Spark chases cost concious Kiwis

Telco prices have dropped 15% over 5 years

New Zealanders holding out for the cheapest broadband they can find is forcing Spark New Zealand to compete more aggressively on price.

Government data show prices for telecommunications services have dropped 15 per cent in the past five years.

In that time, there has been a major overhaul of the sector with a third mobile phone operator gaining traction, network operator Chorus carved out of Telecom, and the rollout of a government-sponsored fibre network.

Spark, the services business that decoupled with Chorus in 2011, has been focusing on the higher-value end of the broadband market in recent times.

However, a two percentage point fall in its market share to 42.3 per cent of connections in 2016 has prompted a rethink and the country’s biggest telecommunications company plans to chase price- sensitive customers, initially with its Skinny brand.

“A growing portion of the market is choosing to buy primarily on price. We’re seeing that across all telco portfolios irrespective of whether its consumer, SME, or big business,” chief executive Simon Moutter told analysts.

Moutter said there are more gains to be made migrating customers to fibre, and that his rivals were paying too much to acquire new connections in what’s largely a saturated market.

Spark lifted earnings by 3.5 per cent for the six months to December 31, the telco reported yesterday. Earnings before interest, tax, depreciation and amortisation rose to $471 million in the six month period, from $455m a year earlier, with revenue up 4.1 percent to $1.79 billion. Net profit increased to $178m from $158m.

Spark affirmed guidance for annual ebitda to rise by up to 2 per cent in 2017 on a revenue increase of up to 3 per cent.

Spark is rethinking its wider strategy, and Moutter plans to put it to investors by the middle of the year.

The company is keen to shift its customers from the copper lines owned by Chorus, which have regulated wholesale prices.