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 FY24 Full Year results, released on 23 August 2024:

Spark’s FY24 financial results are cycling the significant revenue and net profit declared in FY23 following the TowerCo and Spark Sport transactions. As such, both reported and adjusted year on-year comparisons are provided – the latter of which strips out the impact of the one-off gain to provide a like-for-like performance comparison.

In FY24 Spark delivered revenues of $3,861million, a decline of 1.2% on an adjusted basis and 14% on a reported basis. This resulted in EBITDAI of $1,163 million, a decline of 2.5% on an adjusted basis and 32.5% on a reported basis.

Reported NPAT declined 72.2% to $316 million as a result of cycling the TowerCo and Spark Sport transactions, lower EBITDAI, higher finance expenses and depreciation, and a one-off $26 million non-cash tax adjustment relating to recent Government policy changes7. Adjusted NPAT, excluding one-off items in both years, declined 21% to $342 million.

Lower EBITDAI and higher interest, lease costs, and non-cash earnings impacted free cash flow, which reduced 32.5% to $330 million.

Spark maintained its leading position in the mobile market by service revenue and total connections8, with service revenues surpassing $1 billion for the first time – increasing 3.1% to $1,010 million. This was driven by connection growth, price increases, and the stabilisation of roaming revenues in the consumer market and was partially offset by declines in the business market as price competition intensified.

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