Spark first-half profit improves, but still falls shy of expectations

The telco reported a net profit that nearly doubled to $64 million, or $73m on an adjusted basis. The analyst consensus was adjusted net profit of $96m.

Earnings before interest, tax, depreciation, amortisation and investment income (ebitdai) increased 10.3% to $448m, or $471m on an adjusted basis. The analyst consensus was $493m.

Adjusted revenue (after a year of partial and full asset sales) fell 1.1% to $1.92 billion in line with analyst expectations.

Unlike this time last year, when Spark shocked the market with a full-year earnings downgrade – after missing its first-half guidance, triggering a 19.3% one-day fall that wiped more than $1b from its market cap – the telco stood by its (muted) full-year earnings guidance for $1.01b to $1.07b ebitdai (including the shift to partial data centre ownership during the final five months).

Its net cost reduction target was narrowed to $40m to $50m as $55m in savings from second-half FY2025 layoffs was offset by an anticipated 18% increase in operating expenditure (partly tied to opex tied to new outsourcing deals; detailed below).

Spark announced a first-half dividend of 8 cents per share versus its 12.5cps profit payout for H12025.

The fall was in line with analyst expectations for a dividend “reset” amid ongoing tough market conditions.

The telco reaffirmed full-year free cashflow guidance of $290m-$330m, which it earlier said would underpin a full-year dividend of 15 to 17cps (compared to 25cps for FY2025 and 27.5cps for FY2024).

Mobile – which generates around half of Spark’s operating earnings – was being closely watched by analysts, who expected fewer connections but a 1% bump in mobile service revenue due to price increases.

In the event, Spark said its mobile market share had decreased by 0.5% but that it had increased mobile service revenues by 1.6% to $499m. The firm said a small number of “low value” customers had been lost with its 3G switch-off.

In the much-watched enterprise and government space (or “E&G”), where 2degrees has made inroads with keen pricing, Spark said its mobile service 7.8% in the first half to $51m from the H12025 $47m, which it framed as an improvement on FY2025’s overall 13.4% fall.

Total E&G customer connections fell from the year-ago 312,000 to 308,000.

On the analyst call, Hodson said the corporate mobile market was stabilising. In the broader mobile market, she said Spark had seen a boost from Apple’s strong iPhone 17 launch.

Analysts had also been wary of more revenue losses in broadband, but Spark said the division had stabilised with revenue increasing from $302m to $303m.

As in mobile, there were fewer customers as total broadband connections fell by 29,000 to $649,000, but Spark made more from those who remained.

Cloud revenue increased 1.7% to $120m but managed services was a continued pain point, falling 19.7% to $49m.

Shares closed Tuesday at $2.19. The stock is down 27% over the past 12 months.

Going into today’s earnings, Forsyth Barr had an “underperform” rating and a $2.40 12-month price target.

Spark’s Auckland staff moved into the newly constructed Fifty Albert tower last year. Photo / NZ Herald

While the economy remains muted, Spark is much-changed.

The telco has made a series of moves to slice costs and pay down debt by selling infrastructure and positioning itself for the future.

Those include over the past 12 months:

Slicing 23% of its staff to save more than $50m in labour costs (its 2025 annual report put the telco’s headcount at 4043, a reduction of “approximately 1300 fulltime employees” over 2024).Outsourcing more IT and mobile network work to Nokia and Indian giant Infosys. Tech upgrades, including those involving artificial intelligence (AI), also helped to cut costs.Selling 75% of its data centre business to Private Equity Partners in a deal worth up to $705m (the deal closed on January 30, a month after the first half closed). Spark says the proceeds will allow $2b in upgrades to the data centre operation, in which it now owns a 25% stake.Selling 100% of its celltower passive assets (the physical towers plus land and leases) across two deals.Selling its minority stake in Hutchison Telecommunications Australia for $47m.Announcing a satellite-to-mobile service will launch this year with a US player, widely expected to be Starlink. Elon Musk’s firm is a double-edged sword, given it also competes for home and small business broadband connections. A June 2025 Commerce Commission report said Starlink customers had increased 57% from 37,000 to 58,000 over the past year, accounting for 19% of the rural market and 2% overall. Musk’s firm drew $110m from the New Zealand market last year.Spark confirmed today that its satellite-to-mobile launch would be “in the second half” but had no further details.

Spark has also indicated it’s looking for an investor for its Mattr data business – for which the financials have not been material enough to report.

Ibbotson and Crozier said there is potential for an update.

“Any meaningful valuation would likely be a net positive,” they said.

In the event, Spark made no mention of Mattr in an investor presentation released this morning.

Earlier, Spark sold down its stake in transpacific fibre network operator Southern Cross Cables from 50% to 38%. It also shuttered Spark Sport and various side projects.

Regime change

What’s left?

Spark says its new five-year plan focuses on “communications”. Analysts call it sticking to its knitting.

While there are no obvious big strategic moves to make, boardroom leadership change is on the way.

Long-time chair Justine Smyth has said her current term (expiring in November 2026) will be her last.

Three new independent directors were named last October, one of whom could succeed Smyth: former Mercury chief executive Vince Hawksworth, ex-New Zealand Superannuation Fund and current Milford Asset Management director Lindsay Wright and Tarek Robbiati (a former Telstra and Hewlett Packard Enterprise chief financial officer who is now based in San Francisco as chief financial officer of NYSE-listed Pure Storage).

There was no immediate update on succession planning this morning.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.