HKBN Ltd

HKEX:1310

Earnings Call Transcript 2022-Q2

[Unknown Attendee]

Good afternoon, everyone. Welcome for joining HKBN FY '22 Interim Results Investor Presentation. [Operator Instructions] Without further ado, let me pass the stage to our co-owner and Executive Vice Chairman, William Yeung; and co-owner and Group CEO, NiQ Lai. Thank you.

[Ni Quiaque Lai, executive]

Thank you, everyone. Welcome. First of all, before I say anything, let me say thank you to our 4,700 talents. Thank you to our 500-plus co-owners because without all of us these solid set of results would not be possible.

Today, let me start this analyst presentation with something a little bit different. Let me ask you a quiz. What is more powerful, what is more impactful even -- what is more impactful than the invention of the first telephone? Think about it. What is more impactful than the invention of the first telephone? The answer is the second telephone. That's the network effect.

Now when I'm talking about the network effect, I'm talking about beyond our physical network. I'm referring to Metcalfe's law, which states that the power of the network is the node to the power of 2 squared.

If you look at the partnership network that we are developing across our base to bring in world-class partners to both our enterprise and residential base, this is exactly what we're doing. As the partnerships build up, the value to our customers, the value to our shareholders, the value to our partners all grow exponentially.

And how can we do that? We do that because we have created incredible reach over the last couple of decades. In enterprise, 1 in 2 active companies have a monthly billing relationship. That's over 110,000 customers. In residential, we have over 1 million customers, 1 in 3 households in Hong Kong have a monthly billing relationship. This is incredible reach that very few companies can match. And with this reach, we can attract the world's best partners to come and do business together. We make money from -- for our partners, not make money from our partners. And we do this by opening up this incredible base at a very low cost subscriber acquisition cost, or CAC, C-A-C. By doing that, we can bring world-class services at low cost to our customer base.

In enterprise, you saw our last presentation, we had our partners such as Microsoft, Cisco present. This upcoming event, you will see our new partners, additional partners like [ UiPath, ] StarHub present. And this list will grow and grow over time.

In residential, we're working exclusively with Disney+.

Now in residential, we see a lot of upside because Hong Kong is unique. Hong Kong is one of the few countries in the world -- or cities in the world where the incumbent does not offer a single integrated bill across its product line. The local incumbent in Hong Kong likes to split up individual bills for its broadband, its home telephone service, its TV service, its mobile service. You cannot get a single bill because they are afraid if you get a single bill, you get a sticker shock.

In our case, we love it when you see our integrated bill across our entire product range. We call it infinite-play. It's beyond just quad-play because we know every month when you see our bill, you appreciate the savings that you are earning for your family. That's who we are.

The underlying business in our telecom sector is intense but that's just our base. So we have a very intensive base business. But what we're doing is layering on very profitable services on top -- infinite services by attracting the best partners around the world. And you will be able to see this in our numbers going forward.

The last 2.5 years have been tough, not just for us, for everyone. I think in terms of the on and off lockdowns, in terms of the, you can say, the false recoveries that were backed by multiple waves of COVID lockdowns. So it's been start and go, start and go. I believe these are a very solid set of numbers. Whether you look at it on half-on-half or year-on-year, these are green across the board. And we are very proud of these numbers. Once again, I have to thank my 4,700 colleagues for hitting these numbers.

If you look at our dividend per share, we are proposing HKD 0.40 a share for the 6 months to February '22. I emphasize 6 months. This is the same as the full year run rate of -- when we IPO-ed in 2015, when we paid HKD 0.20 for a 6-month period or HKD 0.40 for the full year. So over this period of time, we are -- we have doubled the run rate of our dividend. And that's something we are very, very proud. If you consider the last 2.5 years have been quite tough with the global COVID environment, we have still managed to squeeze a very decent growth from the business.

If you look at our revenue, on the revenue side, focus more on the underlying. If you were to take some anomaly such as a sale of our 60% joint venture to StarHub, which is really a doubling down of our regional presence. So it's not really a sale. It's bringing in a strong partner in the form of StarHub to work together on the regional presence. And if you look at excluding our more volatile and very, very tiny margin wholesale IDD business, our underlying telco and SI services is essentially flat. Around flat for the year and maybe down slightly half on half. So it's a solid business.

