HKT Trust and HKT Limited (6823) Earnings Call Transcript & Summary

Good afternoon, and welcome to the HKT 2020 Annual Results Presentation. Presenting today will be Susanna Hui, Group MD; and Evan Wang, CFO. We will start with the presentation followed by Q&A. And with that, let me turn it over to Susanna.

Good afternoon, ladies and gentlemen. I'm very pleased to report a year of resilience and stability at HKT, despite the unprecedented challenges we faced during 2020 as we continue to provide the uninterrupted and innovative services to Hong Kong, keeping everyone, individuals and business included, connected and together. I'm happy to report that our AFF increased to $690 million for the year on a very stable service revenue of USD 3.8 billion. The Board earlier today recommended a final distribution of HKD 0.497 per SSU. So together with the interim distribution, the total payout is HKD 0.7107, implying a healthy yield of 6.9%. This slide shows the challenges we faced and met and the opportunities now and ahead. By now, I'm sure that we have all got used to the anti-epidemic measures adopted both locally and around the world in face of these multiple waves of COVID-19. Obviously, these measures have posed significant challenges to the local economy. The impact on roaming was particularly severe as the world basically came down into a global lockdown. The drop in overseas visitors as well as the social distancing requirements have hit sectors, in particular, the retail sector, the F&B and hospitality, transportation and so on. The economic contraction has forced businesses, both large and small, to downsize or even close down. And this meant some of the line terminations for us as well as some projects put on hold. Having said that, we were able to absorb these shock waves and come through relatively unharmed. In fact, with these challenges, we see opportunities arising from the new normal. With people spending more time online, demand for reliable network quality becomes all the more important for both consumers and enterprises. And to accommodate and capitalize the growing trend of e-commerce, virtual office, home entertainment and so on, the new normal has also accelerated the digital transformation momentum of the enterprise side as only through turning digital can businesses survive and thrive. Let's look at the financial impact of some of these impacts. Specifically, you can see here from this slide, that the drag to top line is around USD 140 million downwards from the COVID-impacted areas. The major component, of course, is the lower roaming revenue, which dragged down mobile service revenue by 8%. Just now I mentioned about the SME closures and business consolidation. It also led to a 5% drop in the LTS side, the local telephony. Slowdown in CPE projects in the hard-hit industries, in particular, led to compressed margins as well. But if you look at the slide here, you can see that this is more than offset by the growth areas, amongst which demand for fiber upgrade and WiFi led to a 3% growth in broadband. Digital transformation projects and other Smart City initiatives, which I will give you more details later, led to a 10% increase in data revenues from the enterprise segment. On the international side, we also registered a 4% growth. And the -- our new business initiatives, in terms of the digital business, surrounding The Club, our loyalty platform, as the center of the digital ecosystem, though in the early days, have already started to make a contribution and increased by around $10 million for the year as well. So revenue, excluding the mobile product sales in 2020, increased to $3.82 billion. And if we are to exclude the impact of roaming, service revenue would have gone up by close to 3%. Turning to this slide, some sharing of the interesting data points in the COVID-stricken 2020. As people stay home longer, the overall Internet traffic on our fixed network rose by 65% during daytime and 49% during night time. So it's quite a significant jump. Relatively, on the mobile network side, actually, the jump was less obvious. It was just 20% -- 20% to 30% increase. Now whilst bandwidth usage for social media, if you look at the slide here, increased, it was up by 24%, the bandwidth usage for online streaming was up by 100%. And you'll be surprised to see the corresponding usage for virtual communications for both work-at-home or study-at-home surged by 54x. Not 54%, it's 54x. And to support this, obviously, people and business simply must turn to the most reliable broadband network. And where can they find the most reliable broadband network, obviously, is HKT. HKT has the most comprehensive fiber infrastructure across Hong Kong, which, recently, together with the 5G rollout and correspondingly, the WTTx technology as well, added together, we have covered almost 95% of the households. And this, of course, is supported by our extensive international network to ensure low latency and speedy access, not just to local sites, but also to overseas sites, and this is important to the customers. So despite this massive growth in traffic last year, we are very proud to say that we handled the search without any material slowdown in network speeds at all. Turning to the next slide. So we saw a continuous net gain in terms of broadband customers during the year, despite very competitive market that we are facing. Churn was kept low and stable at 0.8%. And more importantly, we saw a 7% growth in our Fiber-to-the-Home as people rely on PON, the fiber and high-speed broadband for their bandwidth-heavy applications. And these days, with the whole family at home and each member occupying a room or a corner for work, for study, for