Spark, the second largest operator in New Zealand, suffered a double-digit drop in profit for its fiscal year ending 30 June as it incurred higher costs for a business improvement plan, with overall revenue flat despite strength in mobile services.
The operator’s net profit fell 9.7 per cent year-on-year to NZD385 million ($257 million), due in large part to higher costs for implementing the three-year Quantum plan announced in June 2017. Spark said it accelerated the programme, taking an additional NZD24 million charge in the second half of fiscal 2018 and bringing the total annual cost to NZD49 million.
Revenue inched up 1 per cent year-on-year to NZD3.65 billion, with strong growth in mobile and cloud, security and service management (up 15.1 per cent) mostly offset by continuing declines in legacy voice, managed data and network revenue.
In a statement, Spark MD Simon Moutter said its success in growth areas continued to offset declines in legacy areas of the business: “We saw a continued growth story in cloud, security and service management products during FY18, with both revenues and margins improving over the year.”
Overall mobile turnover rose 6.9 per cent, which the operator said was driven by an increase in high-margin service revenue from ARPU and connection growth, and strong demand for high-end mobile devices. Mobile service revenue was up 4.6 per cent to NZD817 million, while other mobile service revenue (covering equipment sales and interconnect income) increased 11.3 per cent to NZD463 million.
Total ARPU was mostly flat year-on-year at NZD27.85, while prepaid ARPU grew 6 per cent to NZD12.45.
Spark added 58,000 mobile subscribers since June 2017 to end the fiscal year with 2.42 million. Prepaid accounted for 51 per cent of its user base.
Capex for the year dipped 0.5 per cent to NZD413 million and is forecast to drop to NZD410 million in fiscal 2019. In line with its changing revenue mix, the operator said the percentage of capex (excluding spectrum) spent on mobile increased to 28 per cent in fiscal 2018, up from 25 per cent the previous year.
Revenue in fiscal 2019 is expected to be flat at between NZD3.6 billion to NZD3.67 billion.Subscribe to our daily newsletter Back