HKT Trust and HKT : 2023 Interim Report

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HKT Trust and HKT Limited interim report 2023

STATEMENT FROM THE CHAIRMAN

HKT's performance in the first half of 2023 remained solid, which is a reflection of the gradual revival of Hong Kong's economy and a testament of the Group's dedication to innovation and its customer.

Our consumer mobile business enjoyed a strong head start as travel resumed, which led to a substantial rebound in demand for roaming services. As at the end of June, our 5G customers approached 1.2 million, comprising 35% of our post-paid base.

Netvigator expanded its offerings by introducing the city's first 5000M fibre-to-the-home ("FTTH") broadband service to address consumers' growing connectivity demand. Customer upgrades to our 2500M service continued to gather momentum. Our unrivalled symmetrical uplink and downlink speeds provide a platform to uplift our average revenue per user ("ARPU"). Supported by the Government's initiative to extend fibre-based networks to remote areas, we also completed the construction of the optic-fibre cable to Lamma Island in the first half of 2023.

Now TV's diverse offerings of stellar international sporting events such as the live broadcast of La Liga, exclusive English Premier League, and 4K Formula 1® as well as award-winning entertainment content have driven growth in both residential and commercial subscription against a changing market landscape.

HKT Enterprise Solutions has continued to leverage artificial intelligence ("AI") and cloud technology to assist organisations with their digital transformation, increasing operation efficiency and propelling expansion, especially into the Greater Bay Area. Broadening our 5G applications to diverse industries such as smart campuses and property, we remain committed to our role as a driving force behind smart city development.

HKT is proud to support the Hong Kong Monetary Authority's initiatives in preparation for a potential e-HKD. As part of a consortium, we have been selected to participate in its e-HKD Pilot Programme, utilising our experience and wallet infrastructure to contribute to this important initiative.

For the third consecutive year, we have supported the Consumption Voucher Scheme via Tap & Go. Through extending its partnership with The Club, Tap & Go has created synergy to benefit both merchants and consumers while fostering fintech adoption, particularly among younger consumers.

As part of our efforts to enhance user experience,

the Group has launched a pilot programme transforming traditional phone booths into Smart Kiosks to offer

free connectivity and useful information for locals and visitors alike. We also showcased Hong Kong's cultural talent through HKT x WestK Popfest, the city's largest music festival, as we celebrated Hong Kong's resurgence as a world-class destination.

As an organisation that is deeply rooted in Hong Kong, HKT remains committed to delivering innovative and high-quality services to support the needs of our customers and community, whilst delivering sustainable returns for our stakeholders.

Richard Li

Chairman

2 August 2023

HKT Trust and HKT Limited interim report 2023

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Hong Kong started to witness economic recovery in the first half of 2023 with the Government unveiling a series of initiatives and the reopening of borders creating upward momentum for local consumption and travel-related spending. Leveraging our leading telecom infrastructure and continual innovation to offer appealing customer- centric services, HKT delivered resilient results in the first six months.

Consumer business progress from economic upturn

As travel resumed, our consumer mobile business saw a return in demand for its roaming services, particularly outbound. With top-tier networks from our overseas partners and value-added travel information and assistance, we endeavoured to deliver a hassle-free, quality roaming experience for travellers. This helped drive our outbound roaming revenue in June to 80% of pre- COVID levels and increase our total roaming revenue in the first half of 2023 by 166% year-on-year.

Alongside Hong Kong's economic revival, the public began to engage in more activities, increasing mobile network traffic. Continued improvements to our 5G network have enabled its quality and outstanding speeds at the city's prime locations to meet users' digital lifestyle needs.

This has spurred the growth of our 5G penetration, which had progressed to nearly 1.2 million users as at the end of June, representing 35% of our total post-paid customer base, and further reached 1.27 million or 38% of our post-paid base by the end of July. 5G conversion is even more pronounced in our premium segment, hitting over 45% for csl and 1O1O. As economic recovery gains momentum, we also forecast handset sales uplift as new models are released in the second half of the year.

Post-COVID, Netvigator added to its diverse and complementary range of household broadband solutions, reinforcing its industry leadership by becoming the first in the market to offer 5000M fibre-to-the-home ("FTTH") broadband service. Tapping the sustained demand

for greater bandwidth driven by the permanent shift to hybrid work arrangements as well as the availability of

2.5G-enabled devices and Wi-Fi 6E routers, we stepped up promotion efforts for our 2500M FTTH broadband service. Its differentiating symmetrical uplink and downlink speeds have driven upgrade momentum, creating impetus for average revenue per user ("ARPU") uplift and customer acquisition. The latest equipment is also ready for even higher bandwidth connectivity, enabling seamless future upgrades without the need for on-site visits to enhance efficiency and customer experience whilst reducing our

operational cost. Our FTTH network coverage with 10G fibre capacity and 5G wireless-to-the-home ("WTTH") technology has reached 98%.

Content aggregator Now TV has been building its repertoire in earnest. Featuring three seasons of La Liga as well as Formula 1® and Wimbledon in 4K, the Home of Sports is also exclusively broadcasting the English Premier League, UEFA European Under-21 Championship, FIFA Women's World Cup, and US Open Golf Championship. Now TV has further invested in exclusive award-winning movies, children's favourites and simulcast dramas to appeal to a diverse family audience, boosting subscriber acquisition against a changing market landscape. With hotels planning major upgrades alongside tourism recovery, our penetration in the hospitality sector increased as we saw our commercial subscription revenue grow by 17% year- on-year.

Backed by the Government's Subsidy Scheme to Extend Fibre-based Networks to Villages in Remote Areas,

we completed a dedicated optic-fibre cable connecting Lamma Island, on top of similar connections to Peng Chau and Cheung Chau. Households in these locations are now ready for home broadband speeds of up to 10G.

The network also improves 5G mobile reception while lending itself to cross-selling and upselling for ARPU increase.

Endeavours for smart city and digital economy development

On the enterprise side, we have seen accelerating demand across different industries for our unique integrated fixed-mobile solutions in Hong Kong and mainland China, including the Greater Bay Area. Incorporating 5G applications into smart city solutions such as blockchain, artificial intelligence ("AI"), machine learning and the Internet of Things ("IoT"), we have recorded a 10% year-on-year growth in local data revenue, with widening penetration into smart healthcare, campus, and property management.

Broadening our digital transformation service portfolio, we have integrated connectivity and cloud computing with AI-powered resources and Enterprise Managed Services ("EMS"). These include single-helpdesk service with omni-channel touchpoints as well as modern workplace, connected audio-visual and cybersecurity solutions.

In addition to improving productivity, promoting sustainability and addressing manpower shortage for government

and enterprise customers across different industries,

our services have empowered businesses expanding from Hong Kong to the mainland and vice versa in fields such as retail, financial services and bio-pharmaceuticals.

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HKT Trust and HKT Limited interim report 2023