entertainment, home WiFi has become a must. Some 21% of our customer base is now using home WiFi solutions, including different types of routers, providing an ARPU uplift of an average of $90. On the B2B side, property developers are also responding to this rising demand for high-speed broadband and home automation. And correspondingly, we saw a very significant rising trend of contracts to help property developers to preinstall our Smart Living solutions, automation in their new residential developments. And we have, to date, secured over 140 projects, totaling more than HKD 300 million. Next is the slide on our enterprise trusted partner. On the enterprise side, HKT is a trusted partner for, obviously, reliable connectivity, resilience and digital transformation solutions across different industry verticals. So we have included some of the new wins here in the year 2020. On the left-hand side is the retail sector, the smart retail. We are pleased to share with you that we have won a contract from Chow Tai Fook, where we are deploying a managed network solution across their 4,000 stores in China with intelligent service apps on top as well. In the fintech sector, as the banks are turning digital, we are also working with Fubon Bank in Hong Kong to develop their mobile banking app, which will allow remote account opening and eKYC. In the property space, we are working on a project for a landmark retail and office campus near the Hong Kong Airport to deliver a lot of the smart systems, including, obviously, footfall tracking, video analytics, IoT platform and so on. And we are pleased to share here that the -- our commercial team has secured new contracts worth a total value of more than HKD 3.8 billion in the year 2020, which is not just one-off, but would also provide a long tail to support the revenue going forward in the years to come. Next slide is on Smart City initiatives. So on top of the private sector, HKT is also working very extensively in support of the government in terms of the Smart City initiatives. For instance, under the infrastructure, we have won multiple projects, such as with public hospitals to deploy 5G infrastructure to enable advanced health care applications. We are also working in-hand with the government to extend fiber to remote villages and to outlying islands as well. And under the Smart Mobility initiative, we are in the middle of installing the new-generation parking meter system for the transport department. This system will allow drivers to identify the locations and occupancy status of metered parking spots and top-up remotely using multiple means of payment. At the end of January this year, 2021, about 200 new parking meters have been put in place. And obviously, we have recognized some revenue in the year 2020 and in the coming year 2021. The remainder of the 12,000 new meters is targeted to be installed by first half of next year. HKT is also responsible for operating and maintaining these parking meters, which will bring revenue -- recurring revenue for the coming years. And during the year 2020, we were also awarded an extra contract in terms of Smart Mobility to deliver real-time arrival information system for green minibuses. And this system will cover thousands of vehicles across hundreds of operators and routes territory-wide. In the area of autonomous vehicles, we have been trialing Vehicle-to-Everything technology in the field with our partners as well. So a lot of these projects are still in the pipeline, and we expect that there will be more opportunities to help turn Hong Kong into -- our Smart City ambitions into reality. Next slide. This slide here is basically on our international business, PCCW Global. PCCW Global also experienced the same trends in terms of the international connectivity as in the local scene. Obviously, with the world coming into a total lockdown, we experienced a significant uplift in terms of network traffic, in both voice and data, and hence, we saw global business revenue up by 4%. At the same time, enterprises are moving their applications to the cloud. And we have created this new platform called Console Connect, which enable users to automate their network and cloud connectivity. And the unique feature is that this would allow users to self-provision global Internet access to an on-demand usage basis. And we think that this has the potential to facilitate nonlinear growth in the future. Turning to our mobile business. Competition remain intense, particularly in the low-price segment. And obviously, given the weak economy, consumers will be very price sensitive. Nevertheless, we are pleased to share with you that we managed to achieve an increase in terms of postpaid customers to 3.2 million. In particular, the 1O1O customer base continued to expand by 3% year-on-year, reflecting, indeed, a very strong customer demand for premium network and premium customer service. Our churn rate continued to improve to 0.9%, attesting to our effective retention strategy and personalized digital marketing efforts, in particular, through our retention program and through our loyalty program, The Club, which I will share with you more details later. Roaming revenue, as we have shared before, extended its drop in the second half. We have the -- in terms of its proportion to the mobile services revenue, we see that it continues to come down from the 8% in first half to 3% in the second half. The initial uptick of our 5G services has been very encouraging, especially post-iPhone launch of the 5G model in late October. As a result of that, local revenue -- local mobile services revenue surged by 23% half-on-half, and exit local ARPU increased to $184. So next slide. Some