Covid-19 coronavirus: Spark to undertake company-wide cost review

Spark chief executive Jolie Hodson says its expects flow on impacts from the economic downturn.

Spark will undertake a company-wide cost review as its seeks to offset current and future impacts from Covid-19.

The country's biggest telecommunications company reaffirmed guidance for earnings before interest, tax, depreciation, amortisation and investment income of between $1.1 billion and $1.12 billion in the 12 months ending June 30, up from $1.09 billion a year earlier.

And it still expects to pay dividends of 25 cents a share.

But it also said that travel restrictions and border closures had significantly reduced higher-margin mobile roaming revenues and retail revenues had also declined with most of its stores currently being closed.

While broadband usage had increase significantly the majority of its customers were on unlimited plans and those on data capped plans are not being charged coverage fees as part of Spark's financial support package.

Late payment fees and disconnections as a result of financial hardship had also been waived, the company said.

Spark chair Justine Smyth said it was an incredibly challenging time for New Zealand.

"We take our role as an essential services provider very seriously in this context. It is heartening to see that after many years of network investment we have been able to manage a dramatic increase in usage across our networks at a time when connectivity is of such critical importance."

But Smyth warned: "Like all businesses we are preparing for a different set of economic conditions in the coming financial year and we need to take sensible steps now to ensure the business is equipped to respond."

She said the company would implement a cost review and reprioritisation of capital expenditure for its 2021 financial year.

CEO Jolie Hodson said: "We expect to experience flow-on impacts from the broader economic downturn, as our customers reduce usage or find it difficult to pay for our services, and with the indefinite closure of international borders we also expect the loss of all mobile roaming revenues."

Much of Spark's capital expenditure hinged on the rollout of 5G mobile infrastructure, to support the economic recovery. It still expects to spend about $370 million on capital projects in the June year.

The government postponed the interim 5G auction at the end of March, putting the brakes on rollouts by the major telco companies, Spark and Vodafone New Zealand.

Funding lines

Spark has also been active in securing funding lines.

Earlier this month, Spark set up two new banking facilities totalling $150 million to cover 18 million British pounds of notes that were maturing, and for general business purposes, and at the end of March, it extended the term of a $200 million lending facility by a year, with a commitment to step it down by $33 million from May 2022.

Today, it said it's committed to keeping its 'A-' credit rating with Standard & Poor's, and that it has sufficient access to funding.

Spark's shares closed at $4.28 yesterday, and are down just 1.2 percent so far this year, outperforming the 8.3 per cent decline on the S&P/NZX 50 Index.

- additional reporting BusinessDesk

• Covid19.govt.nz: The Government's official Covid-19 advisory website