Spark blames COVID-19 border closures for slight revenue decline

Spark New Zealand reported its revenue decreased by 1.5% to around NZ$1.8 billion for the half year to December 31, attributing the drop to sustained COVID-19 border closures.

According to the telco, broadband and prepaid markets were heavily impacted by COVID-19 as approximately 44,000 fewer people migrated to New Zealand during the six months to December when compared to the period immediately prior. As a result, the telco’s mobile services revenue declined by 1.2% year-on-year to NZ$5 million.

Spark said it was optimistic about its mobile business’ future outlook, however, as mobile services revenue increased by 3.8% year-on-year when the impact of the loss of roaming is excluded.

“The broadband market was impacted during the half as COVID-19 border closures reduced the number of people moving to New Zealand and needing a connection. While this has impacted our growth aspirations in the short term, our longer-term wireless ambitions have not changed,” Spark CEO Jolie Hodson said.

“There remains a significant addressable market, which continues to grow as we roll out 5G, and precision marketing is helping us to identify customers who are best suited to wireless broadband and provide them compelling, tailored offers.”

Spark’s cloud, security, and service management business, meanwhile, continued to chug along, with revenue growing by 4.6% to NZ$229 million.

Despite the drop in overall revenue, earnings before finance income and expense, income tax, depreciation, amortisation, and net investment income (EBITDAI) remained flat at NZ$502 million as operating expenses decreased by NZ$30 million during the period.

Net profit after tax reduced by 11.4% to NZ$148 million, driven by a NZ$29 million increase in depreciation and amortisation charges which resulted from the shorter asset lives of new digital technologies, and an increase in depreciation related to customer and property leases. 

Looking ahead, Spark said it has revised its EBITDAI guidance as the implications of border closures have become clearer when compared to six months ago.

Spark’s FY21 EBITDA impact has now been set at NZ$50 million, down from the previous NZ$75 million estimate. As a result, Spark’s EBITDA guidance range has been changed to NZ$1.1 billion to NZ$1.13 billion. The guidance range was previously NZ$1.09 billion to NZ$1.13 billion.

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