24 Feb 2021

Spark's net profit falls as border closures cut demand

11:02 am on 24 February 2021

Spark's bottom line has been hit by closed borders and a fall in net migration.

Exterior shots of Sparks Christchurch office

Photo: RNZ / Nate McKinnon

The telecommunications company's net profit for the six months to December fell 11.4 percent to $148 million as depreciation costs increased by $29m.

Revenue eased over the period by 1.5 percent to $1.8 billion because Covid-19 border closures had cut demand for both its high earning mobile roaming plans and broadband connections from migrants.

"With borders closed for the foreseeable future we have had to adapt at pace to the ongoing loss of mobile roaming revenues and lower growth broadband and prepaid markets," Spark chair Justine Smyth said.

The company had also recorded a $41m fall in revenue from its legacy fixed-line voice business, about half of which was related to one-off costs associated with refunding historical wire maintenance charges to customers.

Spark chief executive Jolie Hodson said the ongoing border closures had hurt its desired growth in its broadband business.

"The broadband market was impacted during the half as Covid-19 border closures reduced the number of people moving to New Zealand and needing a connection. While this has impacted our growth aspirations in the short term, our longer-term wireless ambitions have not changed."

Despite the obvious challenges presented by the pandemic, it had thrown up some opportunities for the company as it managed to grow its cloud, security and service management revenue by $10m to $229m.

Hodson said last year's lockdowns spurred many businesses to digitise their systems and establish new ways of working.

"We are investing behind digital skills programs for our small business customers, to support their adaptation to an increasingly digital marketplace."

The company said the financial implications of Covid-19 had become clearer over the first half and it lifted the lower range of its full year underlying profit guidance by $10m to sit between $1.1b and $1.13b.

Spark shareholders would receive an interim dividend of 25 cents per share.