Now what is more incredible is actually the EBITDA. If you look at the EBITDA, you can see a clear J-curve. We rolled out what we call our Enterprise 2.0 restructuring at the beginning of this year. So 6 months into the restructuring. Because the first couple of years of integrating JOS, which we acquired in December 2019, we struggled. It's very hard to integrate a company that's almost the size of us when we bought it. We went from about HKD 6 billion to HKD 10 billion in revenue when we're trying to do it all from home.

So imagine meeting 2,000 new colleagues on Teams. Imagine trying to run workshops and programs all on Teams for the very first time. So we did struggle. But in ES 2.0, Enterprise Solutions 2.0, we call it the second version of our restructuring, I think you'll start -- we are starting to see good momentum.

As I mentioned, the underlying business is highly competitive, but that's okay because this is just our foundation. What we would use to drive growth is layering on the partnerships. And William will go through in detail the partnerships that we have in the pipeline because there is so much potential in what we do.

We are the combination of 5 companies over the 5 last years. And we have taken the revenue from HKD 2 billion to HKD 10 billion. Now if you imagine 5 companies worth of management teams, 5 companies worth for support functions, 5 companies worth of overhead, we now only have 1 set of these. So that is where a lot of the basic low-hanging fruit in terms of cost savings is coming from.

But cost savings is limited in terms of what you can drive, but revenue synergies are unlimited. With this 4,700 talent base that we have, we can easily layer on more and more services. With 1 million households in residential, we can easily layer on more services, such as our incredible run with Disney so far since our launch in November. And that's why they chose us to be the exclusive partner in Hong Kong because we have incredible distribution power, both in residential and in enterprise.

So we expect the core business to be tough. You can see the red, but we expect our focus would be on subscriber growth because once you have the subscriber growth, we can layer on additional services.

Going back to Enterprise business. Our Enterprise Solutions business today, the ARPU is only around HKD 3,000 per month. But if you look at our SI, system integration business, per subscriber, that's closer to about 10x that ARPU. So what we're going to do going forward is to upsell our warm existing 110,000 customer base, more and more SI services, partnering with world-class vendors.

This is our enterprise business and our residential business. You can see they're solid. It is not easy to grow the underlying business, but I mentioned that's not the base for growth. The base is defend the underlying competitive business, but to layer on more and more high gross margin businesses of the same distribution channels. Think about it, our salesperson servicing a corporate account can easily sell more services without doubling the number of salespeople.

We are leaner and fitter today. Over the last 6 months -- over the last 12 months, we have taken the headcount from almost 5,700 to 4,700. And this will flow through over the next couple of years in terms of efficiency.

We are the best of breed. So if you imagine 5 companies, and we select the best of breed amongst the 5 to stay, these are the 4,700. We like to be lean because that way, we can pay more. We have less salespeople selling more, we can afford higher commission per salespeople and attract better people.

Also, moving on to CapEx. With the integration of 3 of the biggest alternative networks in Hong Kong, being HKBN, New World Telecom and WTT, we are seeing significant CapEx synergies today and going forward.

Our debt is manageable. It is 4.7x net debt to EBITDA. We plan to drive this down by growing our EBITDA.

With that note, I'll pass to William. Thank you.

[Chu Kwong Yeung, executive]

Thank you, NiQ. I echo NiQ to first say big thanks to our talents in Hong Kong and outside Hong Kong to help us to deliver a very solid first half of financial year '22. In addition of that, I also want to thank our partners, our business partners.

Let me use a quote: tough times never last, but true partners do. We, HKBN, is so happy and lucky to have true partners helping us to grow our business together. In the last 6 months, we entered into partnerships with Cisco, Microsoft, Disney+ and PwC. You have all seen them coming here 6 months ago, talking about our partnership. And true partners don't talk, true partners walk.

So during the past few months, we did have very successful growth in the residential markets through Disney+. In the enterprise markets, we do have some exclusive offer from our partners or even having partners joining us to have skin in the game for common KPI.

