HKBN Ltd

HKEX:1310

Earnings Call Transcript 2020-Q2

[Operator]

Ladies and gentlemen, greetings in this virtual space, and welcome to HKBN's 2020 interim results webcast event. We will have Q&A session immediately after the presentation. On the stage, we have 3 co-owners: William, Nick and Samuel. We'll kick off with NiQ to start off with the presentation.

[Ni Quiaque Lai, executive]

Thank you. Can I have that clicker, please? Over there. Thank you. Good evening, everybody. Thank you for joining us in this virtual analyst presentation. Despite what is happening with COVID-19 around the world, we are actually ecstatic to be here today. What we will show you in the next half an hour or so is the accumulation of 5 years of mergers and acquisitions, where we have really put together something incredible.

If you look at the results, it's massive transformation since our IPO in 2015. We are about 5x bigger. When we IPO-ed, our run rate was about HKD 2.5 billion. Today, on a annualized basis, on a fully consolidated basis, we are in excess of HKD 10 billion, 5x increase. When we IPO-ed, we are 80% residential. Today, we're 80% enterprise. We have a fantastic asset of residential and enterprise business that we can interlink to create stickiness in our service, which William will go into in detail. At the end of the day, look at us as like the power rangers. Separate, we're quite weak. Separate, as an individual telcos, be it Hong Kong Broadband, New World or Wharf. As individual telcos, we are subscale and quite weak. Separate as JOS, standalone SI we're quite weak. But together, we form an incredible entity in excess of HKD 10 billion revenue run rate, and we are chasing down the incumbent, who is currently 4x our size. So we have plenty of growth runway as we chase and overtake the incumbent. At the end of the day, look at our performance, dividend per share, HKD 0.37, up 9%.

I believe this is a very, very good set of results in the current environment that we are in. And the outlook is even brighter. The long-term outlook as we fully consolidate and integrate the businesses is even brighter. If you look at this slide, it's simple, one color, green. We are growth all around. We are firing on all cylinders, Residential and Enterprise. And what's special about our business is that we interlock the 2 businesses. We are accepting barter. For our Enterprise business, you can pay with vouchers instead of paying us. And then we're distributing it through our massive residential base. If you look at our business, we're no longer a telco, we are a distribution company. 1 in 3 residents, households are our monthly billing relationship. One in 2 active companies are our monthly billing relationship. So this gives us incredible distribution power in Hong Kong that very, very few alternatives can offer.

This is a transition slide. I will show you maybe this period or maybe one more 6-month period, and then after this, this becomes irrelevant. This is revenue, EBITDA and free cash flow by segments. Why I say it will become irrelevant is we operate as one entity. For us, we have no silos in the company. Whether we make money or lose money on one leg or another arm, it doesn't matter as long as the entire entity makes money. Later, you will see, we have 935 co-owners. We own one HKBN. We do not own the individual silos. That's the beauty of our business is we operate as one entity. Many of our competitors have separate segments. Some even separate individual legal entities. But ours is one single entity, a silo-less endeavor. Our debt profile, HKD 4.2 billion.

Actually, we were organically on track to lower this to HKD 4 billion, but due to the M&A and the fees associated and taking on a little bit of additional debt because of M&A, we've flattened that about HKD 4.2 billion this year. We are on track to bring this down to below HKD 4 billion towards our kind of comfort zone of HKD 3.5 billion and below in the next couple of years as we drive growth. So our balance sheet is very comfortable.

This brings me to the absolute most important slide in this whole presentation, our co-ownership. Our co-ownership is not something that we invented overnight. It's something that we've built and refined year-after-year over 3 tranches, since our management buyout in 2012. Today, about 1 in 6 Hong Kong Broadbanders, HKBN-ers is a co-owner. So if you call our hotline in Guangzhou, the team head running a team of 8 is probably a co-owner. That's the difference of our company. What does a co-owner mean? It means someone has looked, who's done the due diligence from within, who has understand the business and then decide to vote with their family savings to invest in the company. The top 73 executives in the company, the take-up rate is 100%. Let me stress 100%, and this 100% consists of a range of backgrounds.

