New Zealand’s largest operator Spark reported a healthy increase in profit for its fiscal H1 as mobile and broadband revenue continued to climb on subscriber gains in both segments despite rising price pressures.
The operator’s net profit for the period ending 31 December increased 12.7 per cent year-on-year to NZD178 million ($130 million), with its EBITDA rising 3.5 per cent to NZD471 million. The company said the profit increases were driven by the inclusion of the full six months earnings from CCL Group (acquired in December 2015) and the timing of Southern Cross dividends.
Spark chairman Mark Verbiest (pictured) said despite vigorous price competition, top-line revenue growth was pleasing. “While the revenue performance across mobile, broadband and IT services was good, it is clear the intense ongoing price competition, particularly at the lower end of the market, is driving margin pressure and reinforcing the need to increase our focus on our brand assets, as well as continuing to tightly manage operating and capital expenditure.”
Total operating revenue rose 4.1 per cent year-on-year in H1 to NZD1.79 billion. Mobile revenue increased 4.4 per cent to NZD478 million, broadband revenue inched up 1.5 per cent to NZD326 million and IT services revenue grew 19.3 per cent to NZD220 million. Fixed voice revenue fell 8.2 per cent to NZD157 million.
Mobile connections grew 6.4 per cent to 2.35 million, boosting its market share by nearly 1 percentage point to 38 per cent. It closed 2016 with 138,000 fibre broadband connections, after accounting for 43 per cent of market growth in H1.
Operating expenses increased 4.3 per cent to NZD1.32 billion, which Spark attributed to an increase in the cost of supporting IT services growth and bringing on new big business customers.
H1 capex increased 3.7 per cent to NZD224 million. Due to unplanned work following earthquakes centred near Kaikoura, its capex guidance for FY17 was increased nearly 4 per cent to NZD415 million, which is 11 per cent to 12 per cent of revenue.
EBITDA for the full year is forecast to be flat or decline 1 per cent to 2 per cent, while revenue is expected to fall 1 per cent to 3 per cent.