So going forward, we will have more and more true partners like what NiQ described. So today, we will have 3 Hong Kong being our partner of MVNO, the mobile. We have StarHub being our trading partner in Southeast Asia, covering Singapore, Malaysia and Hong Kong. We also have UiPath being our partner in the automation area. So let's hear what they say.

[Sing Fai Koo]

3 Hong Kong is thrilled to collaborate with Hong Kong Broadband Network to rock the 5G market in Hong Kong. Our outstanding mobile network provides Hong Kong Broadband Network with the most reliable network connectivity, highest 5G availability as well as a rich portfolio of mobile and data services. 3 Hong Kong fully supports Hong Kong Broadband Network with the most comprehensive mobile plans while increasing our 5G penetration through Hong Kong Broadband's 110,000 enterprise customers and 1 million residential customers. Together, we work tirelessly to drive 5G adoption that enables Hong Kong to step up as a global smart city with world-class applications.

[Nikhil Oommen Eapen]

For us, at StarHub, as many of you know, with our DARE+ transformation we're really focused on bringing together cloud cyber and cloud connectivity. And we want to do it in scalable, agile digital platforms. So this is the 3 Cs as we call it. So as we build connectivity platforms across Singapore and Hong Kong, we also intend to build together solutions across Singapore and Hong Kong. Now, not old school solutions. But, again, solutions that seamlessly bring together cloud cyber and cloud connectivity and do that for regional enterprises. Now this is an ambitious proposition as we both know at StarHub and HKBN. But one that we think, together, we can do. So all in all, we could ask for no better partner than HKBN in this journey. Our aggressive challenge and DNA is one and the same between the two of us. Our focus on delivering new value to our customers is one and the same between the both of us. And our focus on learning the very best from each other and growing our partnership is one and the same between the both of us.

[Horace Chow]

Enterprises are looking at how they can increase their productivity, trimming down their unnecessary processes and operations, or even the cost factor that is not needed, and put those resources back to the real innovation, new capability for the future growth of the businesses. Hong Kong Broadband has a great reputation in the market for their agile operation and also their business creativity. I'm actually very excited to hear and to see that Hong Kong Broadband is now very actively into the enterprise automation market. Not only they are trying to put into their automation capability into their own massive operation, but they want to use this learning and experience to help their customer, to help their partner to innovate, to automate. UiPath is a leading robotics company in the world. We are so pleased, so happy to able to have this opportunity to work with Hong Kong Broadband, to help enterprises to get into this new wave of enterprise automation and become the leaders in the industry. I have the confidence that Hong Kong Broadband and UiPath will form a new driving force in Hong Kong and greater China region to help our customer and partner to enter this new journey of enterprise automation.

[Chu Kwong Yeung, executive]

So having heard what our partners described about how we are going to go big together in the coming years, let me further elaborate.

Like for 3 Hong Kong,, being our partner on 5G, our promotion will extend from the residential market to the enterprise market. So our team, including myself, are having frequent meetings with 3 Hong Kong's team, working out different offers. And the next wave, we'll be targeting our enterprise customers, which is talking about existing 110,000 corporate customers. And of course, we will go after some new customers as well.

You can imagine that today, we don't have any footprint for 5G penetration in enterprise market. So every single new SIM card in the enterprise market will be our net growth from this new revenue stream. And no one can speak louder than I, too. Why? I have been in HKBN for 16 years. Before that, I have been in local mobile retail for 10 years. So I know the industry well. I know how the shareholders, the management play about the game. But now the difference is that today, we are executing our business plan as co-owners, not the employees having different agendas among our competitors.

Second one, StarHub. Nikhil explained or shared his thoughts. We both have our customers like Hong Kong customers having footprint in Singapore or Malaysia and they, StarHub, also have their customers having footprints in Hong Kong as well. So the partnership or the JV through the JOS is the beginning of our new joint expansion plan in the Southeast Asia area. We don't talk. We walk.

Both StarHub and HKBN have signed a multiyear contract such that each year we committed to buy from each other the telecom or IT facilities locally in Hong Kong or in their [ turf ] Singapore or Malaysia such that we will grow our overseas revenue through partnering or mutual purchase of our facilities. That is the way we grow our business together. Very unique, powerful. Go big. So for the other partners, I will just mention simply that they have a skin in the game together with us such that we help them opening up our customer base to grow their service or products in our base. And in return, they also help us to promote or bundle our fixed broadband service to the corporate customers as well. So this is a win-win from the 2 partners, and we will go big together in the enterprise market.

