Market upheaval likely, warns Spark
Spark has forecast ‘‘something will have to give’’ in the broadband market because of intense competition, rising wholesale costs and low margins.
Managing director Simon Moutter issued the warning as Spark announced a 13 per cent rise in the company’s annual profit to $418 million and the appointment of its first chairwoman, Justine Smyth, who will take over from chairman Mark Verbiest in November.
Spark hopes to move almost half of its broadband customers to ultrafast or wireless broadband by 2020, adding to the 37 per cent who have already made the switch.
That would leave only 15 per cent of its 687,000 broadband customers on copper technology.
Something would have to give in the broadband market because of ‘‘the laws of economics’’, Moutter said, adding that increasing prices was difficult given there were 80 players in the market ‘‘selling a common input’’.
Spark vowed earlier this year that its Skinny brand would not be beaten on price.
Moutter forecast there would be consolidation in the market, saying he believed it had become cheaper for internet providers to buy customer bases than to win over individual consumers by luring them with the offers that were available today.
But Spark was not actively looking for acquisitions, he said.
Slingshot and Orcon owner Vocus’ $215 million writedown of its New Zealand business on Thursday was an indication of industry pressure, he suggested.
Moutter said Spark aimed to turn its Lightbox internet television service into a ‘‘marketplace’’ before Christmas that studios and other content providers could use to sell television channels and programmes to viewers on a revenuesharing basis.
That would include pay-per-view programming.
"We started Lightbox as a Netflix lookaliketype service because that was possible when we were an early mover. But we know that is not a sustainable long-term position." Simon Moutter
‘‘We started Lightbox as a Netflix lookalike-type service because that was possible when we were an early mover. But we know that is not a sustainable long-term position,’’ he said.
Spark had some content partners lined up but was not naming them. ‘‘We have not limited our minds about what kind of content it could carry,’’ Moutter said.
The changes to Lightbox may be the biggest development for customers in the next few months.
Spark had aimed to enter an additional ‘‘adjacent’’ market during the year to June, but Moutter said it was still looking for opportunities and nothing was at an advanced stage.
Smyth, who chairs Spark’s audit and risk management and human resources and compensation committees, is one of three female directors on Spark’s board but will become its first chairwoman.
Achieving gender diversity was a ‘‘catch 22’’ because it required leadership from the top but also required talent to come up through organisations, she said.
Smyth said she believed having more woman on boards would encourage other forms of diversity. ‘‘The conversation starts with gender diversity, but by virtue of that you are able to have a wider diversity conversation.’’
A significant part of Spark’s $48m profit rise was the result of a $20m windfall from the sale of surplus land in Mayoral Drive in Auckland.
The company forecast growth of zero to 2 per cent in its revenues and operating profit this financial year.
Spark’s revenues were up 3.3 per cent at $3.6b, thanks in part to 5.1 per cent growth in its mobile revenues, which was just ahead of its target.
But it did not achieve its goal of winning 45 per cent of orders for ultrafast broadband – although it said it ‘‘came close’’ during the final quarter.