Spark warns of larger COVID impact to New Zealand telco in coming year

Despite the impact of coronavirus in its final quarter, and increases in revenue and net profit, the telco has said it expects a larger impact to occur in the coming year.
Written by Chris Duckett, Contributor

Spark New Zealand reported a solid 2.5% increase in revenue to NZ$3.62 billion and a 4.4% jump in net profit to NZ$427 million for the full year to June 30, but the telco was less enthusiastic about its prospects for the coming twelve months.

"We are now entering a more challenging period as a country, and we expect the impact of COVID-19 to be more material in FY21," Spark chair Justine Smyth said.

"The recent return to alert level three in Auckland and alert level two more broadly has reminded us that this challenge is not behind us, and we moved quickly to lift broadband data caps for our customers once again. We know it is vital for New Zealand that we continue to invest in smart infrastructure during this time, and we are focusing our FY21 capital expenditure on supporting New Zealand's economic recovery, including through the rollout of 5G and investment in rural connectivity."

The telco said its results came on the back of a strong first half, and the completion of its three-year plan to move from a telco into an "end-to-end digital services company".

Using its measurement of earnings before finance income and expense, income tax, depreciation, amortisation, and net investment income (EBITDAI), the company reported NZ$1.1 billion, a 2.1% improvement on last year.

"Agile ways-of-working have improved our speed to market and customer focus, and we have seen a significant increase in both customer and people engagement during this time," Smyth added.

"Our sustained network investment has underpinned our ability to innovate and grow and provided secure connectivity for our country during COVID-19."

Of its NZ$3.62 billion in revenue, mobile contributed NZ$1.3 billion, broadband added NZ$680 million, cloud and security services reported NZ$443 million, and voice services recorded just over NZ$390 million in revenue.

With mobile, the telco said it now had 2.5 million customers and an average revenue per user (ARPU) each month of NZ$28.27, which amounted to a 2.5% increase. Of that number, the number of prepaid customers declined 5.8% to 1.16 million with ARPU gaining 6.8% to be NZ$13.33 a month. For postpaid, customers were up 6.3% to 1.33 million while ARPU dropped 1.5% to NZ$42 a month.

Looking at mobile in revenue terms, the consumer business increased sales by 1.1% to NZ$862 million and business revenue grew 1.8% to NZ$391 million. For broadband customers, Spark saw a quarter of copper connections disappear over the year to sit at 186,000, while fibre connections increased 20% to 367,000, and wireless connections grew by 11% to 156,000.

Looking ahead, the telco expects to report EBITDAI between NZ$1.09 billion and NZ$1.13 billion.

Spark will release its next three-year plan on September 16.

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