So residential market, you will be familiar of our Internet page. Having the fixed broadband and then the OTT, which includes Disney+, Netflix and also myTV SUPER, the local contents, and HOME+, more than 20,000 SKUs of popular choices and also 3 Hong Kong's 5G services.

What I want to highlight is that 5G, HOME+ or OTT are all tools to support the growth of our core fixed broadband or fixed telecom services in the residential and enterprise market because this is our core, having 80% margin. So whenever we do bundle, we are not aiming at making profits from like 5G, HOME+ or OTT. But all this, we will offer as a bundle at a very competitive price to help us to grow our subscriber numbers in both enterprise and residential, and also the monthly fee as well. That is the way how we grow our business.

And I want to highlight again, we are executing this as co-owners, one HKBN. One bill for all this, for the total company's P&L.

I share this PowerPoint, actually, how we think, how we act. I don't fear any competitors that will copy us because they cannot. Our competitors, for the management, that is employee mindsets. They don't have the authority of co-owners. So because of that, they have the silos. They cannot use this infinite-play like we, HKBN, here to go big with infinite-play.

So I'd like to spend some more time to update our investors, our shareholders and also our analyst, either buy side or sell side. The true picture is that in the telecom industry, no matter broadband or mobile, price wars never end.

When you hear somebody say the market is now quite calm, no competition, no price competition, that is false facts. The true fact is that in the market, there are always price wars. Never stop. But the price wars, depending on which time, sometimes initiated by A, followed or [ contacted ] by B or C, sometimes initiated by some others. But price wars in both fixed broadband and mobile have been here for decades and will continue.

Look at this fixed broadband by the left-hand side. You can see that Hong Kong T, they will sell 1 gig service at HKD 108 on the street. Of course, they will mention that this promotion is only for a certain period, certain location, something like that. Please send your friends or your relatives that out of those locations, out of timing -- out of the timing to see if they can still get this offer. I can tell you, 90% chance or above, they can still get these offers.

For example, when there are [ tariff incentives ] for student plan, anybody not being a student can still get those [ tariff ] plans. That is the truth about the competition, but the competitors are playing single pay.

One more PowerPoint. Before I talk about the left-hand side of the table, look at the right-hand side, particularly when you guys want to do homework, write report. Please give the true market price on the street at true offers and not the listed price at the website, which is only for display, for lazy guys sitting in your room in a table to do the very mediocre report.

The true fact is competition or price wars always happen in the street in both fixed and mobile. On the fixed side, I will say we, HKBN, will continue to remain being the most competitive one. Most competitive, that means we don't hide anything. Our price at the street or at website will be the same. Unlike our competitors, they will be different. They will be different. So -- but we are doing the actual battlefield fight.

And why do we want to continue fighting the price war or being most competitive? Very simple, I repeat again, our target is Hong Kong T. Hong Kong T has the biggest market share in each category of products or service. On each product or each service, their price -- their single unit price is higher than ours on average. On that, when we fight price war, we're going up to grab more market share.

For example, in the enterprise area, we, HKBN, today, even though we have acquired New World, acquired Wharf T&T, acquired JOS, our market share of revenue in enterprise is still less than 20% as of today. So they are 80% waiting for us to grab. So where are these 80%? Majority of them in HKT. So we are going to continue to price war to offer better value for money to grab their market share to help us.

And what can they do? They can do nothing, because if they react, we will help them magnify their [ matter ] to all their customer base. So that all the customers will go call them and then reduce price. Then they can no longer deliver the same dividend to you guys. That is the way we fight the war.

Okay, 5G on mobile. Here, again, with the close support and partnership with 3 Hong Kong, today and tomorrow, we will continue to offer the best. When I say the best, look at the table. No matter low usage or high usage, our monthly fee is lower than the market's 4G or 5G monthly fee. But we are talking about 5G speed and even more data, like 10 gig versus 5 gig or 8 gig. Even for the thereafter data or the speed, we are talking about 500 megabit per second, enough for you to go to YouTube, while the others, they cannot.