People who have worked together like -- with us for the last decade. People who've just joined us through WTT in the last 11 months, and people who just joined us in the last 4 months through the JOS acquisition. So this is a absolute incredible number, 100% take-up rate. If you look at the next tier, manages and above, 400, the take-up rate is about 74%. The overall take-up rate is 58%, something that we are incredibly proud of. And this is almost impossible to replicate. If you start now, you have 8 years to catch us.

With that, let me introduce Samuel. Samuel is our youngest Chief X Officer, in his case, Transformation Officer. We actually discovered him in 2008, in our summer intern program. And then it took William and I, 8 years of careful head hunting to convince him to join us in 2016. Samuel, let me pass it off to you.

[Samuel Hui, executive]

Thank you, NiQ. And thank you for coming to our investors presentation today. My name is Samuel. I am the Chief Transformation Officer at HKBN. But more importantly, I am also a co-owner. I joined HKBN 4 years ago, have witnessed our transformation from a single-play company to a single broadband company into an infinite play of multiple products and services across our B2B and B2C, right?

I've been witnessing that and also driving that over the past 2 years. And today, what I'm going to introduce as well is that we, as a group, are now working and partnering with our customers to leverage the experience that we built up through our own transformation to co-grow and to co-transform with our customers. And we call this Transformation as a Service, a completely new service model, right? How we co-grow and co-transform with our customers. Now transformation has often and is currently a huge buzzword. But we at HKBN, we're very specific about what we want to do. Where we, at HKBN, are looking at is how do we double our revenue, while keeping our head count relatively flat, right? So more simply put, it means that every single talent in the company makes more money. And also the company makes more.

So it's a win-win-win. How we differentiate ourselves as Transformation as a Service versus all the others is really 3 important areas: one, being that 1-HKBN. So we're not just your technology partner, where we come in is that we help not just support and help your technology build-out, but also at a business and marketing level, we work with you. William, in a bit, will also talk about Barter & Bundle program, which is precisely how each of our engagement works, which is everything from technology all the way how we co-market and co-distribute our partners -- our customers' products into our base, right? 1-HKBN. The second important point is we eat what we cook, right?

We've invested, and we built out -- and we've taken a lot of lessons over the past 2 years to become what I personally believe is the most digitalized company in this telco industry in this market, right? So we know what we're talking about, not just from a technology perspective, but how we run our business on top of it. And here, we can work with customers to co-transform. And finally, third is skin in your game. And I really like this because where we differentiate ourselves from other partner -- with other transformation partners is that we're willing to invest, co-invest in your business KPIs.

So let's say you have a KPI of driving your online e-commerce revenue by 30%. We're willing to put our KPI at 30% as well, right? If we help you hit it, we get paid. If we don't help you hit it, then we're here to take a discount, right? So that's the conviction that we have when we go into a task partnership with you. Now let me double-click a little bit into what we did, right, over the past two years. Specifically, transforming our relationship with the customers from a very simple account servicing concept where you only call in, if there's complaints through a multichannel, personalized engagement across our world-class platform. Today, myHKBN app, right, enjoys about 70,000 -- 700,000 accumulated users out of our 1 million household, 1 million customer base. Every 2 weeks, we engage with -- we frequently engage with our customers with promotions and Jetso's and a lot of different items, right? And we see at least 30,000 redemptions per biweekly engagement campaign.

It could actually be a lot more. We just set an quota around it because we constantly hit our maximum quota in about 2 days, right? And the third piece and also tying really back to the business is that we see more than double paying visitors coming from myHKBN to our e-commerce to buy new appliance, to renew their contract, et cetera. So we're seeing this as we evolve from a servicing into an engagement platform. And one area that my team has been very, very proud to work together is that this actually is the engine behind our #ToughTimesTogether program, which, by the way, is probably a single largest customer engagement campaign in HKBN history ever, right? The $100 million in face value of remedy for our customers, right? I still remember getting that call from NiQ to discuss that program to actually launching that program was exactly one week's time.

