Spark mobile revenue returns to growth as dividend rises

Spark's FY26 results showed mobile service revenue returned to growth, while free cash flow rose and the company declared a full-year dividend of 16 cents a share.

Reported revenue rose 6.0% to NZD $3.949 billion, while adjusted revenue was unchanged at NZD $3.700 billion. Reported EBITDAI increased 23.0% to NZD $1.295 billion, while adjusted EBITDAI fell 2.4% to NZD $1.035 billion. Reported net profit after tax rose 91.9% to NZD $499 million, while adjusted net profit after tax slipped 0.9% to NZD $225 million.

Free cash flow increased 18.5% to NZD $308 million, and business-as-usual capital expenditure was flat at NZD $401 million. The board declared a final dividend of 8 cents a share, taking the full-year payout to 16 cents a share, equal to 100% of free cash flow.

The result comes as Spark continues to reshape the business under its SPK-30 strategy and after completing the sale of a 75% stake in its data centre business. The transaction generated NZD $462 million in net proceeds and reduced debt to target levels.

Mobile was the strongest part of the business during the year. Mobile revenue rose 4.4% to NZD $1.517 billion, and mobile service revenue increased 1.1% to NZD $998 million.

The improvement was supported by growth in average revenue per user in the consumer and small and medium enterprise segment. Spark also pointed to stabilisation in connections and average revenue per user in more price-led parts of the market, including domestic prepaid and enterprise and government customers.

Other parts of the business remained under pressure. Broadband revenue fell 2.0% to NZD $596 million in a highly competitive, price-driven market, although gross margin improved through product cost management.

Business connectivity revenue dropped 9.9% to NZD $327 million, reflecting the divestment of Digital Island, the shift from legacy managed data and network products to newer services, and the timing of internet of things hardware sales.

Digital services also weakened. Cloud revenue was broadly flat at NZD $233 million, as 20% growth in public cloud was offset by a continued move away from higher-margin private cloud. IT services revenue fell 10.3% to NZD $104 million because of lower project activity and migration away from legacy services.

Strategy focus

Chair Justine Smyth said the company had made encouraging progress in the first year of its current strategy. "Our SPK-30 strategy reflects clear choices about where Spark can build sustainable competitive advantage and deliver improved shareholder returns over time. We are encouraged by the progress made during this first year of execution, and by the momentum in areas where we have concentrated effort and investment, particularly mobile," Smyth said.

She linked the dividend outcome to stronger cash generation. "With an 18.5% increase in free cash flow to $308 million, the total FY26 dividend is 16 cents per share4, representing a 100% payout ratio, in line with guidance," Smyth said.

Smyth said portfolio changes remained a priority for the board.

"The Board remains focused on ensuring Spark's portfolio supports the strategic choices we have made and strengthens long-term performance. During the year we completed the sale of a 75% stake in our data centre business, generating $462 million in net proceeds and returning debt to targeted levels. Our retained 25% interest enables Spark to continue participating in the significant long-term growth opportunity in the sector," she said.

She also referred to a review of activities outside Spark's core operations. "In July we announced a strategic review into the areas identified as outside core operations, including cloud and IT services, which now form part of the Digital Services division. This review will assess how to maximise the value and returns generated by this division for shareholders and is expected to be completed during the first half of FY27," Smyth said.

Mobile recovery

Chief Executive Officer Jolie Hodson said the company had focused on converting strategy into operational results. "Our focus this year was on turning the SPK-30 strategy into better outcomes for our customers and measurable performance improvements for our shareholders," Hodson said.

Hodson outlined the changes in the mobile business. "Mobile service revenue returned to growth as we continued to build in more value for our customers. We delivered New Zealand's first Kids Plan, introduced better roaming experiences, and launched satellite-to-mobile capability. We completed the nationwide shutdown of our 3G network on time and to plan, freeing up spectrum to support the ongoing expansion of 5G," she said.

She also addressed the earnings trend. "Returning to EBITDAI growth remains a focus, and we are clear on what will deliver it - building on the healthy mobile growth we saw this year, embedding structural productivity improvements across our business, reducing our exposure to declining legacy products, and further simplifying our portfolio," Hodson said.

Spark delivered NZD $40 million in productivity benefits during the year. The decline in legacy voice also continued, with the category now accounting for only 3.2% of overall revenue.

For FY27, Spark guided to adjusted EBITDAI of NZD $1.010 billion to NZD $1.080 billion, free cash flow of NZD $300 million to NZD $350 million, and business-as-usual capital expenditure of NZD $350 million to NZD $380 million. It also set dividend guidance based on a payout ratio of 90% to 100% of free cash flow, supported by a target range of 16 to 18 cents a share.

"Our strategic focus on better network and customer experiences is delivering tangible results, with Spark retaining leadership in 4G and 5G mobile coverage experience in New Zealand7 and improving customer experience for the sixth year in a row," Hodson said.