And look at the high usage one, $149. 100 gig. Even China Mobile Hong Kong are charging the same. We do have something on the right-hand side, the HOME+ coupons and also the OTT contents. So this is what we have been doing and what we will continue to do.

Let me share with you some figures. We have been selling this HKD 68 plan at the Chinese New Year or slightly more than 2 months together with the $149. So for a period of slightly more than 2 months, we already got about 19,000 5G customers. 19,000 within, say, 2.5 for 5G. And ask yourself, ask your friends, ask your family members, are they 4G or 5G? Majority of them are still on 5G (sic) [ 4G. ] So there's a huge market base for us to target to go for 5G with the best value for money. That is how we want to go after.

So for me or for us, our team, for the coming year or next 12 months, I think we will at least get like 100,000 5G customers very easily. Why? Because even 100,000, it is only 1% of 10 million postpaid customers in the Hong Kong market. So it is really very low-hanging fruit for us.

And let me repeat 5G or Disney+, no matter how competitive they are, they are going to help our fixed broadband business. I'll share with you another figure. For the 5G, all of those like 19,000 customers, majority of them or around 60%, 61% of them are bundled with our fixed broadband customers. So it's going to help our retention, renewal of contracts or even growth of the combined ARPU for both fixed and mobile. That is our edge over the others.

Like Disney+, this is the exclusive OTT, premium OTT that we have in -- over for the past few months. We already have more than 140,000 customers joining the Disney+. And all of them are on bundle. Why? Because simply, this agreement between us and Disney was that we need to sell it by bundling with the fixed broadband service because Disney+ want to replicate the successful story overseas like in Singapore to Hong Kong through HKBN because bundling fixed broadband service with OTT has been proven a very successful business model overseas. And now, in Hong Kong, with HKBN having proven record in growing, like having more than 700,000 myTV SUPER OTT, our local content, in the last couple of years. We are the one chosen by them as their exclusive partner to help them grow their OTT content. So we are helping each other. And you can see that the OTT, the mobile, all along are going to help us to grow our 80% margin fixed telecom business.

So this is the last page about the competition. Just want to let you notice that no matter for mobile or fixed, we'll be very aggressive. And we always have something unique and exclusive like Disney+, like HOME+. And HOME+ is our JV. So we can always having HOME+ and HKBN to co-subsidize each other to help the growth of both. And we are very happy on the growth.

Okay. I like to share with you about ESG. ESG is a hot topic today. But for we, HKBN, we IPO-ed in year 2015, but we already started our ESG journey in 2016 by inviting a ESG consultant to help us such that we will work more environmentally friendly with less energy consumption. But at the same time, improve our business operation such that with 5 -- 4 to 5 years' effort like in year 2020 or year 2021, we already went out and do the benchmark through Hang Seng or through MSCI and then they grade us as AA. AA is the second tier because AAA is the first tier. But we are the only one having AA in 2 categories, different years when compared with the other players in the telco industry. But Hang Seng or MSCI to us is good, but not great. When we want to go from good to great, we go global.

So we are now having internal implementation actions or initiatives such that we will form a -- we will very soon form an ESG committee at Board level. We will also go after benchmarking with international global standard like SASB on those benchmark, such that we'll do even better than today. And we hope to have to -- the CO2 emission cut of 40% by financial year '25. That is just 3 years or 36 months from now. So this is an aggressive action plan to serve you, please take a photo and then further monitor our progress.

Whenever we do something, we will try -- can we replicate and then create a share base or a value added to our partners or enterprise customers? Like what I said, in year 2016, we invited the ESG consultant to help us. We did not need to pay any CapEx. The consultant will pay the CapEx for us. The agreement is on 5-year such that the energy saving or the reduction of the dollar amount in the electricity bill, the savings, the net savings, will be shared with this consultant, like they get 70%. We got [ 30%, ] something like that. So in the past 5 years, we already have net savings, to us, is HKD 1.3 million, while HKD 2.9 million is sharing to the ESG who, through the ESG consultants, who are paying their own money or pay money through their fintech investors into us.

