“The scale and pace of deterioration in trading conditions we have experienced over the last year has been substantial.”

Spark reduced its full-year ebitdai guidance from a $1.12 – $1.18 billion band to $1.04 – $1.10b, below analysts’ (already reduced) expectations.

The key reasons for the downgrade were “further deterioration in the performance of Spark’s enterprise and government division, which has been impacted by spending cuts and mobile fleet reductions across Government and businesses, changes in product mix, and aggressive price competition in mobile”.

A 12.5 cent per share dividend was declared, a 1c decrease on the same period last year. But its full-year dividend guidance was maintained at 25cps.

Reported revenue declined 1.9% to $1.99 billion, “driven by the performance of mobile, IT services, and the continued decline of legacy voice, and partially offset by growth in mobile devices, cloud, data”.

There was weakness across the board, bar the telco’s data centre business, where revenue increased – albeit off a small base – by $13.6m to $25m.

Broadband revenue declined 2.3% to $302m “as cost-of-living pressures saw customers trade down to lower priced plans”.

Price competition was also blamed.

Mobile service revenue declined 3.7% to $491m, “driven predominantly by shrinking mobile fleets following customers’ headcount reductions and price competition in the enterprise and government division,” Spark said in a market filing.

Spark said at its full-year result last August that it was exploring options to raise up to $1b to fund data centre expansion over the next five to seven years.

It said today: “Progress has been made towards the establishment of a capital partnership to accelerate growth”.

The telco reiterated its goal to increase its data centre capacity from today’s 22 megawatts to 140MW.

Free cashflow increased 67% to $77m.

Capex fell $12m to $252m.

Spark said it would book $310m from the sale of its remaining stake in its cell tower network in the third quarter, as previously flagged.

More cost-cutting, more job losses

A “significantly expanded cost-cutting programme” was now on track to deliver $80m – $100m in labour and operating expenditure costs “in-year”, “funded by a non-recurring transformation charge of $45m – $50m”, with $29m reported in the first half result.

Additional cuts of $20m – $30m in labour and op-ex were seen next year, then ongoing annual savings of $110m – $140m by FY27.

Last August, Spark said it would cut $50m from its labour costs in 2025, implying it would cut about 10% of its workforce. That target had been “exceeded”, the company said today.

“We are responding to the challenges we are experiencing in the short-term, in a way that also builds a stronger, more competitive business over the longer term,” chief executive Jolie Hodson said.

Forsyth Barr downgraded Spark to “underperform” on February 14, with a $2.80 price target.

Craigs upgraded it from neutral to overweight in December, with a $3.60 target, saying the stock was over-sold.

Analysts Aaron Ibbotson and Benjamin Crozier also believed the telco had done the “heavy lifting in early FY25” in its bid to cut $50m from labour costs

Shares closed Thursday at $2.93. The stock is down 43% over the past 12 months.

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.