more update on our 5G rollout. We have been progressively expanding our coverage. And currently, we have the most comprehensive outdoor and extensive indoor 5G coverage in Hong Kong on an NSA basis. HKT was also the first one to bring 5G underground to provide 5G coverage along the 6 major MTR lines running through the core districts of Hong Kong, seamlessly connecting over 60 stations. And the coverage is not just on platform concourses, it also covers tunnel as well as train compartments. So it's real full coverage in the MTR station. And in fact, we are the only operator in Hong Kong to deploy dedicated spectrum for 5G in the MTR for unparalleled 5G user experience without compromising the existing performance of the 4G users. And we are targeting full MTR coverage within the first quarter of this year. In terms of the 5G migration, I'm pleased to share with you that, as of February 1, we have 329,000 5G customers, representing 10% of our postpaid base. And these 5G customers provide a plan fee uplift of around $70 on average. And with more different price range 5G handsets available in the market, and as the applications in the ecosystem mature more, we think that the trend of 5G migration will continue to persist. Apart from expanding the reach and quality of our 5G network, we are driving 5G consumer adoption by enhancing the user experience with exclusive and innovative applications. So this slide here shows our AR capability and VR content. So we have a csl. 5G AR lens app, which is a location-based platform connecting consumers and merchants. This platform currently has close to 120,000 registered users and has served more than 120 merchant partners, including some famous names like Chow Tai Fook, UNIQLO, JOYCE Beauty and different shopping malls and so on. Meanwhile, on the right-hand side, our 5G VR app is also designed to bring a whole new media viewing experience for users, especially for fans of the K pop music, so we have a lot of the Korean pop VR content. And one recent demonstration is our 360-degree HD Live and Multi-Angle fan cam view for the Kingmaker talent show, which is produced by our -- Viu in PCCW. The app will be extended to live sporting events once everything comes to normal and live sports resume normal as well. Turning on to next slide. Our 5G opportunities in the enterprise and public sectors. Personally, I do believe that the enterprise adoption of 5G provides a far greater potential for the monetization of 5G. So we are focusing our efforts in terms of industry-specific application spanning across different verticals. So including health care, as we have also shared earlier on, that we are using -- we are working with 5 hospitals right now in terms of 5G infrastructure enablement, allowing them to perform remote consultation in the operating theater, the Internet Medical -- Internet of Medical Things, robotics for patient care, smart glasses and so on, and all these are important in this COVID-stricken era. And in property, we are also working hand-in-hand with very established developers in terms of smart buildings. Smart apps, energy savings, IoT, robotics application, artificial intelligence, AR/VR and so on. So some of the names are included in this slide here. And in construction as well, this is a very high potential area as there are a lot of construction sites. And the 5G-enabled surveillance and robotics can help enhance site security for workers. And further applications include the smart metering, drones, IoT and so on, which are applicable for utilities and transportation sectors. And we do think that when this becomes mature, the monetization of the 5G will become more obvious in the coming years. Turning to the next slide. This is the Now TV. As we announced before, the integration of Now TV was completed end of September. And this, obviously, with Now TV rejoining the HKT platform enable us to become the truly quadplay service provider in Hong Kong. For the year 2020, although the Now TV subscription was slightly impacted by live sport suspension in the first half, and obviously, reduced patronage on pubs and bars in Hong Kong, but we see new subscription from hotels because of all these staycation and new offices and growth in advertising revenue, particularly in the fourth quarter as well as subscription. So our Now E, a lighter OTT version of Now TV, all of these helped us to regain some of the lost ground. And obviously, looking ahead into 2021, we expect that we would regain much more of the growth momentum as we start to exclusively broadcast our highly anticipated EURO 2020, which was delayed from last year. In terms of content, we have also launched self-curated content more relevant to the Hong Kong viewers' taste on top of the linear channels. And we have launched a new pack called Now True for documentary lovers, and we have received very good response from our customers. In addition, we have launched a new homepage early this year supporting up to 5 user profiles, which would allow personalized recommendations of content. And we have also allowed a single account offering 3 concurrent access on TV and other devices, including handsets and tablets, using the companion app, the Now Player. So we are also leveraging on The Club loyalty program to attract and retain customers by offering club points. And so we expect that more synergies will be able to be released in the coming year 2021 as more efforts in terms of cross-selling and new content offering are being launched. Turning to the next slide. Again, this is The Club loyalty program that we have mentioned many times. The loyalty program continue to add new members. And now we have almost 3.2 million members, some