And then our upside is for the -- our net savings is for the coming 4.2 -- HKD 4.2 million in the next 5 years on the energy saving of only one location, Trans Asia Centre where I am standing here today with the NOC, Network Operating Center, here, which is consuming high electricity. But we still have more locations that we can go after this.

But what we think is that, how come so good? We have people helping us pay us CapEx and then help us saving money. They just want to do the revenue share from us. So we already partnered with this ESG consultant such that we will go after selected high energy spending ES customers we are serving today and then we will add this value to our customers.

Again, this is value added to our customers or new enterprise customers. But ultimate goal is still to get the bill, the revenue for us or the spend of telecom and IT from them.

Last page, recap. 6 months ago, we announced the commitment of co-ownership 4, which is a 3-year plan targeting AFF per share of $2.70 to $3. And if you can recall, the usual dispute 100% of AFF as dividends. So logically thinking is $0.80, $0.90 and the $1, we will hit the lower margin of $2.70 for our CO4.

So now financial year '22, we already passed the first half. First half is $0.40. You look at the commitment of our co-owners, look at the power and the contribution from our strategic partners, our 5G offers, our exclusive HOME+ bundling or even the value added from ESG, all these are very unique for us, and we are very upbeat in full speed to grow our business.

This, together with the page that NiQ shared with you on the DPS deck, we [ distributed ] since our IPO in 2015, we are doing what we promised, delivering what we promised. In IPO year 2015, we only had 4 words to investors and shareholders: high growth, high yield. If you look back for the DPS for the past 6 or 7 years, look back for the revenue EBITDA growth, we are delivering what we promised before, and we will continue to grow. Thank you. NiQ?

[Ni Quiaque Lai, executive]

Yes, I think your mic needs to be -- as William fixes his mic, let me just recap. At Hong Kong Broadband, we love competition. The tougher it is, the more blood there is on the street, the better we are at playing the game. And I'm saying this with a 30-year track record.

If you look at our heritage, we started -- we are actually celebrating our 30-year heritage this year. We started our callback service back in '92. And for a period of time, there were literally hundreds of callback operators in Hong Kong, but we dominated. We reached about 30% market share in a market of hundreds of callback operators.

In residential, we started our business in year 2000. We were 1 of 5 licensed operators. The other 4 have gone bust. Today, we have about 36% subscriber market share in broadband.

In enterprise, I would say we really started in November 2019 with the acquisition of WTT and JOS. And for the last couple of years, we have struggled a little bit in terms of integrating that during COVID. But I would say with confidence, going forward, the restructuring that we implemented at the beginning of this financial year will pay dividends. We are confident that the second half will be as good or better than the first half. And that's our outlook going forward.

Do you want to add anything?

[Chu Kwong Yeung, executive]

Internally, in fact, we started what we call ES 2.0 since the beginning of this financial year, i.e., in September last year. So we shift more focus on the high-margin fixed telecom services, which are helping us a lot to grow both EBITDA or AFF. And of course, we also streamline what we want or what we don't want. For example, in the SI industry or the JOS area, we basically said no to certain business or certain jobs because all those jobs or business are very low margin. Wed rather redeploy our manpower resources or our strength for high-margin areas.

Having said that, we want to make it clear that we won't chase for the revenue. We chase for the maximum and growing GDP and more focus on the low-hanging fruits of fixed telecom services. That is what we are doing. But again, simple way is go big together with our partners in both enterprise and residential.

[Ni Quiaque Lai, executive]

Now we have [ come down in the ] business a lot better over the last couple of years. Let me give you a specific example of what we can do that others will struggle to match. For example, if you're looking to buy 1,000 laptops, we can offer 1,000 laptops at below cost to you as long as you switch over your existing Hong Kong telecom spend on telecom services to us at the same price, at the same SLA. And if you do that, that's an 80% gross margin for us. So the end customer is not paying anymore, but you're enjoying laptops at below cost. That's what we can do. That's what other companies will have struggled to match. So competing is what we love doing.

On top of that, if you look at our reach, a typical multinational global best practice coming into Hong Kong will spend somewhere between 20% to 40% on subscriber acquisition costs or customer acquisition costs. We can do that for you, on your behalf, as many of our partners, for way below that cost. And that's how we do a win-win.

Let's move to questions.

