Spark NZ remains “on-track” despite competitive telco market

Spark New Zealand says the company’s half-year results for the FY15 financial year show it is “continuing to deliver against the milestones” set out in its long-term growth strategy.

Spark New Zealand says the company’s half-year results for the FY15 financial year show it is “continuing to deliver against the milestones” set out in its long-term growth strategy.

Released today, the telco’s net earnings from continuing operations after tax for H1 FY15 were $147 million, unchanged from H1 FY14.

Operating revenues from continuing operations declined 2.7%, to $1,797 million, largely as a result of the ongoing and historical decline in consumer use of legacy fixed and voice products.

Earnings before interest, tax expense, depreciation and amortisation (EBITDA) from continuing operations were down 3.5% - this includes the impact of non-recurring rebrand costs and the higher reorganisation costs versus the prior year.

Taking these items into account, the telco reports that operating earnings were “broadly flat”.

“More than two years ago, we made the decision to build our business around a digital services future inspired by the needs of our customers in a rapidly changing world,” says Mark Verbiest, Chairman, Spark.

“At the time, we outlined a two-phase approach: first, resetting the business by stabilising revenue and margins and reducing costs; and subsequently, moving to create value by driving market revenue and margin growth, with continuing improvement in unit costs.

According to Verbiest, the first half of the 2015 financial year saw Spark New Zealand remaining “on-plan” as it nears the end of this first phase of repositioning.

“The decline in core retail product revenues evident in recent reporting periods,” Verbiest explains, “due to lower demand for legacy and fixed voice services and sharp declines in broadband pricing, showed further signs of moderating, while underlying net earnings from operations were flat compared with the corresponding period in the previous financial year.”

Connections…

Managing Director Simon Moutter says the results reflect the ongoing repositioning of the company and the execution of its long-term strategy.

“There has been sustained growth in good quality mobile connections, up another 108,000 in the period since 30 June 2014, as Spark New Zealand continues to close the gap on the competition,” he says.

“Total mobile revenues grew by 2.4% however the market remains very competitive, particularly in the business segment where revenues have actually declined on the back of continuing price reductions and data bundle expansion.”

Moutter says the company’s performance in the broadband market also reflects the competitiveness of the market, with Spark’s share of connections declining slightly.

“That said,” he adds, “gains were made in broadband revenue and profitability as we weighted our efforts toward higher-value customers through the introduction of higher-end products and the provision of valued broadband services for Spark New Zealand customers, such as Lightbox.”

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