During that one week, we set up everything, got everything ready, start communing with customers about this remedy. And during the whole campaign period, we had 0 downtime. Even when we saw more than 10x visitors coming to our platforms. And our app also hit top free downloads for that region. And really, that's -- this is where we've evolved to, right? From months long preparation of campaign to now only needing one week, right? And to achieve this, not just from a technology perspective, but also from a business and how we engage with our customers' perspective. And so that's what we're really bringing in table with both internally as well as Transformation as a Service, which is how do we double your company's revenue, keeping your head count flat. So everyone makes more and the company makes more.

So I'm going to hand off at the time to William to talk a little bit more about the business. Thank you.

[Chu Kwong Yeung, executive]

Business outlook. So the first half on the left-hand side is quite familiar to most of you because it's talking about what we did in the past 4 financial years, financial year '16 to '19, talking about invest and then harvest. So we believe that evolvement stage is behind us. Now we are in the middle of financial year '20. So as you look at the table, it's all green. So starting from now, the whole team, no matter Residential or Enterprise, will be very busy in harvesting, in maximizing where we should grow the best. So it is good for both Residential and Enterprise area.

Let me talk about Enterprise area first. If you look at the heading, it's talking about transformation into telecom and technology powerhouse. That means with all the acquisitions, we are now in a strong position, full speed of services in both telecom and technology, plus the added value of transformation led by our youngest CTO, Samuel. So we are talking about TTT for the enterprises: telecom, technology and transformation. In transformation, it is value-added because we already have more than 2 years of own practice on the digital transformation. Particularly, after the COVID-19, more and more corporate customers, they want to go digital or speed up their online transformation, whatever. We are using our own experience to help them. So it is the value-add in the enterprise area.

Residential area. We already sort of forgot about ARPU, average revenue per user, because we are going for multi-play. Anything related or required by each household, it will be our targeted services. We just talk to the partners and then bundle those products or services as our bundle play offer, the multi-play offer to our residential markets, such that we can maximize the average revenue per household, ARPH, that is our direction.

Look at the top. We are still talking about the Co-Ownership III target within financial year '19 and '21. I guess we -- some of you already may ask, is this still a target for you or something like that? I will say, because of the economic downturn, it will be very, very challenging for us to hit the high side, the fee dollar side, the target. But the whole company, the whole team are still consciously optimistic in delivering the net margin to low-end of about 250 over the 3 years DPS target.

As for the dividend, first half, we are talking about HKD 0.37, as dividend to our shareholder. In second half, we will deliver no less than HKD 0.37. Second half, we will deliver no less than HKD 0.37. So that is what I share with you as the most updated figure as of today.

So with the acquisition of WTT and JOS. Nowadays, the enterprise revenue occupies almost 80% of the whole company's revenue. So it is the area, the major area that draws most of attention and resources of the company, particularly the top management's resources or the mind power. Just want to share with you some big wins. There are different companies in different industries. In the last 6 months or the first half, we already got some big win with our contract sum, total more than HKD 1 billion within this group of companies. And the counter period starts from 2 years to 15 years. So they are mobile operator giving us the 5G backhaul business. So we are the major mobile backhaul provider for them.

And then we have a leading digital hub. They outsourced the network operating center, the management of operation to us so -- and also a sort of a public service organization that they also outsourced, however, related to telecom or technology area to us. For the quick service restaurant, we have those retail chain selling hamburger, selling pizza. They both signed 10 years contract with us committing, I would say, a quite high amount of monthly fee over the next 120 months to us. And some others like the casinos in Macau. There you might -- in these casinos than it is more than one being our key customers. So without the acquisition of WTD or JOS, we could not do that. Stand-alone, we cannot do that. Together, it is just the beginning of the beginning. So our growth path in the years ahead will be very steep.

So talking about JOS. The completion of acquisition is in mid-December. So it is just a few months, but we can still share a view what we have done.

