READ MORE: Spark follows Air NZ in deal with Indian outsourcer, Luxon visits offshoring specialist

“An operating model change in 2025 led to a significant increase in the number of people that left our business,” Hodson said.

“We do operate in an industry that is constantly changing. So I can’t say that there’ll never be further change, but of the size that we saw in FY25, that is unlikely.”

Green shoots?

“The past year has been one of the most challenging periods in Spark’s history, as we navigated economic headwinds, materially lower customer spending, and ongoing structural change in some of our markets,” chairwoman Justine Smyth said in Spark’s results filing.

Is Hodson seeing any improvement in FY2026, which got under way on August 1?

“It’s still a pretty tough economy,” she said.

“I know OCR is out today and that might lead to some further reduction [there was a 25 basis point cut]. We are seeing a couple of small green shoots within that, but … I think it’s still a pretty interesting time ahead as we go into this next year.”

Craigs Investment Partners analyst Mo Singh noted that on a conference call yesterday, Hodson had said that Spark had increased consumer and small business mobile plans by $2 to $5 a month.

In the first three weeks at least, there had been low churn (net customer losses).

Singh, who saw the result as being in line with expectations, said consumer and small business mobile business had been relatively stable in FY2025, while revenue from Government and corporate customers had been under pressure.

Government department spending had stabilised, but big companies were still under pressure.

Why sell the fast-growing data centres?

Data centres were one of the few bright points of Spark’s full-year result as revenue from the segment grew 11.1% to $50 million.

Why did it recently announce a deal to offload the top-performer, or at least a 75% stake in the data centre division?

“It’s really important to have that business well-funded. We’ve got a significant pipeline of growth in the next five to seven years.”

The telco earlier laid out plans to spend up to $1 billion on expanding the capacity of its data centre business from 23 megawatts today to 130MW, which would put it toe-to-toe with the Big Tech contenders.

“What we get here is we realise some value now,” Hodson said.

“We also get to participate in that longer-term value, and our DC [data centre] business is funded to grow, which is a really important opportunity for us.”

Profit hit

Spark yesterday reported another big fall in profit, with reported net profit down 17.7% to $260 million – or a 33.6% fall to $227m, adjusting for one-offs and a “$26m impact of the government change to tax depreciation rules” on commercial buildings.

Shares closed up 3.2% to $2.56.

The profit crunch was within revised-down guidance and close to analysts’ consensus expectations.

And the telco predicted a more stable FY2026 after its recent accelerated cost-cutting – which hit $85m in the second half – and asset sales.

FY2026 dividend will be lower

The full-year dividend was 25 cents per share – in line with revised-down guidance (from the original 27.5cps) and ahead of the analyst consensus 24cps.

Spark said 100% of FY2026 free cash flow (a forecast $290-$330m) would be paid out in its dividend, which a Spark spokeswoman said translated to 15 to 17cps. Craigs had been expecting a dip, but to 18cps.

The telco also revealed a new five-year strategy, dubbed “SPK-30″, which it said would deliver a “capital management reset that refocuses Spark on its core connectivity business”.

SPK-30 was outlined in very broad strokes yesterday.

“The strategy includes four key focus areas – growing core connectivity, simplifying and optimising beyond the core, and delivering a better network and better customer experiences.

“These priorities are enabled by a focus on people and culture, embedding technologies such as AI across Spark, disciplined financial management, and an enduring commitment to sustainability,” the telco said in an NZX filing.

Spark also said a “process has commenced to introduce new investors” to Mattr, its digital identity spinout that recently won a key contract for a new digital wallet and ID system that people will use to interact with government departments.

In-line operating earnings, flat guidance

Reported ebitdai was $1.053b, just a whisker shy of the analyst consensus of $1.054b.

FY2026 guidance was for operating earnings of $1.02-$1.08b or $1.01-$1.07b excluding its now spun-out data centre business.

Revenue fell 2.5% to $3.75b.

Total capital expenditure fell 17.2% to $429m. Spark said “business as usual” capex would fall to $380-$420m in FY2026 – excluding $50-$70m in “strategic capex” for data centre expansion, which will now be shared with a new majority owner.

Mobile down sharply in Govt, corporate

Mobile service revenue declined 2.3% to $987m, “driven by price competition in enterprise and Government and consumer prepaid,” Spark said in an NZX filing. Small business and consumer numbers grew in the second half, the telco said.

Mobile revenue from consumer and small-to-medium business customers was down 0.9% from $869m to $861m for the full year.

On a conference call, CEO Jolie Hodson said the telco was three weeks into $2 to $5 per month increases for the segment with “low churn”.

At the top end of town, there was continued pain, with mobile revenue from enterprise and Government falling 17% from $120m to $100m.

Spark said total FY2025 mobile market growth was 1.2%, which it said was lower than market researcher IDC’s 3% pick. One bright spot: Growth picked up to 1.9% in the second half.

Continued weakness in IT services

IT services revenue continued to be a pain point, falling 7.7% to $144m.

Broadband revenue fell 0.8% to $608m.

Cloud revenue grew 4.4% to $235m “as public cloud uptake continued to increase”.

Data centre growth, sale

Data centres revenue grew 11.1% to $50m.

On August 12, Spark said it had sold 75% of its data centre operations to Australian Pacific Equity Partners in a deal that values the business at $705m.

The telco will get $486m cash, with a further $98m – for a total $584m – in FY2027 if performance targets are hit.

The proceeds will go to paying debt, the company said in an NZX filing. Spark had net debt of $2.74b as of December 31, 2024 and $2.13b as of June 30, 2025.

The Sydney-based Pacific Equity Partners (PEP) has more than A$14 billion ($15.4b) in funds under management.

Its largely non-tech portfolio includes financial services and healthcare companies, Singapore Post’s Australian operation and fleet leasing. It has also owned and sold major New Zealand businesses, including the chicken company Tegel and biscuit maker Griffins.

Hutchison sale

Spark banked a windfall $47m on June 23 as Hong Kong conglomerate CK Hutchison bought out its ASX-listed subsidiary, Hutchison Telecommunications Australia – in which Spark owned a 10% stake (dating from its Telecom days and a never-realised plan for a 3G partnership).

The cash proceeds arrived in July, but will help with the FY2026 outlook delivered with results.

Spark also realised $309m net of transaction costs as it sold its remaining 17% stake in Connexa, the company set up when it spun out its passive cell tower network assets.

After a slow first half, Spark’s drive to save $80m-$100m in costs gained steam in the second half.

In April, it announced an expanded contract with Indian outsourcing and offshoring giant Infosys, and in May, 180 network operations roles were outsourced to Nokia (once a marquee handset brand and now a global giant in mobile networking infrastructure that runs outsourcing centres in two cities in India for global clients, as well as local operations).

Spark has said it will launch a mobile-to-satellite service in the New Year, via a United States operator – who is unnamed, but there are strong indications its name rhymes with Farlink and has a famous South African-American billionaire as its CEO.

How the competition is faring

Rival One NZ, now 100% owned by Infratil, reported ebitdaf (earnings before interest, taxes, depreciation, amortisation and fair value adjustments) for the year to March 31 of $604.0m from last year’s $545.5m, “despite a challenging economic backdrop” on revenue that fell from $1.996b to $1.921b.

Last November, privately held 2degrees said its operating earnings increased by 16% (excluding one-off gains from the FY2023 70% sale of its cell tower network) to $339m in the year to June as revenue rose by 7% to $1.34 billion in the year to June 30, 2024.

The firm is expected to post its FY2025 numbers later this year.

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.