Spark chief executive Jolie Hodson observes smoother move into lockdown

Wednesday, 18 August 2021

Spark slightly outperformed most analysts' expectations despite the net profit drop.

Most businesses appear to be much more prepared to work through the level 4 lockdown than they did when the country first went into lockdown last year, Spark chief executive Jolie Hodson says.

Speaking after the company delivered its full year result, Hodson said a lot of companies had improved their digital connectivity and introduced different ways of connecting with their customers.

“The amount of calls we took from customers last time to help them get set-up – we just haven’t had the same level.

“Businesses have more business continuity plans and a lot have adopted new collaboration tools such as Microsoft Teams.”

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But it was obvious that the longer the lockdown went on, the more impact it would have, she said.

Spark could have a role to play in helping the country live with Delta after mass vaccinations, as and when borders opened, Hodson said.

One of the businesses Spark owns, Mattr, had done a lot of work in the area of verifying identities and data, including “the ability to use different forms of technology to ensure ‘you are who you say you are’, she said.

Spark chief executive Jolie Hodson has committed an extra $35m this year to 5G.

“Technologies like that will play a role as we think ahead to a world where people do start to move around again and we need to know that ‘you have had the vaccination or you haven’t, or you have this credential or you don’t’ and we are excited about the opportunities that exist with that.”

Spark posted a 9 per cent drop in its net profit to $384 million, for the year to end of June, and announced it is stepping up the pace of its investment in 5G.

In a release that was prepared in advance of Tuesday’s Covid outbreak and made no mention of it, chairwoman Justine Smyth said the economic recovery had been stronger than expected, but that with recent travel bubble pauses, uncertainty remained.

“Closed international borders continue to impact Spark through the loss of roaming revenues, lower overall growth in some markets, and talent scarcity within the technology sector,” she said.

Spark’s operating profit rose 1 per cent and was towards the high end of expectations, at $1124 million, while revenues edged down 0.8 per cent to just under $3.6b.

Hodson committed an extra $35m in investment in its 5G network this year, which she said would bring its investment in mobile connectivity this financial year to $125m.

Broker Forsyth Barr had forecast Spark would post a net profit of $374m and an operating profit of just over $1.1b.

Spark shares were trading up 0.8 per cent at $4.77 in early afternoon trading on the NZX aftre the result.

One way Spark can improve its profitability is to encourage consumers to switch to its fixed-wireless broadband service, as an alternative to copper or ultrafast broadband wholesaled from Chorus.

But Spark confirmed it had not achieved its target of adding 40,000 wireless broadband connections in the year to June, adding only 19,000 net connections.

Hodson said it was now targeting the lower end of its previous goal of having 30 to 40 per cent of its broadband customer base on fixed-wireless by June 2023.

Currently, the figure was about 25 per cent, she said.

Spark’s ability to shift existing customers to its own fixed-wireless broadband service was “crucial to protect gross margins” in an increasingly competitive retail market, Forsyth Barr said ahead of the company’s result.

But going too hard marketing fixed-wireless risks the wrath of regulators.

Network operator Chorus could start withdrawing copper phone and broadband services from some areas where the uptake of ultrafast broadband is high from the start of next month.

Telecommunications commissioner Tristan Gilbertson said earlier this month that telcos were confusing customers over their broadband options ahead of the gradual closure of the copper network.

He has warned the watchdog will impose a binding rules if the industry does not develop a satisfactory code of practice.

Gilbertson made clear in April that one of the things he did not want to hear was copper network customers being told they had to switch to fixed-wireless, or that it was a substitute for ultrafast broadband.

Hodson said it was comfortable with its own marketing of fixed-wireless and how it was presenting different technologies to customers.