Revenue upside, very simple. Cross-sell of products and service in the customer base of JOS and original HKBN. And also having the executive close to 60% of them -- of those qualified executives. They joined our skin in the game. Bear in mind that they just joined us for a few months. If you join a new company for a few months and you're willing to invest 2 months to 2 years salary as the co-owner tying with the DPS target. So you already -- what we said, you've already done a clear DPS, the insider. That is another vote of confidence. And this won't happen in any of our competitors.

Last, cost synergies, JOS used to have different operations, different entities even within JOS. But we are talking about integrating different functions with interest and also integrating JOS with the original HKBN. So now the thicker and stronger HKBN, we'll have manpower with higher per head productivity and share smaller office floors to save cost and increase revenue. That is what we are doing.

Okay. For the past few PowerPoint, we are -- I'm talking about business profit. This page is not our purpose, and this page is unique to HKBN. Because we are very committed as a company who pursue both purpose and profit. Our purpose, let me repeat -- our home a better place to live. So with the COVID-19 current year and will still last for maybe a couple of months, different centers of our Hong Kong community or businesses are suffering. So we -- and we'll continue to think of more waves of #ToughTimesTogether actions to help different stakeholders. One month service fee, we did that such that customers can register and get the one month service fee waiver for the month of February year 2020. I saw this a traction already from some of you about the impact of that.

Let me share our view. We have close to -- we have about 880,000 fixed broadband customers. We have about 110,000 enterprise customers or the companies. In both centers, we have more than 40% of them, getting this one month service fee waiver. The ceiling of monthly fee waiver for residential is HKD 20. This ceiling is at HKD 500 for enterprise. So you can then roughly know what's the figure.

This only impacts our overall full year's DPS target. As I mentioned, second half of this year's DPS will not be lower than HKD 0.37, first half. So you roughly will know what's going on. And because we are a bigger HKBN, so on both revenue and cost synergies, we do have many rooms for us to put effort and deliver the best for co-owners and shareholders.

Second one. Share. 10,000 free broadband to disadvantaged families. It is the criteria or the selection is through 7 NGOs. They did all these things for us, and then just gave us the name and location. We go to do the installation. But we want to share with you that for this free broadband service, it also apply to existing customers because we are going to help. We are not using this as a acquisition tool. As of today, we have more than 8,000 families qualified, applied. All of this 8,000 plus, 2/3 of them are our existing customers. And we are going to replace their existing paid service contract with free 24 months broadband service for them. It is talking about a genuine helping hand to our communities. The third wave is for the graduates. Every year, we have management trainees from the fresh graduates, maybe 5 or 6 or 7, something like that. But this year, we also decided to help 100 graduates, such that we will sign a 3-month contract with them. Within these 3 months, they will learn how to excel in the coming career path with main thoughts from senior executives of HKBN.

So we are going to help them. And then after these 3 months, they think we are good or we think they're good, then some of them will stay as permanent talents. For the others, they will still be better equipped to join their new career path.

So on this, may I request any of you, if you have any ideas that we can help out our different stakeholders in Hong Kong, Singapore, Macau, China, Malaysia, wherever HKBN appears, please share with us your views. Those that cannot be happened or executed by your company, very likely, it can be executed by HKBN. We are here to really deliver our purpose.

So Barter & Bundle. NiQ has already mentioned this. I would say this is a very strong strategy that our competitors, including the incumbent, they cannot copy. Even if they want to copy, they won't execute well. Because we are silo-less, we come out -- go to any of the enterprise customers telling them that you can now switch from your current provider and join us with part of your service be settled by your service or products against coupons. On that, you have product margin. You actually save your cost and we have a certain number of your cash coupons. Our marketing or our Chief Marketing Officer of Residential Markets is going to work with your marketing team head for joint promotion to market your products to our 1 million residential customer base. So we are helping you to save your cost. We are helping you to grow your revenue by co-marketing into our customer base.

And then we are giving better value to our customer base. And on that, in fact, we, ourself, we also save some of our marketing cost. So it is talking about win-win-win. The only loser, of course, the incumbent. So -- but I think they will copy, let's see if they copy, then we are really friendly competitor doing something Win-win-win for everybody and helping the customers as well that will be a bigger scale. Okay? So in short, HKBN today is well positioned to continue the growth in harvest stage. It is tough time in terms of the economy. But during these tough times, we are doing everything good from purpose context. But business-wise, in fact, the whole team are very busy. Many and more customers are coming to us through the Barter & Bundle and better value of our telecom, technology and transformation. Thank you. NiQ?

