Spark NZ FY26 Results Highlight Mobile Growth and Data Centre Sale

Mobile Revenue Growth Anchors SPK-30 Progress

Spark New Zealand (ASX:SPK) delivered FY26 results that underscore the early traction of its SPK-30 strategy, with mobile service revenue returning to growth at +1.1% and overall mobile revenue up 4.4% to NZD 1.517 billion. This marks a notable turnaround amid a subdued economic environment and intense competition, driven by product innovation including New Zealand’s first Kids Plan, enhanced roaming options, and the introduction of satellite-to-mobile services in partnership with Starlink.

Chief Executive Jolie Hodson highlighted the successful nationwide shutdown of the 3G network, freeing spectrum to expand 4G and 5G coverage, and the company’s continued leadership in mobile network experience as independently recognised by Opensignal. These developments are complemented by a $40 million productivity benefit and disciplined cost management, which helped offset declines in legacy voice and digital services.

Data Centre Sale Boosts Reported Earnings and Strengthens Balance Sheet

The standout financial highlight was the completion of the sale of a 75% stake in Spark’s data centre business to Pacific Equity Partners, generating net proceeds of NZD 462 million and a net gain on sale of NZD 278 million. This transaction returned net debt to targeted levels, reducing the net debt to EBITDA ratio to approximately 1.7x from 2.2x a year earlier.

Reported EBITDAI surged 23.0% to NZD 1.295 billion, primarily reflecting the gain on sale, while adjusted EBITDAI declined 2.4% to NZD 1.035 billion, reflecting underlying pressures in digital services and legacy voice. Free cash flow grew 18.5% to NZD 308 million, enabling a final dividend of 8 cents per share and a total FY26 dividend of 16 cents per share, representing a 100% payout of free cash flow in line with guidance.

Strategic Review of Digital Services Division Underway

In a significant strategic move, Spark announced a review of its Digital Services division, which includes cloud and IT services, to assess how to maximise shareholder value. This division has faced headwinds from lower project activity, margin pressure from the shift to public cloud, and subdued economic conditions. The review, expected to complete in the first half of FY27, reflects Spark’s broader focus on simplifying and optimising beyond its core connectivity business.

The company also revealed a new organisational structure comprising two divisions: Connectivity, covering consumer mobile, broadband, and business connectivity; and Digital Services. This realignment aims to sharpen accountability and execution.

Sustainability and Governance Remain Central

Spark continues to embed sustainability into its operations, reporting scope 1 and 2 emissions tracking 59% below its FY20 baseline, ahead of its science-based target to reduce emissions by 56% by FY30. The company’s renewable energy partnership with Genesis Energy and investments in energy efficiency and network resilience support these goals.

Governance updates include Board renewal with three new directors bringing expertise across telecommunications, infrastructure, and finance, and the announcement of Vince Hawksworth as incoming Chair from November 2026, succeeding Justine Smyth.

Outlook and Guidance for FY27

Looking ahead, Spark guided adjusted EBITDAI of NZD 1.010 to 1.080 billion, free cash flow between NZD 300 and 350 million, and BAU capital expenditure of NZD 350 to 380 million for FY27. The dividend payout ratio is expected to remain between 90% and 100% of free cash flow, targeting 16 to 18 cents per share.

While competitive intensity and economic pressures persist, the company’s focus remains on sustaining mobile momentum, embedding structural productivity improvements, and portfolio simplification to drive EBITDAI growth. The outcome of the Digital Services review will be a key catalyst to watch.

Overall, Spark’s FY26 results demonstrate a company balancing transformation with financial discipline, strengthening its core connectivity business, and advancing sustainability commitments amid evolving market dynamics.