Spark New Zealand Limited Analysis

Overview

As one of New Zealand's largest listed companies, Spark New Zealand has many responsibilities to customers, partners, shareholders, and New Zealand.

Spark New Zealand is made up of a number of core business areas, Spark Home, Mobile & Business, Spark Digital, Spark Ventures, and Spark Connect. In addition, there are a number of flanking brands, including Revera and Appserv, both Cloud computing specialists that together can provide Cloud solutions across the market, Big Pipe and Skinny as value-brands for the broadband and mobile markets respectively, a smart data business called Qrious, and Lightbox, an internet TV business.

Spark New Zealand is the parent company. Spark Home, Mobile & Business provides access to technology in new and innovative ways to help New Zealanders and New Zealand businesses move forward and reach their goals. Spark Digital provides solutions for the rapidly evolving needs of business, enterprise and government clients as they meet the demands of an increasingly globalised, connected and mobile customer base. Spark Ventures will be accelerating the company's future focus and pace of innovation, and delivering new services and businesses such as WiFi, Internet TV and Smart Data analytics.

Spark New Zealand has a continued focus on becoming a winning business inspired by customers, providing communications, entertainment and IT services over our networks and the cloud, to enable New Zealanders to unleash their full potential. Its aim is to achieve #1 in mobile, #1 in data, and #1 in effortless service and cost. To achieve this, it is investing broadly across its organisation - in people, in new services, products and businesses, in customer service and intelligence, and in digital networks, spectrum and IT platforms - to set itself up for success and for further growth in the future.

Spark New Zealand (then Telecom) was formed in 1987 out of the telecommunications division of the New Zealand Post Office, a government department. In 1990 Spark became one of the first telcos in the world to be fully privatised. On 30 November 2011, Spark New Zealand demerged into two entirely separate, publicly listed companies; a retail services provider (Spark) and a network services operator (Chorus). Structural separation of Spark's retail business from the business that owns and operates the Fibre-To-The-Premise (FTTP) network was a pre-requisite for participation in the Government's Ultra-Fast Broadband scheme (UFB).

Today, Spark has a significant level of operational scale within the New Zealand telecommunications market and provides fixed, mobile and IT products and services to consumer, small and medium-sized enterprise (SME), corporate, enterprise and wholesale customer segments.

Performance

The following information was extracted from Spark NZ Limited's FY25 Half Year results, released on 21 February 2025:

Reported revenue declined 1.9% to $1,939 million, driven by the performance of mobile, IT services, and the continued decline of legacy voice, and partially offset by growth in mobile devices, cloud, data centres, and IoT.

Reported EBITDAI declined 20.9% to $419 million, driven by lower IT services project activity, the mixshift from private to public cloud, and supplier cost inflation. Reported NPAT declined 77.7% to $35 million, due to lower EBITDAI and higher depreciation and amortisation costs. When adjusting for the non-recurring costs of operating model transformation of $29 million in H1, adjusted EBITDAI declined 15.5% to $448 million, and adjusted NPAT declined 64.3% to $56 million.

Spark’s mobile service revenue declined 3.7% to $491 million, driven predominantly by shrinking mobile fleets following customers’ headcount reductions and price competition in the Enterprise and Government division, and the cessation of Spark’s mobile insurance product in consumer.

Broadband revenue declined 2.3% to $302 million as cost-of-living pressures saw customers trade down to lower priced plans, and connections reduced off the back of intensified price competition.

Total IT revenues6 declined 1.5% to $336 million. While IT products grew 1.1% to $264 million due to strong growth in public cloud, this change in mix contributed to a 10% margin reduction. Reduced IT services project activity across the government and business sectors saw revenues reduce 10% to $72 million, while high-tech revenues grew 17.1% to $41 million as IoT connections increased 25% to over 2.2 million.

Data centres’ revenue increased 13.6% to $25 million, as billing of Spark’s 22MW capacity increased.