[Operator]

We now have the Q&A session. I'll read out the questions submitted in the web. First question is from Mr. Joe Ho, Rondel Investments.

It's in 3 parts so I'll read out in parts. What is the strategy for mobile? And is the subscriber for both fixed and mobile has lower churn rate?

[Ni Quiaque Lai, executive]

So the first point is quad-play. It's a common term in the industry, so yesterday. We're well past that. We're now into infinite play. So we have an infinite number of services and products that we can sell into our customer base. Mobile is only one of infinite options. We will sell whatever has the highest margin. Today, mobile margins are low. It's a super competitive market, and the outlook for the mobile-only industry is not great. So where it's a defocus. It's still there, but it's no longer a focus.

In terms of churn rate, the basic relationship is, the more services that we have, the stickier the service, and the lower the churn rate. We're experiencing amongst the lowest churn in our corporate history today as people are locked in and just want to stick with a quality service provider.

[Operator]

Okay. A follow-up question on mobile. Will you have 5G offerings?

[Ni Quiaque Lai, executive]

It comes down to the options in the industry. We don't have a 5G network ourselves. So it comes down to reselling others and it comes down to optionality.

[Chu Kwong Yeung, executive]

We have not yet started talking to our MVNO partner. But I think it is still too early. Maybe just ask any of our investors or any of our friends in Hong Kong, have you already got a 5G phone or 5G plan? Certainly not. I think it's still too early, and we are still very busy from other big tickets.

[Operator]

Okay. Next question is on the enterprise business. What is your organic growth for your enterprise business?

What do you take the market share from, HKT or HGC? And what is your growth driver in the coming?

[Ni Quiaque Lai, executive]

Actually the organic growth is so yesterday, it's not relevant anymore because we are, today, a combination of 5 entities in one. And if you look at our growth rate, it's stellar. Basically, we're taking market share from the incumbent. Any market share we take from others is collateral damage. Our focus is to take market share from the incumbent by offering a better service and far, far better value.

[Chu Kwong Yeung, executive]

And we don't have a limit on how to acquire customers or from which competitors. Basically, we look at the -- overall the big number of service revenue. The growth of service revenue is our target because our service revenue can be from company or customer number times the monthly fee. So as far as these 2x together help us to grow the overall service revenue, we go for that.

[Ni Quiaque Lai, executive]

Actually I think I'd like to tangent a little bit. If you look at our synergies, our cost synergies is quite distinct. When we buy a company, it takes about 12 to 24 months to realize the cost synergies, the full run rate. But our revenue synergies are infinite. We are still generating revenue from the New World acquisition that we completed about 4 years ago. The New World salespeople that we have in our company today are now selling the full suite of services, including JOS services. So the revenue synergies are infinite and unlimited in scale. But the cost synergy is fixed. So that's why we think -- we feel that's a very interesting outlook going forward. Very optimistic outlook.

[Operator]

Next question is from James Wang, UBS. Considering the coronavirus impact, would -- are you -- would the growth rate be sustainable in the second half?

[Ni Quiaque Lai, executive]

Repeating what William said. The second half will be better than the first half, no worse than the first half. Now if you look at how we pay out dividends. In the first half, we pay over 100% in free cash flow because we pay the full year tax in the first half. The second half, there's no tax. The outlook for a second better DPS, no worse or better outlook in the second half, is based on a 100% payout ratio for the full year. That means the second half AFF will be substantially better than the first half.

[Chu Kwong Yeung, executive]

And sorry, I will also add on this. We do not just look at first half or second half. We look at the whole co-ownership 3-year target. So we always think of the best way of utilizing the fund on hand between DPS today or growth tomorrow. So if it is talking about investment growth of DPS over the whole co-ownership 3-year period, we go for the overall longer-term purpose. But of course, still talking about second half DPS, we rehired in the first half.

