The company was restructuring in an effort to reduce its labour costs by 10%, or $50 million.
Dekker’s research suggested Spark’s dividend had been overpaid for the past decade compared to its earnings, with recent payouts to investors supported by financial transactions such as selling its cell tower sites for just shy of $1 billion.
“The clear point is that the earnings haven’t grown into the dividend that Spark’s had.
“I think it’s probably time to reset the dividend back to where the earnings sit and then increase it with actual demonstrated growth in the earnings and cash flow.”
Forsyth Barr analyst Aaron Ibbotson agreed, with his research stating: “We expect continued weak performance from here.”
“Spark’s historically dominant position within private cloud in general, and government cloud in particular, is also deteriorating, driven by a combination of structural, technical and competitive factors.” Ibbotson wrote in September.
Outside of the cloud business, Dekker said competition among the three telco players – Spark, One NZ (owned by Infratil) and 2degrees – had not changed meaningfully over the past decade, and he did not expect it to in the future.
“The rate of change and share, and those sorts of things [in this industry] is very slow.
“So in any sort of set period, we wouldn’t expect there to be major changes in the dynamics in influencing their share.”
However, Spark did have an opportunity ahead of it – data centres.
Watch Arie Dekker discuss the dynamics of the telecommunications market in today’s episode of Markets with Madison above.
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is the host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.