Spark New Zealand (ASX:SPK) reported a “clear step-up in profitability” in its half-year results for the period ended 31 December 2025, as improved mobile momentum and a cost-out program helped offset softer conditions across parts of its business portfolio.
Chief executive Jolie Hodson said the New Zealand economy showed “signs of finding its footings” during the first half, with improving consumer activity and “a growing sense of stability” as the period progressed. Management said that backdrop supported progress in Spark’s consumer business heading into the second half.
Adjusted earnings rise despite lower revenue
On an adjusted basis, Spark’s revenue fell 1.1% year over year to NZD 1.917 billion, down NZD 22 million. Hodson attributed about NZD 10 million of the decline to the divestment of Digital Island in FY2025, with the remaining decrease driven by muted business project spending, service management, and legacy voice.
Adjusted EBITDA increased 5.1% to NZD 471 million, which management said reflected improving mobile service revenue and “disciplined execution” of cost reductions. Adjusted NPAT rose 30.4% to NZD 73 million, mainly due to higher EBITDA. Free cash flow improved 84% to NZD 107 million, driven by higher EBITDA and lower cash tax payments, which CFO Stewart Taylor said was largely timing-related and expected to normalize in the second half.
The board declared an interim dividend of NZD 0.08 per share, imputed at 50%.
Mobile trends improve; ARPU strengthens
Spark’s total mobile service revenue increased 1.6% in the half. In consumer and SME, pay-monthly connections were broadly flat, while ARPU rose 5% year over year, which management attributed to product innovation, plan refreshes, increased competitiveness of higher-value plans, and mix improvement.
Hodson also highlighted a 15% uplift in pay-monthly mobile acquisitions using interest-free payments, which she said was consistent with attracting higher-value customers and supporting retention. In consumer prepaid, connections stabilized in Spark’s “New Zealand packs” segment (about 90% of prepaid revenue) following plan refreshes and targeted promotions, while prepaid ARPU dipped slightly amid competitive dynamics. The Skinny prepaid New Zealand base grew 2%, driven by uptake of long-term plans launched during the half.
In enterprise and government, management said connections and ARPU further stabilized since the close of FY2025. Spark said it “won more business than we lost,” with a small connection decline attributed to fleet shrinkage and the 3G shutdown. ARPU pressure persisted but moderated: enterprise and government ARPU was down 7.8% year over year in H1 FY2026, compared with a 13.4% decline at the end of FY2025. Taylor later said keeping ARPU declines “around about” the 7% rate across the year was “probably about right,” reflecting multi-year contract renewals.
Hodson noted Spark’s mobile service revenue grew more slowly than the market, resulting in a 0.5 percentage point share contraction. She said the highest growth was in the MVNO segment, where Spark accounts for about 40% of connections and where its revenue growth was consistent with MVNO market growth.
Broadband steady; IT and legacy products remain pressured
Across the broader connectivity and IT portfolio, Spark said performance reflected “a tough market alongside areas of resilience and progress.” Broadband connections declined in a competitive environment, but revenue was stable at NZD 303 million as higher fiber costs were passed through to customers.
Wireless broadband was described as an opportunity as 5G matures and Spark explores bundling with mobile, though Hodson acknowledged competition and said Spark’s wireless broadband market share remains “way above” its broader share. She flagged planned refreshes to pricing and bundled offerings in the second half, and said the expanding 5G footprint increases the addressable market.
Legacy lines continued to fall: voice revenue declined 16.7% and “other connectivity products” declined 10.4%. Management said about a third of the other connectivity decline was due to the Digital Island divestment, with the balance driven by managed data and networks as customers transition from legacy products to lower-ARPU alternatives. In IT, cloud revenue grew 1.7% on migration from private cloud and expansion by public cloud customers, while service management revenue fell 19.7% as businesses deferred or scaled back large projects. In Q&A, Hodson said there were “some green shoots” in activity but the market was “way off” prior levels.
Cost-out delivery, capital discipline, and data center transaction
Spark reported NZD 51 million in net cost savings in the first half, including NZD 55 million of net labor cost reductions, NZD 12 million in product cost reductions, and a NZD 16 million net increase in other OpEx. The other OpEx increase was primarily driven by NZD 11 million in higher marketing spend and costs associated with a new technology delivery model. Management narrowed the FY2026 cost-out target to NZD 40 million–NZD 50 million and said it remains on track to deliver multi-year productivity benefits, balancing savings with inflation and delivery-model costs.
Capital expenditure totaled NZD 271 million, excluding spectrum, including NZD 54 million of strategic CapEx tied to the data center business. BAU CapEx was NZD 217 million, down 8.8% year over year. Taylor said Spark acquired 20 MHz of 5G spectrum (18-year rights) for a reported NZD 7 million net present value. He said no further strategic CapEx was expected in the second half following an additional NZD 1 million spent in January before the data center transaction completed, and reiterated FY2026 BAU CapEx guidance of NZD 380 million–NZD 410 million.
Shortly after period-end, Spark completed its data center transaction, retaining a 25% stake in the standalone business now named TenPeaks Data Centers. Spark received approximately NZD 453 million in initial cash proceeds, with up to NZD 98 million in deferred proceeds contingent on performance milestones through 2027. Taylor said, on a pro forma basis after the transaction, net debt excluding leases would fall by NZD 453 million to around NZD 940 million and net debt-to-EBITDA would reduce to around 1.7, which he said aligned with Spark’s targeted credit rating.
Management reaffirmed FY2026 guidance, including EBITDA guidance of NZD 1,010 million–NZD 1,070 million. Taylor said the midpoint implies a more typical 45%/55% split between the first and second halves.
About Spark New Zealand (ASX:SPK)
Spark New Zealand Limited, together with its subsidiaries, provides telecommunications and digital services in New Zealand. It offers telecommunications, information technology, media, and other digital products and services, including mobile services; voice services; broadband services; internet sports streaming services; cloud, security, and service. The company also provides IT infrastructure, business cloud, business and outsourced telecommunications, software, data analytics, data center, and international wholesale telecommunications services.
