“The true value of HTA shares is likely a significant uplift from CKH’s lowball A3.2 cents per share offer,” Piliouras said.
Piliouras, a former stockbroker, claimed HTA’s share price was artificially depressed because the shares were so illiquid, with the two largest holders controlling 98%.
He also said, “The basic mathematics of the CKH offer don’t stack up”, given HTA has a 25.05% stake in TPG Telecom – the ASX-listed firm that owns the Vodafone brand in Australia.
“Spark NZ has exposure to over A$240m in TPG shares. Each $1 increase in TPG shares is potentially worth A$46.5m to Spark NZ. It is bad business to sell that upside for only A$43.4m when TPG has risen more than 20% in four months. You never sell a stock that is rising.”
Spark NZ shareholders will potentially be forgoing millions of dollars, based on historical pricing, should they accept the offer, he said.
A spokeswoman for Spark said the firm was aware of the offer.
“We will await the HTA board’s target statement and independent expert report to consider our options,” she said.
How did we get here?
The saga began in 2001, when Telecom paid A$250m for a minority stake in HTA, operator of the “3” mobile network at the time.
The idea was that Telecom and HTC could pool their efforts on 3G technology, which was, then, about to become the Next Big Thing.
In the end, the technology partnership went nowhere. (Arguably, Telecom should have pursued it with more vigour, given the disastrous way its initial “XT” 3G launch panned out.) But Telecom kept its stake. As tech fell into a funk during the 2000s, there were simply no buyers.
In 2009, HTA merged with Vodafone Australia in a 50:50 deal, with the combined entity, Vodafone Hutchison Australia (trading as Vodafone Australia) then merged with TPG in 2021. A complicated deal structure saw HTA - owner of a quarter stake in TPG – still listed separately on the ASX.
Telecom offloaded various Aussie investments in the build-up to the Chorus spin-off and its rebirth as Spark, but trading in HTA shares (described by Spark’s head of investor relations in 2019 as “very, very illiquid”) was too thin for any sale to be practical.
Hype around the TPG deal saw the value of Spark’s HTA stake – valued at $247m in its 2020 annual report – briefly surge to $300m.
But since then, there’s been a heavy post-pandemic hangover, which has broadly hit the value of most telco assets.
Spark’s 2024 annual report listed the “fair value” of its 10% Hutchison stake at $41m, down from $61m in 2023.
Data centre ‘auction’ progress
Piliouras said Spark’s current strategy was to sell down assets such as a reported 50% stake in its data centre business “to shore up its balance sheet”, and said holding out for a better deal for its Hutchison stake would only make more sense given the company’s push to free up capital.
The AFR reported on June 1 that Pacific Equity Partners, QIC, and Mitsubishi-owned Igneo Infrastructure Partners were all bidding for a half-share in Spark’s data centre auction.
The telco said last August that it would seek to raise up to $1 billion – possibly by bringing in a partner – for data centre expansion over the next five to seven years. A spokeswoman said Spark would not comment on media speculation about possible investors.
Spark makes Morningstar ‘best stock ideas’ list
Spark shares were flat at $2.23 in midday trading on the NZX. The stock is down 44.9% over the past year.
Meanwhile, Spark made Morningstar’s “Australia and New Zealand Best Stock Ideas” list released this morning of “stocks currently trading at discounts to our assessed fair values” – along with Auckland International Airport and James Hardy.
The ratings firm has maintained for months that Spark has been oversold, giving its ASX/NZX-listed shares a “fair value” estimate of A$3.20, citing a “reinvigorated focus on costs” and the likelihood earnings would pick up as the New Zealand economy recovered.
Ironically, TPG was dropped from the list. “While the shares remain undervalued relative to our fair value estimate, their recent rally and relative out-performance versus Spark New Zealand warrant a switch,” Morningstar said.
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.