of which are not HKT customers. They are non-HKT customers, and they can also join The Club. And The Club has evolved itself from just a loyalty platform to an ecosystem. And at the center is, of course, The Club, and you can see here that we have different new adjacency that we have built surrounding this club. But the crux and the essence of The Club is that it streamlines the customer experience and enable effective digital marketing, which is important for supporting our existing Now E business for new acquisition and retention, especially given the reduced retail traffic under the new norm. And also, in response to the accelerated adoption of digital channels by our customers, we have unified all of our business lines' online platforms, including Netvigator, csl., 1O1O, Smart Living and so on onto the one Club Shopping platform. And so this single platform is our extension of our brick-and-mortar stores as well as offer an effective distribution channel for all the HKT businesses. And also because of the new e-commerce platform that we have created, it is also an effective distribution channel for our merchant partners. Turning to the next slide, which is our financial services. Again, this is one of the -- one of our efforts in growing into adjacencies, the fintech. Fintech is advancing very rapidly in this space, and we are focusing our efforts in terms of building 2 ecosystem, one is on the merchant side, the other is on the consumer side. So on the merchant side, we have established very solid relationship with many retailers over the years. And we have also created a comprehensive suite of merchant solutions, which can help them. And these solutions include the essential component of a Smart POS service with payments, with e-commerce, connectivity, lending and potential advertising across our different platform as well. So we now have 1,700 or more subscription, and transactions via this service, despite the reduced consumer sentiment last year, increased by 280% year-on-year. By obtaining insight into our merchants' transactions, we can offer them more data analytics as a value-added service to help them serve their customers more. And on the consumer side, we continue our efforts in terms of growing our Tap & Go mobile wallet, which right now has more than 2.7 million users. Many of these users are young and mobile-savvy, and this continues to be our focus. And to keep them engaged, we are also developing a lot of interesting applications for them. And in the second half of last year, we launched HKT Flexi, which is a very user-friendly micro-credit service, which would offer flexibility for these young users to buy products and services within our ecosystem. And the virtual bank, Mox, where PCCW and HKT together has a 25% interest, has officially been launched in September with very good results. And this, of course, broadens the total suite of financial services offered by HKT as well. Next slide is DrGo. This is another new business that we have started in the year 2020, telemedicine. And it was launched, commercially rolled out in the third quarter. As of year-end, the platform has accumulated 88,000 registered users. We have been expanding the ecosystem and partners. So the first 2 hospital partners are Gleneagles and Precious Blood. And then we have added onto the platform the medical chains as well, clinical chains, including Union Medical Healthcare and Quality Healthcare, both very established chains in Hong Kong. We have also included a lot of the insurance partners, including FWD and so on, to enable seamless claim -- medical claim from our customers. And in terms of service scope, we are also trying to extend from GP to include other chronic disease management like diabetes, like hypertension and dietary management and Chinese medicine and so on. So a lot are still in the pipeline. We believe that there is huge potential for growth in terms of DrGo as demand for telemedicine services continue to grow. The next slide is on our community support. We are proud to say that HKT has been supporting the people of Hong Kong through thick and think for decades and is well aware of its corporate social responsibilities. During the year, a number of initiatives were rolled out to support the needs of the under-privileged in Hong Kong, including providing mobile devices, mobile data, connecting broadband services for free to the students, elderly, dwellers in the subdivided flats, and so on. We have also, in partnership with FWD insurance, offered free DrGo telemedicine services for low-income families as well. Going forward, although the outlook continues to be uncertain, we remain very focused. We will be very agile and vigilant in fortifying our core business areas, because it is this area which gives us a very steady cash flow, from the quadplay. Medium term -- near term, medium term, we will continue to drive 5G adoption, both by consumers and enterprise side. As I said, the enterprise side offers a lot of room and potential for monetization. And we would capitalize on the demand for enterprise digital transformation and the public Smart City initiatives. All of these, I'm confident, that will provide an impetus to growth in the year to come and in the medium term. And finally, leveraging the growing membership of The Club, we will continue our efforts in a very disciplined way to build our new digital businesses, especially in the new normal. Areas like e-commerce, fintech and telemedicine continue to be our focus, and we believe that these will spur growth and add to the diversity of HKT business in the long-term and create value. With that, I will pass to Evan, our CFO, to share with you the financial analysis.

