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Spark New Zealand chair Justine Smyth reported a sharp drop in profits today with declines in ICT services revenue contributing to a disappointing result for the year to 30 June.
Total revenue from continuing operations fell 14% to $3.86 billion while net profit was down 72% to $316 million.
Total IT revenue declined 1.6% to $692 million, driven by a $29 million (14.9%) decline in IT services revenues as economic conditions impacted demand and masked 3.5% growth in IT products revenues, driven by continued business migration to the cloud.
Data centre revenue grew 54.2% to $37 million, with Spark’s Takanini campus expansion completed on time and on budget and new revenue streams coming online.
High-tech revenue grew 21.5% to $79 million, with IoT revenues up 53.3% and over two million devices now connected to Spark’s IoT networks.
“It has been a challenging year for Spark and for many businesses across Aotearoa, with recessionary economic conditions creating a tough operating environment,” Smythe told shareholders today.
Public sector spending cuts and deferred private sector investment had a significant impact on IT services revenues, while lower household and business spending impacted mobile devices and accessories sales. At the same time, competitive pricing pressure intensified, particularly in business mobile.
“We did see strong growth in many of our core markets such as mobile, where service revenue surpassed $1 billion for the first time, as well as cloud, data centres and high-tech,” Smythe said.
“This was not enough to offset subdued demand in other areas, and we could not adapt our cost base quickly enough as the market turned.”
Smythe said business fundamentals for the year ahead were strong and a continued focus on cost reduction would improve margins and support growth.
“Our data centre strategy is a significant mid-term growth opportunity,” she said.
Spark maintained its leading position in the mobile market by service revenue and total connections, with service revenues up 3.1% and surpassing $1 billion for the first time despite intensified competition in the business mobile market.
Broadband revenue declined 2.1% to $613 million, however, as lower consumer spending increased price driven competition, particularly amongst non-telco competitors.
Spark CEO Jolie Hodson said it had been a tough year but business fundamentals remained strong and Spark was focused on returning to earnings growth in FY25.
“Our leadership in the growing mobile market will support future top-line growth as demand for data continues to grow, customer experience remains strong, and annual price reviews enable us to realise the value of the significant investments we make into our mobile network every year,” she said.
“The New Zealand data centre market is predicted to grow from ~90MW today to ~500MW by 2030, driven by the acceleration of Generative AI and ongoing business migration to the cloud.”
Spark’s SPK-26 Operate Programme would deliver further cost reductions across the business in FY25, as the company reaped efficiencies enabled by AI and transformed its enterprise and government division by integrating subsidiaries to remove duplication, simplify product portfolios and processes, and deliver better customer experiences.
“It is never easy to make changes that impact our people, and we do not do so lightly,” Hodson said.
“However, to compete and better serve our customers we must make the difficult but necessary decisions to ensure our cost base is sustainable.”