[Ni Quiaque Lai, executive]

Actually, there's a fantastic new book by Simon Sinek. He talks about playing the infinite game. Now we don't play by 6 monthly results. We play the infinite game. Co-owner tranche after co-owner tranche and overlapping intentionally so that we're not just focused on any single tranche. That's why we have transformed the company as we have in the last 6 years.

[Operator]

Next question is from Mr. Chris Ko, DBS. HK government announced a relief package to help the corporate sector. Are we one of those beneficiaries and we'll apply for the subsidy?

[Chu Kwong Yeung, executive]

I think I already said, he is talking about more than 40%.

[Operator]

No, no, the government subsidy.

[Chu Kwong Yeung, executive]

Okay. Government subsidy. Okay. Government subsidy, we are still getting more details from the Hong Kong government. As far as we know, as of today, the intents of the Hong Kong government's subsidy is to benefit the employees because many of them will have the sort of a salary cut or having no paid leave and also sort of prevents the possibility of redundancy, something like that. But internally, we already have this discussion. HKBN, the company, will help our talents to get any support or subsidy from the government and 100% pass on the subsidy from the government to our talents. The company itself will not get any subsidy or will not benefit from the subsidy. The top executives, the -- talk about the top line management committee executives. We, ourselves, we will donate the amount for charity purpose.

[Ni Quiaque Lai, executive]

Beyond the government subsidy, we are already taking action on our own. In the numbers that you see in these interim results, they already include our own private sales guarantee. For the sales minimum support. So anyone that's making under the minimum medium household in Hong Kong, HKD 18,000. Near threshold, we are already paying out of our own pocket to make sure that they are getting through these tough times. That's costing us about HKD 0.5 million a month in subsidies. So that's a nongovernment subsidy. It's a private subsidy. We think it's the right thing to do. So we are doing that.

[Operator]

Next question is from Ms. Vicky Chung, HSBC. Impact of COVID-19 on overall business performance, including client acquisition and growth plans?

[Ni Quiaque Lai, executive]

The outlook, COVID-19 globally will slow down business as usual. So if you're in the business of usual business, your outlook is extremely grim. We are no longer in that business. We are in the Transformation as a Service business, where there's massive demand. Because of COVID-19, we're going to have to change the way we do business. We're going to have to reduce our reliance on rent. We have to increase productivity. And, Samuel just spent time sharing you how we've already executed that inside the company. We've already eaten what we cook. And now we're ready to help other companies transform. In terms of kind of short-term outlook on business activity, it's somewhat neutral. We offer a lifeline business. Broadband is an essential business. So what we're seeing is a slowdown in gross additions, but offset by a slowdown in gross churn. So our net subscriber is about the same. Very resilient.

[Chu Kwong Yeung, executive]

And let's look at the whole picture. Even after we acquired WTT and also JOS, our market share of revenue in the enterprise to our own calculation or estimate is just around 15%. So there's still 85% revenue, huge revenue for us to pursue, and we are only offensive. We go there with, I would say, better value for money for our enterprises.

[Operator]

Next question is from Ms. Chung, Absolute Investment Management. Any M&A plan in the coming years?

[Ni Quiaque Lai, executive]

If you have any good ideas, please bring it forward. We have a fantastic template on how to integrate M&A as proven by our track record of 5 integrations over the last 5 years. So anything that makes sense for co-owners, we would certainly consider. One thing I would like to emphasize. William and I are in the business of creating value, not empire building. We have taken the company's revenue 5x from 2.5x -- HKD 2.5 billion to HKD 10 billion. Our basic salary -- our total annual salary has not changed in the last 5 years other than inflation. We do not get paid for buying companies. We get paid through dividends for creating value for shareholders. That's how 935 co-owners are paid. So yes, we're interested in M&A that makes sense, but it has to be DPS-accretive.

[Operator]

Next question is from Mr. Neale Anderson, HSBC. What enterprise product and target customer groups are you most excited about in the current business environment?

