Spark reviews costs as it stands by 2020 guidance

Spark reviews costs as it stands by 2020 guidance

Loss of roaming revenues and store closures bite in final quarter

Justine Smyth and Jolie Hodson (Spark)

Justine Smyth and Jolie Hodson (Spark)

Credit: Spark NZ

Spark is moving to manage and reduce costs to partially offset the impacts of the Covid-19 pandemic on 2020 revenue.

“Like all businesses we are preparing for a different set of economic conditions in the coming financial year and we need to take sensible steps now to ensure the business is equipped to respond," chair Justine Smyth said. 

To offset against both current and anticipated impacts from Covid-19 Spark said it would implement a company-wide cost review and a reprioritisation of 2021 capital expenditure that would support New Zealand’s economic recovery, such as the roll-out of 5G.   

CEO Jolie Hodson said Spark expected to experience flow-on impacts from the broader economic downturn, as customers reduce usage or find it difficult to pay for services.

As forecast by Reseller News, the indefinite closure of international borders the company also expected to lose of all mobile roaming revenues, which on an annual basis accounted for around 5 per cent of Spark’s total mobile revenues.

Spark said it had delivered a strong first half and most Covid-19 impacts have only materialised in the final quarter of 2020, which moderated the impact of the pandemic during this financial year. 

With the information known today, Spark reaffirmed 2020 guidance of $1.1 billion to $1.12 billion EBITDA and a 25 cents per share dividend. Capital expenditure remained at around $370 million.

Spark’s network of retail stores is also currently closed, with the exception of a small number that are operating as emergency distribution centres for the provision of essential hardware only. 

As a result, retail revenues have also declined due to lower device and accessory sales.

 "It is heartening to see that after many years of network investment we have been able to manage a dramatic increase in usage across our networks at a time when connectivity is of such critical importance, Smyth said.

While broadband usage has increased significantly, the majority of Spark’s customers were on unlimited plans and those on data capped plans are not being charged overage fees as part of Spark’s financial support package. 

Late payment fees and disconnections as a result of financial hardship have also been waived.

While there has also been an uplift in voice calling, the majority of Spark’s mobile customers are on unlimited minute plans and it is uncertain if the increase in calls to 0800 numbers will be sustained as New Zealand moves through alert levels.

“As an essential services provider we must ensure we are sustainable over the long-term so we can keep New Zealand connected, help to close the digital divide, and support the transition to new ways of working," Hodson said.


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