Change costs see Spark earnings fall on increased sales

Change costs see Spark earnings fall on increased sales

Telco major Spark reports increased sales of $1.82 billion for the six months to 31 December, but lower profits

Simon Moutter - Managing director, Spark

Simon Moutter - Managing director, Spark

Spark increased sales by 1.6 per cent in the six months to 31 December, but profits continued to sag for the telco in New Zealand.

Total sales were $1.82 billion but both EBITDA and net earnings fell compared to the previous corresponding period, by 1.7 per cent and 3.4 per cent respectively.

EBITDA was reported as $463 million while earnings were $172 million.

Mobile and cloud, security and managed services contributed strong top line sales growth, with mobile up 8.3 per cent to $635 million and cloud up 17.5 per cent to $181 million.

“Our cloud, security and service management revenue also continued to grow, on the back of customer demand for 'as a service' products," Spark managing director Simon Moutter said.

"Mobile and cloud growth continue to more than offset the declines in voice, managed data and networks."

According to financials, capital expenditure grew 17 per cent to $262 million and overall, EBITDA declined by $8 million, as the half-year included $13 million of change costs as Spark positioned the business towards what it called the "lowest cost operator model".

"The six months to 31 December 2017 have seen Spark embrace a bold programme of digital transformation in line with our strategy," a note from Moutter and chair Justine Smyth stated.

"Spark has continued to invest substantially in a digital services future, using best-in-class technology to meet the rising expectations of our customers.

"We’ve made real progress on a number of strategic initiatives, and are encouraged by this to consider accelerating our business transformation in the second half."

During the past six months, Spark's efforts to shift customers to wireless brodband rather than Chorus's fibre have made progress.

"Our wireless broadband product is now in 104,000 premises a little more than a year after we launched it into urban markets and is delivering around $46 million of annualised gross reduction in broadband access costs," Moutter and Smyth stated.

"We are still targeting 125,000 wireless broadband customers at financial year end."

Other strategic initiative include Spark's multi-brand strategy to serve the growing price-sensitive end of the market, expanding the offerings through Skinny and other brands.

Third is the lowest cost operator model, through simplification, automation and digitisation across the business.

"On all three of these areas we have made substantial progress in the first half of FY18," Moutter and Smyth added. "We grew mobile revenue and margin with total mobile average revenue per user (ARPU) returning to growth for the first time in two years, up 1.8 per cent on the prior year."

In other tech-related statements, Spark said it has deployed 35 bots, presumably robotic process automation, to automate tasks across business and solve customer problems.

The telco has also begun it nationwide Internet of Things network roll-out and it expects to provide coverage to 20 urban centres and in key rural areas by mid-2018.

Both Spark and rival Vodafone won rights to supply an expanded range of services under the government's telecommunications as a service supplier panel earlier this month.

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