Spark Profit Hit: Telco’s Five-Year Plan

Spark, which had set the aim of shaving $50m from its labour costs, revealed that its workforce was cut by “approximately 1300 full-time employees at the end of FY2025 [June 30]” for a new total of 4043 as roles were eliminated or went to outsourcing and offshoring firms.

READ MORE: Spark follows Air NZ in deal with Indian outsourcer, Luxon visits offshoring specialist

The profit crunch was within revised-down guidance and close to analysts’ consensus expectation.

And the telco predicted a more stable FY2026 after its recent accelerated cost-cutting – which hit $85m in the second half – and asset sales.

FY2026 dividend will be lower

The full-year dividend was 25 cents per share – in line with revised-down guidance (from the original 27.5cps) and ahead of the analyst consensus 24cps.

Spark said 100% of FY2026 free cash flow (a forecast $290-$330m), which a Spark spokeswoman said translated to 15 to 17cps. Craigs had been expecting a dip, but to 18cps.

The telco also revealed a new five-year strategy, dubbed “SPK 30″, which it said would deliver a “capital management reset that refocuses Spark on its core connectivity business”.

SPK-30 was outlined in very broad strokes today.

“The strategy includes four key focus areas – growing core connectivity, simplifying and optimising beyond the core, and delivering a better network and better customer experiences.

“These priorities are enabled by a focus on people and culture, embedding technologies such as AI across Spark, disciplined financial management, and an enduring commitment to sustainability,” the telco said in an NZX filing.

Spark says a “Process has commenced to introduce new investors” to Mattr, its digital identity spinout that recently won a key contract for a new digital wallet and ID system that people will use to interact with Government departments.

In-line operating earnings, flat guidance

Reported ebitdai was $1.053b, just a whisker shy of the analyst consensus $1.054b. FY2026 guidance was for operating earnings of $1.02-$1.08b or $1.01-$1.07b excluding its now spun-out data centre business.

Revenue fell 2.5% to $3.75b.

Total capital expenditure fell 17.2% to $429m. Spark said “business as usual” capex would fall to $380-$420m in FY2026 – excluding $50-$70m in “strategic capex” for data centre expansion, which will now be shared with a new majority owner.

Mobile down sharply in govt, corporate

Mobile service revenue declined 2.3% to $987m, “driven by price competition in enterprise and government and consumer prepaid,” Spark said in an NZX filing. Small business and consumer numbers grew in the second half, the telco said.

Mobile revenue from consumer and small-to-medium business customers was down 0.9% from $869m to $861m for the full year. On a conference call, CEO Jolie Hodson said the telco was three weeks into $2 to $5 per month increases for the segment with “low churn”.

At the top end of town, there was continued pain, with mobile revenue from enterprise and government falling 17% from $120m to $100m.

Spark said total FY2025 mobile market growth was 1.2%, which it said was lower than market researcher IDC’s 3% pick. One bright spot: Growth picked up to 1.9% in the second half.

Continued weakness in IT services

IT services revenue continued to be a pain point, falling 7.7% to $144m.

Broadband revenue fell 0.8% to $608 million.

Cloud revenues grew 4.4% to $235 million “as public cloud uptake continued to increase”.

Data centre growth, sale

Data centres revenue grew 11.1% to $50 million.

On August 12, Spark said it had sold 75% of its data centre operations to Australian Pacific Equity Partners in a deal that values the business at $705 million.

The telco will get $486m cash, with a further $98m – for a total $584m – in FY2027 if performance targets are hit.

The proceeds will go to paying debt, the company said in an NZX filing. Spark had net debt of $2.74b as of December 31, 2024 and $2.13b as of June 30, 2025.

The Sydney-based Pacific Equity Partners (PEP) has more than A$14 billion ($15.4b) in funds under management. Its largely non-tech portfolio includes financial services and healthcare companies, Singapore Post’s Australian operation and fleet leasing. It has also owned and sold major New Zealand businesses, including the chicken company Tegel and biscuit maker Griffins.

Hutchison sale

Spark banked a windfall $47 million on June 23 as Hong Kong conglomerate CK Hutchison bought out its ASX-listed subsidiary, Hutchison Telecommunications Australia – in which Spark owned a 10% stake (dating from its Telecom days and a never-realised plan for a 3G partnership).

The cash proceeds arrived in July, but will help with the FY2026 outlook delivered with results.

Spark also realised $309m net of transaction costs as it sold its remaining 17% stake in Connexa, the company setup when it spunout its passive celltower network assets.

After a slow first half, Spark’s drive to save $80m-$100m in costs gained steam in the second half.

In April it announced an expanded contract with Indian outsourcing and offshoring giant Infosys, and in May 180 network operations roles were outsourced to Nokia (once a marquee handset brand and now a global giant in mobile networking infrastructure that runs outsourcing centres in two cities in India for global clients, as well as local operations).

Spark has said it will launch a mobile-to-satellite service in the New Year, via a US operator – who is un-named, but there are strong indications its name rhymes with Farlink and has a famous South African-American billionaire as its CEO.

Reaction to Spark’s first half FY2025 result was brutal as weak earnings came in under a twice-lowered forecast.

About $1b was wiped off the telco’s market capitalisation in the hours after it was announced.

“It must have felt like the last days of Rome in the Spark head office on Friday as the share price burned,” Craigs’ Geoff Zame wrote the Monday after the shocker result delivered on February 21.

Shares closed Tuesday at $2.48. The stock is down 42.3% for the year.

Spark recently announced a board refresh that will see three new directors arrive between today’s earnings and its annual meeting in a couple of months. They are:

The successor to chair Justine Smyth is expected to come from their ranks.

How the competition is faring

Rival One NZ, now 100% owned by Infratil, reported ebitdaf (earnings before interest, taxes, depreciation, amortisation and fair value adjustments) for the year to March 31 of $604.0m from last year’s $545.5m, “despite a challenging economic backdrop” on revenue that fell from $1.996b to $1.921b.

Last November, privately-held 2degrees said its operating earnings increased by 16% (excluding one-off-gains from the FY23 70% sale of its celltower network) to $339m in the year to June as revenue rose by 7% to $1.34 billion in the year to June 30, 2024.

The firm is expected to post its FY2025 numbers later this year.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.