Thank you, Susanna. On the financial review, maybe we first take a look at the key financial highlights for the year. As mentioned at the beginning of our presentation, even facing with the very challenging market condition this year, we are able to maintain our AFF at the level of USD 690 million, a slight 1% increment year-on-year. And our service revenue has also been maintained at a very steady level at USD 3.818 billion, as the strong demand on broadband and local data services has been able to offset the drop in roaming revenue on the mobile side under the COVID situation. If to include the sales of handsets, our total revenue for the year has dropped by 2% to USD 4.152 billion. The drop in mobile handset sales was basically due to the overall weak market sentiment, particularly during the first half of the year. Our total EBITDA for the year was down by 2% as well to USD 1.606 billion, as the revenue contribution by the roaming business has dropped, for which the profit margin is relatively higher. But the impact of this has been partially offset by our various and effective cost control measures. As such, our overall EBITDA margin has been kept steady at 39%. And after taking into account the lower finance cost, tax charge as well as accounting gains, our net profit for the year was up by 2% to USD 680 million. Looking into the details of our TSS segment. The total revenue for TSS was up by 2% to USD 2.866 billion, in which our broadband and local data business continue to be the key growth engine, for which the related revenue has increased by 6% in total to USD 1.05 billion. The growth is supported by the tremendous demand for high-quality and reliable broadband connectivity from both the consumer side as well as the enterprise customers. Remote office and study-from-home arrangement has boosted up the demand for higher bandwidth provisioning as well as WiFi solutions. Also the COVID environment has accelerated the pace of digital transformation for many enterprise customers, which has brought strong demand for our comprehensive one-stop-shop of digital products and solutions. Certain infrastructure and Smart City project, as mentioned by Susanna earlier from the public sector, has also helped offsetting the impact of slowdown of certain ICT projects by those private enterprise customers engaging in those hard-hit industry under the COVID environment. On the international business, the total revenue has shown a healthy growth of 4% to USD 980 million. The increase was contributed by the strong growth of international voice wholesale business as well as the solid demand for international data connectivity under the global lockdown situation. So as a whole, our total TSS EBITDA has moved up by 1% to USD 1.078 billion, with a steady EBITDA margin at 38%. Then let's turn to the mobile segment. Our total mobile revenue for the year was USD 1.329 billion, including a service revenue total of USD 995 million, representing a drop by 8% year-on-year. The drop in revenue was primarily due to the reduction in roaming revenue under the COVID travel restriction since early last year. But if to take out the impact of the roaming revenue, actually, our core local component of service revenue has been kept at the same level as compared with the -- as the level in 2019. Our postpaid subscriber base also has further expanded to 3.252 million subscribers by end of the year. This has reflected the benefit that we have achieved from upgrading our subscribers to 5G plans despite the continued price competition in the lower-end sector. As a result, our postpaid ARPU has also increased from the level of HKD 181 as we reported by end of June last year to HKD 184 by end of the year. On handset sales, as mentioned earlier, impacted by the overall weak market sentiment, the total handset sales revenue was USD 334 million, dropped by 20% year-on-year. But because the sales of handsets actually bringing fairly minimal or nominal profit margin to us, the drop in the revenue contribution on handset sales has moved up the EBITDA margin from mobile segment as a whole from 43% to 46%. Our total EBITDA for mobile segment was USD 609 million, a drop by 6%, which is, again, impacted by the roaming revenue drop. And if to take out the mobile handset sales, our service revenue EBITDA margin has been kept at a very steady and healthy level of 61%. On our pay TV business, Now TV business has been integrated into HKT Group since October last year, with a 3-month financial contribution for the group. The total revenue and EBITDA for Now TV in the last quarter were USD 83 million and USD 22 million, respectively. With a full year contribution in the year 2021 and onwards, we are expecting to realize further synergies from our in-depth quadplay integration in terms of both tailored product offerings as well as further enhancement on operation efficiency. Regarding our operating expenses, obviously, cost control continues to be one of our top priorities under the current tough market environment. As such, we have achieved an OpEx savings