Competition remains tight between Spark and Vodafone

Competition remains tight between New Zealand's two largest telcos with Vodafone and Spark both reporting similar mobile and broadband gains in their latest annual reports. Photo / file

Competition remains tight between New Zealand's two largest telcos with Vodafone and Spark both reporting similar rise in customer numbers in the mobile and broadband markets.

In its financial report for the year to June 30, released today, Spark reported an annual profit of 13 per cent as the country's biggest telecommunications company eked out a small sales growth and continued its focus on stripping out costs.

The company has retained or slightly increased its market share at 24.2 per cent, with some 2.39 million mobile connections, up 4.3 per cent on the previous year, and 687,000 million broadband connects, up 1.8 per cent.

Vodafone narrowly retains top-spot in the mobile market, according to its annual report to the end of June. It had 2.49 mobile customers and 425,000 fixed broadband customers.

In a conference following the release of Spark's report, managing director Simon Moutter said most pleasing to him was the "huge gains" the company had seen in customer experience after a relatively poor performance in 2016.

"At this time last year we were really struggling with some of our services. We got sidelined by the winter problems on the copper network and we were in a bit of difficulty but it's very pleasing that we've run through this winter with no issues whatsoever."

The company's emphasis on moving customers off the copper network was paying off, with about 37 per cent now either on the new fibre or wireless networks.

Spark's earnings before interest, tax, depreciation and amortisation (ebitda) rose 3 per cent to $1.02 billion on a 3.3 per cent gain in revenue to $3.61b.

"A 3 per cent increase in revenue in the face of heavy decline [in] yesteryear's voice and legacy data is a significant achievement," Moutter said.

It was the first growth Spark had seen in broadband connections in at least a couple of years in the face [of] vigorous competition, he said.

The year ahead would see significant investment by Spark in automating, digitising and simplifying the company in an attempt to make it New Zealand's lowest-cost operator.

"That said, we won't be taking any soft options. We still want an earnings uplift in FY18 but investors should be clear that our real aim is to deliver a significant and sustainable uplift from FY19 and beyond."

Spark's net profit climbed to $418 million, or 22.8c per share, from $370m, or 20.2c a year earlier.

The company has been focusing on fattening its ebtida margins by switching more customers off copper-line services, which attract a fee paid to wholesaler Chorus, and on to its own wireless networks. It wants to achieve an ebitda margin of more than 30 percent by 2020, and achieved 28.1 per cent in the latest year.

Chairman Mark Verbiest signalled his intention to stand down in November, to be replaced by Justine Smyth, who would be the company's first female chairwoman.

The board declared a final ordinary dividend of 11c per share and a final special dividend of 1.5c per share, payable on October 6 with a September 22 record date. That takes the annual return to 25c per share, unchanged from a year earlier.

Spark plans to keep that annual dividend return at 25c in the 2018 financial year, giving guidance for ebitda to rise by as much as 2 per cent in the current year, with revenue also seen rising by up to 2 per cent.

- Additional reporting BusinessDesk