[Unknown Attendee]

Okay. Thanks for sharing, NiQ and William. So we'll start the Q&A session now. First question is from Sara of UBS. How should we think about the 9% plus growth in AFF? Besides lowering financing costs and one-off premium pay last year, tax and lease payments are also lower than last year. Meanwhile, working capital remains meaningfully positive. May I ask what's the trend going forward? And is there any guidance for the full year dividend?

[Ni Quiaque Lai, executive]

Yes. So there is a lot of timing variances the first half. That's why normally, if you look at our previous history, we paid about 120%, 130% of AFF in the first half and then normalize back to 100%. This year, because of the timing difference, we are only paying about 80% of free cash flow in dividend for the first half, and we expect to pay 100% of the full year as the timing difference normalizes.

The general outlook, there's no specific guidance because it's very hard to predict where COVID would land, but we expect the second half to be as good as the first half or better.

[Unknown Attendee]

Okay. Second question is from Neale of HSBC raised in 2 parts. How big of an impact was the disposal in the Enterprise Solution service revenue decline of 12%? Maybe I'll answer the first part.

For the disposal of JOS Singapore and Malaysia, it contributed about 2% of the drop, and the remaining 10% is on the low margin wholesale IDD business.

The second part of this question is, excluding this, what is your outlook for the full year Enterprise Solutions revenue? How much of an impact has the extensive lockdown in 2022 had on this part of the business?

[Ni Quiaque Lai, executive]

So Neale, I think the momentum -- the wheels are starting to turn on enterprise. Since restructuring, we have restructured the sales team. We have simplified the commission with the aim of paying more commission for higher performance. We have downsized and reduced the underperformance, et cetera. So we are more lean today than a year ago. And I think we are rightsized. So we expect the second half, similar to the overall business outlook, the second half to be as good or better than the first half.

[Unknown Attendee]

Okay. Third question is from Harry of DBS. What was the reason for enterprise and residential ARPU decrease? What is management view on the future trend? Does the company still maintain the target of 1 million residential broadband subscriber by the end of the financial year?

[Chu Kwong Yeung, executive]

Okay. I always repeat my version to discussion about ARPU for many years. Please do not look at ARPU as the single indicator for growth because ARPU, up and down, is a single data. We should use -- we should always use ARPU times subscriber number. So if you have a track record of our performance over the last 10 years, even since 2012, we always say we are zigzag. The price will increase or decrease over time. But the ultimate goal is to get higher growth or increase of the total service revenue, because total service revenue is the result of subscriber number times ARPU.

So when we have ARPU drop, basically 2 reasons. One, we proactively drop the ARPU because we want to initiate a price competition to grab more and more market share. And then, as far as the net resulting service revenue is higher, then we go after that. Of course, we also need to adjust the commission downward as well such that we grow the revenue, we also grow the EBITDA. That's the way we say.

Another point for price cut or the lower ARPU is we actively reduction because of the, like worst economy in Hong Kong, something like that. So the -- I will say, the lower ARPU, no matter it's enterprise or the residential market, in the last 6 months, it is a mixture of both.

But looking forward, like what we just shared, our price will be very competitive, but we will expect a huge growth of subscribers to help us to grow more subscribers in both enterprise and the residential area.

Back to the question of 1 million target. We still maintain the 1 million fixed broadband customers in our central market as our target. But to be honest, the time will be deferred by 6 months or even 9 months from August this year. Why? Because in the last 6 months, in fact, our price -- I mean, on the street, acquisition price was not as aggressive as our competitors. We only decided to lower our price, even lower than the incumbent is -- by the beginning of March. So it's going to take some time for us to achieve the 1 million customers.

But at least we are seeing the 5G and also the Disney+ very effectively helping us to retain our customers. So in other words, less churn or more higher retention rate will also increase our customer number and getting us close to 1 million residential subscribers.

[Ni Quiaque Lai, executive]

Okay. I think let us conclude. Rather than listen to our words, I would say follow our bank account. And if you look at William and I, together, we put in about HKD 25 million in topping up our CO4 program as well as 100% rollover of our existing equity from CO3 into CO4. And I think that says -- that action says more than words. Thank you. Thank you very much.