Spark takes $38m Covid hit, but operating earnings up

Spark says ongoing border closures cost it $38 million in lost roaming revenue in the 12 months to June 30, and it fell well short of its target in the key fixed-wireless market.

But the telco still managed a 1 per cent rise in operating earnings to $1.12 billion – at the top-end of guidance. The company said cost controls drove the ebitda lift.

Revenue dipped 0.8 per cent to $3.59 billion.

Net profit was down 8.6 per cent to $384 million, with the fall pinned on higher depreciation and tax expenses.

A 12.5 cent per share dividend was declared, in line with expectations.

Fixed-wireless miss

Forsyth Barr, which had an outperform rating and $5.00 12-month price target going into today’s report, said fixed-wireless would be a key point of focus.

Spark set the ambitious target of adding 40,000 fixed-wireless customers during FY2021. The segment is prized by Spark, Vodafone and 2degrees because using mobile technology to deliver home or small business broadband cuts Chorus – and its clip of the ticket – out of the loop.

But Spark reported today that it made just half its target, with net additions of just 19,000 fixed-wireless customers for the year.

But it said it remained committed to its aggressive schedule of shifting 30 to 40 per cent of its broadband customer base to fixed-wireless by FY2023 (Vodafone NZ says it wants to get 25 per cent of its base onto fixed-wiress within two to three years, while 2degrees recently set a 20 per cent target).

Broadband revenue fell 1.5 per cent to $670m, but mobile revenue increased 0.5 per cent to $852 million and cloud and security revenue was up 5.5 per cent to $443m.

Chorus recently complained to the Commerce Commission about what it sees as the retail telco’s overly aggressive marketing of fixed-wireless – which resulted in the regulator sending a warning letter to all market participants.

Spark shares closed Tuesday at $4.73, for a market cap of $8.83 billion. The stock is down 5.4 per cent for the year.


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