Spark transformation costs hit profit

Spark New Zealand’s first-half profit fell 3.4 per cent as the country’s biggest telecommunications company ramped up spending on a new transformation programme aimed at making it the nation’s lowest-cost operator.

Net profit declined to $172 million in the six months ended December 31, from $178m a year earlier, it said yesterday.

The telco’s favoured measure, earnings before interest, tax, depreciation and amortisation, slipped 1.7 per cent to $463m as operating costs rose 2.9 per cent to $1.36b, outpacing a 1.6 per cent increase in revenue to $1.82b.

The higher costs were led by an 11 per cent increase in operating expenses to $282m, of which an extra $13m came from the Quantum plan to widen margins through simplification, digitisation and automation, and a $10m increase in advertising.

“As indicated at the end of the previous financial year, the transformation programme has associated costs of change, and revenue growth over the half was partially offset by $13m of such costs,” chairwoman Justine Smyth said.

The telecommunications market has been tight for operators in recent years as they vie for customers unwilling to pay too much for broadband. To counter that, Spark has tried to switch customers on to higher margin services such as fibre and wireless.

Spark affirmed annual guidance for ebitda to rise by as much as 2 per cent, but it’s considering accelerating the Quantum plan which would see the carrier take on extra costs in the second half of the year.

Spark’s shares closed down 3.91 per cent on $3.32.