[Chu Kwong Yeung, executive]

First, most of our retail players, they like the Barter & Bundle because it's going to immediately help them reduce their costs on the telecom and technology spend. And second one is the IT outsourcing. Many SMEs, for them, it is not easy for them to have a CIO or IT head to help them doing better service with better efficiency or effectiveness. And then they can certainly outsource their whole IT function.

Just to maybe share with you, Hung Fook Tong, a local branded video chain with 118 shops selling those herbal tea. They outsource all the whole IT department to us. And we are basically the telecom and technology service partner for them.

[Ni Quiaque Lai, executive]

I'll give you a specific example. Today, McDonald's launched their Oreos Cookie and Cream. This is a fantastic product. I just had it myself today and it's really yummy. We just delivered 15,000 units to our customer base today in one day. We hit the cap that we set ourselves or that we agreed on. 15,000 deployments in one day. So what do we do? We bring traffic to McDonald's. When you go to McDonald's, you don't just buy or you don't just get this for free. If you're a customer, you're likely to buy a happy meal or you're likely to get a soda, win-win for our customer, win-win for McDonald's, win-win for everyone.

[Operator]

Next question is from Ms. Jia Wen, Fitch Ratings. Is there an estimate of loss in revenue from accepting barter from customers?

[Ni Quiaque Lai, executive]

Actually, it's not loss in revenue, it's accretion of revenue because it's business we otherwise wouldn't have. Now remember, our core business is 80% gross margin. So we have a lot to play with when we barter. So barter is actually accretive. It's revenue-accretive. It's on new business that we currently don't have.

[Operator]

Okay. A follow-up question. How much synergy has HKBN achieved via integrating WTT in the first half?

[Ni Quiaque Lai, executive]

The HKD 300 million. We're well in excess of our HKD 300 million over 2-year target.

[Operator]

Okay. Next question is from Mr. Alan Lee, UBS. Can you please talk a bit more about your cloud strategy? And how much of it is part of HKBN's long-term strategy?

[Ni Quiaque Lai, executive]

Cloud is the future. You cannot exist without cloud. Samuel mentioned, we took a 10x increase because of our one-month waiver, and we prepare for that within 7 days from concept to execution, taking a 10x increase. We managed to do that because we are cloud-based. We eat what we cook. If you look at the COVID-19 situation, when it first happened and lockdown happened, a lot of e-commerce sites crashed because of the intake of demand. Our network took a tenfold increase and just sailed through that without any downtime. That's how we can help our customers.

[Operator]

Okay. Next question, we have Ms. [ Clara Lang ] from Standard Chartered Bank. How do you see the 5G development in the coming 6 to 12 months?

And will there be any impact to HKBN as a whole?

[Chu Kwong Yeung, executive]

First, I won't see any large-scale deployment or acquisition of 5G customers in the mobile industry in Hong Kong in the next 6 months or 9 months. But for us, we will be very busy in helping our customer or our partner in deploying their 5G mobile backhaul.

[Operator]

Okay. Next question is from Crédit Suisse. How much was the WTT synergy? Okay, I think that was covered. And there appears to be a EBITDA decline by 7% year-on-year in the first half. What's the view on this?

[Ni Quiaque Lai, executive]

I think -- actually, if you look at the total number, it's up. So maybe -- yes, I didn't see the 7% decline. Maybe it's an accounting thing.

[Operator]

Right. Okay. And okay, a follow-up question. Achieving lower end of CO3, we required 30% DPS growth in FY '21. What do you think can help HKBN to achieve the same?

[Ni Quiaque Lai, executive]

There's incredible operational leverage in our business. So if we can grow in the top line, we can jettison some of the legacy costs we've acquired through the acquisitions. I think we have a fighting chance to get to the low end of the CO3 target as William and [ NiQ ] talked about.

[Operator]

Okay. Thank you. That's all the questions we have the time for. Thanks very much for NiQ, William and Samuel's presentation today. That wraps our presentation.

[Chu Kwong Yeung, executive]

Thank you.

[Ni Quiaque Lai, executive]

Thank you.