Spark claims good progress on transformation, hints at acceleration

Revenue up, EBITDA down

Spark New Zealand has reported half year results showing a 1.6 percent increase in revenue to $1.822b, a 1.7 percent decline in EBITDA to $464m and a 3.4 percent decline in net earnings to $172m.

Net earnings from voice, broadband and managed data and networks services were all down, but offset by increases in mobile, cloud, security and service management and by progress of Spark Ventures’ businesses such as Qrious.”

Spark chair Justine Smyth said the results showed that Spark had made good progress on its transformation strategy.

“We are beginning to see the results of progress against our three strategic focus areas: an emphasis on wireless technologies; better serving price sensitive customers; and radically simplifying, automating and digitising our business – to reduce cost while maintaining the high-quality experience our customers rightly expect,” Smyth said.

She said the results would “underpin the next phase of our transformation, and are intended to seek out growth in a very challenging market and operating environment.”

Smyth said that Spark was considering accelerating its business transformation to strengthen the FY19 result and if so the costs might reduce FY18 guidance.

She said that, based on the results from the first half, the board was affirming full-year EBITDA guidance of zero to two percent growth versus FY17 actual EBITDA (excluding net gain from sale of Mayoral Drive car park).

Managing director Simon Moutter said the launch of an unlimited mobile data plan, which had “set a new benchmark for value in the market, and growth in the online-only Skinny Direct product,” had helped grow mobile margins at both ends of the market and produced overall mobile ARPU growth for the first time in two years.

He said Mobile and cloud growth had more than offset the declines in voice, managed data and networks, and that Spark’s Upgrade New Zealand programme had progressed well over the period, with wireless broadband now in 104,000 premises and large numbers of customers migrating from copper to fibre.

Spark announced the plan in November 2016 saying it would aim to get as many of its broadband customers as possible off copper networks by moving high data volume users to fibre and others to wireless broadband.

A year later, at the FY17 full year results announcement, Moutter suggested Spark would move to providing mostly wireless services,  and predicted significant consolidation in the fixed broadband retail market, citing low margins on the wholesale price fixed broadband retailers pay to Chorus another fixed network owners.

“We now have 45 percent of our customers on these newer technologies, keeping us on track to be mostly ex-copper by 2020,” Moutter said. “This shift improves the customer experience, and is also delivering around $46 million annually in reduced access costs.”

Moutter also talked up the company’s digitisation programme, saying: “We have 35 ‘bots’ performing automated and sometimes very complex tasks, from managing security functions to proactively resolving broadband faults, and we’ve improved our customer self-service tools with enhancements to the Spark App, the MySpark self-service platform and the simplification of our online help section.”

The first insights into Spark’s use of bots were given in an investor presentation in June 2017 when Dr Claire Barber, CDO Spark Platforms, revealed that Spark had been using ‘Tinkerbot’, “a first edition artificial intelligence robot trained by our customer-facing engineers, proactively looking for customers experiencing poor broadband performance and diagnosing and resolving their issue.”

She said Tinkerbot had reduced call handling time and work effort by 40-60 percent.

 

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