New Zealand telco Spark has suffered a slight drop in net profits and revenue as it looks to maintain its market dominance despite significant concerns about key rival Vodafone eating away at its market.
Spark released its results for the full year to the end of June on Thursday, reporting a net profit of NZ$370 million, a drop of NZ$5 million on last year. Operating profit was up 2.5% to $986 million.
Revenues declined by 1% to slightly below NZ$3.5 billion.
Spark says the drop in profit was impacted by a 33% lift in income tax expense to NZ$147 million because of higher current year earnings, prior year non-taxable gains on divestments, and prior year period adjustments.
{loadposition peter}On the marketshare battle with Vodafone, Spark managing director Simon Moutter made a point of highlighting that Spark’s mobile revenues were up 11.3% to NZ$1.134 billion for FY16, “well ahead of Vodafone’s recently published estimate of NZ$1.065 billion”.
“We are clearly winning in the mobile market,” Moutter notes, as Spark overtook Vodafone in the key mobile market.
"We are now 'No 1' in the mobile market by revenue shares," he said.
In today’s results announcement, Moutter expressed further concern about the proposed Vodadfone/Sky TV merger.
“In media, while we’re generally supportive of market consolidation where it leads to better outcomes for consumers, Sky’s monopoly in premium sports content — and the lack of a viable and credible wholesale market that provides better online, on-demand choices for New Zealanders to watch their sports — is a key concern,” he emphasised.
“We believe a merged Sky/Vodafone will be able to leverage its monopoly power in the sports content market, to the detriment of consumers. We have therefore opposed the merger in its current form in our submission to the Commerce Commission.”
Just a week ago, Spark confirmed with the country’s competition regulator, the Commerce Commission, that it opposes the proposed merger between satellite pay television operator, Sky TV and Vodafone.
In its submission to the Commerce Commission, Spark said that based on Sky’s current wholesale market arrangements for premium sports content, it didn’t believe the proposed merger was “in the best interests of New Zealand consumers and so should not go ahead in its current form”.
Vodafone’s New Zealand arm announced in June its proposal to merge with Sky TV in a deal worth $3.27 billion (NZ$3.44 bn), with Vodafone holding a majority 51% stake in the merged company via its UK parent, Vodafone Group.
In today’s full year 2016 results announcement, Spark chairman Mark Verbiest says the telco is now well into the next phase of its ongoing business transformation, “shifting focus from building the solid foundation of digital capabilities needed for future growth, to delivering on the opportunity provided by that foundation”.
“Notably, the growing areas of our business, such as mobile and platform IT services, now outweigh the declining areas such as traditional fixed line voice and legacy data services, signalling a successful repositioning and a notable turning point.”
Verbiest said the financial results for the past year supported the board's view that a return to long-term sustainable growth is “realistic and achievable".
Moutter said today he was pleased with company’s progress over the past year, but referred to areas that he says needed to improve.
“In broadband, our focus on higher-value plans and adding customer value through digital services, such as Lightbox and smart living solution Morepork, has helped a 5.4% growth in revenues. There has also been excellent growth in business IT services revenue, up 11.1%."
While outlining concerns over the Vodafone/Sky TV merger, Moutter said the telco’s most immediate issue is customers experiencing “unacceptable delays when contacting our call centres”.
“While supply constraints and visibility of fault restorations are beyond the control of ISPs like Spark, we do not shy away from the fact that, as their digital service provider, we are responsible for the experiences of our customers.
“This is our highest priority right now and we are moving fast on a number of fronts. While we still have a long way to go, wait time performance has been improving markedly in recent weeks as a result of the work we’ve done to date.”
Spark reported that in June it completed a four-year, NZ$238 million re-engineering programme, with 52 legacy IT systems retired, 41 systems consolidated and over 100 million customer inventory records migrated.
“Completed on time and on budget, it lays the platform for the delivery of excellent digital customer services,” Moutter said.
“We are also proud of our commitment to New Zealand’s future. We’re investing in innovation through Spark Ventures and through our support of start-up sector programmes. And we continue to invest in our nation’s future through the Spark Foundation and through our support of community initiatives, particularly in technology education for young New Zealanders.”