pay TV revenue was down 5%, however, due to the higher revenue in 2022 from World Cup broadcasts as well as the soft economy.

Rival SmarTone reported a 4% fall in first-half earnings which, as with HKT, had been impacted by the drop-off in demand for new phones and the faltering economic recovery.

FWA growth driver

Handset sales plummeted 26%, helping drive down total revenue by 11% to HK$3.39 billion ($433 million). Like HKT, SmarTone also enjoyed a roaming revival, with outbound revenue up 64%. Even so, mobile service revenue was off 1%, although ARPU was up 1% to HK$224 ($28.60).

CEO Fiona Lau told an earnings call that service revenue from the key postpaid mobile, broadband and enterprise segments had improved 3%. She said SmarTone had delivered "resilient results despite the challenging operating landscape."

She cited the continued demand for SmarTone's 5G FWA home broadband. This had become "a material growth driver," with sales up 40%, EBITDA jumping 80% and total subs up 40% for the period, she said.

"We have launched this product for about two and a half years now. We would have expected a slower growth. However, if you look at the numbers, year over year, quarter over quarter, we still maintain a very strong growth, both in terms of revenue and customer numbers," she said.

SmarTone said business would remain challenging in the short to medium term as a result of strong mobile competition and the sluggish economy.