by 8% year-on-year. We have reduced the total OpEx amount down to USD 533 million. The key initiatives we have taken include gradual transition to digital platform in respect to our marketing, promotion and operation as well as enhancing sales channel efficiency, while retail shop consolidation and target marketing initiatives. Accordingly, while we are still investing in certain new and growing business platform during the year, our overall OpEx to revenue ratio has further improved from the level of 13.6% in 2019 to 12.8% in 2020. Apart from OpEx, obviously, we are also exercising very cautious control on our capital expenditure as well. The total CapEx plan for 2020 has reduced by 10% year-on-year to USD 312 million. On mobile side, even with the launch of our 5G service and gradual rollout of our comprehensive 5G network CapEx since the first of April, we are still able to maintain the mobile CapEx spending at the similar level as we incurred in 2019, which is around USD 112 million. This is the result of our continuous effort in spreading out the CapEx spending on 5G infrastructure and critical equipment over the recent years, such that the current 5G CapEx is basically just replacing our previous annual spending on 4G. On TSS side, the total CapEx spending for the year has reduced by 15% to USD 182 million, reflecting the benefit from our extensive local fiber backbone and international cable investments that we have already made in the past years. Accordingly, our total CapEx to revenue ratio has further moved down from 8.2% in 2019 to 7.4 -- 7.5% in 2020, which is obviously well contained within our 10% guidance. Next on the details of our adjusted fund flows, and we have just discussed about our EBITDA as well as the capital expenditure. The total customer acquisition cost and license fees has moved up to USD 171 million, reflecting the incremental 5G license payment since this year. And our rental expenses payment, that is the payment for right-of-use assets, has moved down by 3% to USD 204 million, reflecting the benefit that we have achieved from our retail shop consolidation. And the payment for finance cost has also been reduced by 16% to USD 96 million, benefiting from the lower average market interest rate during the year, particularly on the HIBOR. On tax payment, actually, a portion of the 2019 tax payment has been classified or included in the line of changes in working capital in 2019 because of the delay in issuance of tax demand note by the IRD. If to normalize this reclassification impact, our tax payment of USD 66 million was actually maintained at a similar level as compared with 2019. And after changes in working capital of USD 8 million, our total AFF for the full year has increased by 1%, which USD 690 million, representing a total distribution of HKD 0.7107 per SSU in issue. On the detailed profit and loss account, we have already discussed about the revenue, OpEx and EBITDA. The total depreciation and amortization expenses for the year was up to USD 685 million, an increase by 4% year-on-year, which was mainly contributed by the increase in amortization charge in respect to our investment in digital platform and product development. The net other gains for the year was USD 46 million, which mainly includes a one-off accounting gain/loss recognized at consolidation level upon the transfer of Now TV business, offset by certain write-off of end-of-life IT platform upon our internal digital transformation process. And our net P&L finance cost has moved down by 6% as well to USD 166 million, given the lower market interest rate. And the effective tax rate for the year was down to 13.8% because of certain increased tax benefit that has been enjoyed by the group this year as well as the nontaxable capital gain that has been recognized at consolidation level, as just discussed. So as a whole, our net profit, NPAT, for the year was up by 2% and reached about USD 680 million. On our gearing position, the total gross debt outstanding by end of the year was USD 5.448 billion. And the year-on-year increment of this was mainly on the new bank loan drawn for financing the Now TV acquisition, which was completed in the second half of 2020. And because Now TV was just contributing only 3-month EBITDA to the HKT Group in 2020, our overall gross debt-to-EBITDA ratio has moved up to 3.39x. Currently, we have a total liquidity of around USD 1.5 billion, including undrawn bank facilities totaling over USD 1.1 billion. And we continue to carry investment grade rating at BBB and Baa2. And finally, on our debt maturity profile, as you all can see from the chart, basically, the Group is having a quite a healthy spread of debt maturity over the next few years. In 2021, this year, we have a small portion of around USD 200 million debt maturing, but for which we have already made the corresponding refinancing arrangement. Our current portion of floating rate debt is around 40%, and the overall effective interest rate was around 2.9% for the year. With this, it ends our financial presentation as well.

