Smartone Analysis

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Chairman’s Statement Management Discussion and Analysis Directors’ Profile Report on Review of Interim Financial Information Condensed Consolidated Profit and Loss Account Condensed Consolidated Statement of Comprehensive Income Condensed Consolidated Balance Sheet Condensed Consolidated Cash Flow Statement Condensed Consolidated Statement of Changes in Equity Notes to the Condensed Interim Financial Statements Other Information

SmarTone Telecommunications Holdings Limited Interim Report 2009/2010


(Financial figures are expressed in Hong Kong dollars)

I am pleased to report the results of the Group for the six months ended 31 December 2009.

Financial Highlights
Total revenue decreased by 7% to $1,810 million, compared with the same period last year, reflecting lower handset and accessory sales, and a 2% decline in service revenue. Earnings before interest, tax, depreciation, amortisation, impairment loss and loss on disposal (“EBITDA”) improved by 7% to $517 million as a result of the reduction in interconnection charges and cost control measures. Profit attributable to equity holders increased by 112% to $111 million. Earnings per share increased by 125% to 20.7 cents. The Group’s results included two non-recurring items comprising of accelerated depreciation and impairment loss in respect of fixed assets at its Macau operations; and deferred income tax credit. Excluding the impact of these two items, operating profit grew by 49% to $139 million and profit attributable to equity holders of the Company grew by 69% to $88 million.

In line with the Company’s dividend policy of full distribution of profit attributable to equity holders excluding extraordinary items, your Board proposes an interim dividend of 17 cents per share.

Business Review
Hong Kong
Service revenue recovered from the low levels in the second half of 2008/09, but remained 2% below the same period last year. Local service revenue was stable as the growth in data service revenue more than offset the decline in local tariffs. Data service revenue increased by 23% year-on-year and accounted for 33% of service revenue during the period. Roaming revenue recovered from the low point in the second half of 2008/09, but was still below the levels before the onset of global financial crisis in the same period last year. Handset and accessory sales, net of handset subsidies, dropped by 42%, as a result of lower volume of handsets sold and lower average selling price. This reflected reduced local market demand for new handsets and higher handset subsidies. Total customer number increased by 8% to 1,231,000 as of 31 December 2009, of which just over 70% were postpaid customers. Postpaid churn rate improved to 1.5% from 2.0% in the same period last year. Blended ARPU improved to $214, compared to $210 in the previous six months, but was still lower than $230 for the same period last year. SmarTone-Vodafone’s strategy is to create and deliver unbeatable customer experience through outstanding network performance, compelling and differentiated services and unrivalled customer care.


SmarTone Telecommunications Holdings Limited Interim Report 2009/2010

Our HSPA+ network is already 28.8 Mbps ready, and consistently measures better, in terms of speed and stability, than other networks in Hong Kong. Our backhaul is now fully upgraded to all-IP on fibre, enabling us to increase capacity quickly and more efficiently as bandwidth demand increases. Your Company’s preparation and investment has proved timely in accommodating comfortably the dramatic increase in smartphone, mobile and wireless fixed broadband usage, while still maintaining our quality benchmarks. Our superior network performance is now increasingly recognised by customers and the wider market. Continuing our focus in offering unique and demonstrably superior services and applications, SmarToneVodafone...
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