[Operator Instructions] The first question is, do you expect the strong growth in broadband and enterprise to persist in 2021? And if so, what guidance can you provide for the AFF growth in 2021?

Thank you for this question. Basically, yes, I think we are confident that the growth in terms of broadband and enterprise will continue. Because this is a trend that will persist under the new normal, the demand for growth in terms of the bandwidth will still continue. And so, I think, that we are still very hopeful that this trend -- this increase and the growth trend will continue, especially in terms of all the digital transformation and the 5G enablement that we have talked about just now. In terms of guidance, we very much hope that everything -- with the new vaccine and so on, we can go back to our normal lives. And if the travel lockdown starts to ease, and the roaming revenue starts to rebound, we will be expecting further growth in the AFF in the coming year.

And the next question, it's a multipart question. I'll take the first one first. What is the outlook for 5G CapEx in 2021? And should we expect a step-up in CapEx due to 5G?

Okay. So in terms of 5G CapEx, we have done a lot of the rollout in the year 2020. As we have explained before, it was more than 90% coverage. What we are using, in terms of the technology, is NSA. So we are obviously deploying the new 3.5 gig spectrum as well as refarming the 2100. And if -- just now, Evan has mentioned the CapEx on the mobile side, very stable at around USD 110 million, USD 120 million. And going forward, it will be, obviously, improving and enhancing the indoor penetration and the other remaining of the coverage. We do not expect that there will be step up. Depending on the traffic, we might want to increase the capacity. But definitely, there won't be any further increase in terms of the 5G CapEx.

The next part of the question is -- the next part of the question is, what is the targeted 5G subscriber number by the end of 2021?

Targeted 5G subscriber in 2021? Now 5G was launched in April last year. And interim, I think, if I remember correctly, it was only a few percentage in terms of penetration. It picked up and then in terms of the 5G customer, it was 260,000, more or less 260,000 at the year-end. Further accelerated the momentum in the first 2 months. Now we have around 330,000. So you see the -- basically, with the launch of the new 5G iPhone, the momentum has picked up quite significantly. So right now, it's 10% penetration. We are targeting at least 20% to 25% by year-end this year, especially when some more mid-price -- low-end to mid-price range 5G handsets will be made available in the market. And so -- and also the -- more education, more awareness in the consumer side, we do think that the penetration will be able to be increased to 20% to 25% by year-end.

The next question is, the 5G ARPU uplift was quite encouraging at $70. What is the outlook for 2021? And do you expect it to narrow?

Well, 2 factors affecting this. So right now, it is the early adopter and the -- obviously, the high-end, the trend-setter and so on. So even when 5G is first launched, they are willing to pay more. So the ARPU -- there was this ARPU uplift of HKD 70. In fact, it's slightly higher than HKD 70. It was HKD 80, HKD 90 to the plan fee. But on the -- so theoretically, we would be looking at -- as this goes more mass, it would be a narrowing of the ARPU uplift. But on the other hand, the offsetting factor is that it should not be narrowed very significantly. The reason is that the ecosystem and the sort of the applications and so on, consumer awareness is not that high. A lot of people are still adopting wait and see. Why I said that is because we did notice that a lot of the people have switched their handsets to 5G, but they have not signed a 5G plan. So this represents a very significant segment, which, of course, we will be targeting in terms of migrating them to 5G. So these people who are willing to pay for a 5G handset, obviously, they would be willing to also pay for a higher ARPU. So to that extent, I think I'm quite hopeful and confident that it will be more or less the same in terms of the uplift level in terms of the ARPU in 2021.