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Spark New Zealand Limited (SPKKY)
OTHER OTC:SPKKY
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Spark New Zealand
(OTC:SPKKY)
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Rating:69Neutral
Price Target:
$7.00
▲(4.17% Upside)
Action:ReiteratedDate:02/18/26
The score is driven primarily by solid financial performance (cash flow strength despite revenue decline) and a constructive earnings update with reaffirmed guidance and balance-sheet improvement. These positives are tempered by weak technical momentum (below major moving averages and negative MACD) and the risk implied by high leverage, while valuation is supported by a moderate P/E and very high dividend yield.
Positive Factors
Free cash flow improvement
Material FCF growth and solid cash conversion indicate the business now generates durable internal funding for reinvestment, dividends and debt reduction. Higher cash conversion cushions cyclical revenue weakness and supports execution of SPK‑30 without relying heavily on external financing.
Balance‑sheet de‑risk via data‑centre sale
The completed sale materially lowers leverage and improves liquidity metrics, giving management flexibility to fund BAU and strategic capex, sustain dividends and pursue selective M&A. This structural derisking reduces refinancing pressure and strengthens resilience to shocks.
Mobile revenue and ARPU momentum
Improving mobile metrics show the core growth engine is regaining traction, producing higher‑quality, recurring revenue. Strong mobile ARPU and net adds support margin sustainability, offset legacy declines and provide a platform for upsell of higher‑margin digital and enterprise services.
Negative Factors
Declining revenue trend
Persistent revenue decline erodes operating leverage and limits long‑term margin expansion. Structural downgrades from legacy lines and lower‑ARPU migrations mean management must replace lost topline via higher growth segments or sustained cost and product repositioning to restore growth.
Weakness in IT services & legacy voice
Sharp declines in IT services and legacy voice reflect customers deferring projects and a structural shift to lower‑ARPU solutions. These trends pressure enterprise margins and create uncertainty about recovering higher‑value contract volumes in the medium term.
Elevated leverage (historical level)
A high debt‑to‑equity ratio increases interest and refinancing risk, constraining strategic optionality. While recent asset sales reduce gross leverage, the historically elevated indebtedness means balance sheet sensitivity remains higher to earnings or cash‑flow shocks until net debt is materially lower.
Spark New Zealand (SPKKY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.55B
Dividend Yield19.27%
Average Volume (3M)4.39K
Price to Earnings (P/E)16.6
Beta (1Y)0.31
Revenue Growth-5.97%
EPS Growth-21.81%
CountryUS
Employees4,884
SectorCommunication Services
Sector Strength97
IndustryTelecommunications Services
Share Statistics
EPS (TTM)0.12
Shares Outstanding378,026,030
10 Day Avg. Volume2,432
30 Day Avg. Volume4,390
Financial Highlights & Ratios
PEG Ratio-0.96
Price to Book (P/B)2.91
Price to Sales (P/S)1.22
P/FCF Ratio18.44
Enterprise Value/Market Cap2.85
Enterprise Value/Revenue2.01
Enterprise Value/Gross Profit10.91
Enterprise Value/Ebitda6.73
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)0.38
Revenue Forecast (FY)$2.16B
Spark New Zealand Business Overview & Revenue Model
Company DescriptionSpark 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, big data analytics, data center, and international wholesale telecommunications services. In addition, it offers local, national, and international telephone and data services; finance products; group insurance products; and mobile phone repair services. Further, the company retails telecommunications products and services; and distributes equipment. It serves consumers, households, small businesses, government, and large enterprises. The company was formerly known as Telecom Corporation of New Zealand Limited and changed its name to Spark New Zealand Limited in August 2014. Spark New Zealand Limited was incorporated in 1987 and is headquartered in Auckland, New Zealand.
How the Company Makes MoneySpark New Zealand generates revenue through multiple streams, primarily from its telecommunications services, which include mobile phone plans, fixed-line broadband subscriptions, and business communication solutions. The company charges customers for monthly service fees, data usage, and additional value-added services. Key revenue streams also include the sale of devices, such as smartphones and routers, along with enterprise solutions that encompass cloud services and cybersecurity offerings tailored for businesses. Furthermore, Spark New Zealand engages in strategic partnerships with technology providers and content creators, enhancing its service offerings and customer engagement, thus contributing to its overall earnings.
Spark New Zealand Earnings Call Summary
Earnings Call Date:Feb 17, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Aug 21, 2026
Earnings Call Sentiment Positive
The call conveys an overall positive tone driven by a clear step‑up in profitability (EBITDAI +5.1%), strong improvements in NPAT (+30.4%) and free cash flow (+84%), successful completion of the data center transaction that materially strengthens the balance sheet, and tangible operational gains in mobile, network performance and customer satisfaction. Offsetting these positives are revenue pressures in legacy and IT services lines (notably service management -19.7%, voice -16.7%, other connectivity -10.4%), ongoing migration to lower‑ARPU products, and some normalization/timing risks in cash tax and FCF. Management reaffirmed FY26 guidance and signalled continued cost discipline and strategic focus under SPK‑30, but execution risks remain in parts of the portfolio.Q2-2026 Updates
Positive Updates
Improved Profitability (Adjusted EBITDAI)
Adjusted EBITDAI of $471 million, up 5.1% year‑on‑year, driven by mobile momentum and disciplined cost‑out execution.
Strong Net Profit After Tax (Adjusted NPAT)
Adjusted NPAT increased 30.4% to $73 million, primarily reflecting higher EBITDAI.
Material Free Cash Flow Improvement
Free cash flow strengthened to $107 million in H1, up 84% versus prior year, reflecting operating leverage and reduced cash tax payments (timing effect expected to normalize in H2).
Data Center Transaction Strengthens Balance Sheet
Completed sale of data centers, receiving approximately $453 million upfront (plus up to $98 million deferred contingent proceeds) while retaining a 25% stake in TenPeaks Data Centres; pro forma reduction in net debt (ex leases) by ~$453 million to ~ $940 million and implied net debt/EBITDAI around 1.7x.
Mobile Revenue and ARPU Momentum
Total mobile service revenue grew 1.6%; consumer pay monthly ARPU up ~5%; pay monthly mobile acquisitions up 15%; Skinny prepaid NZ base grew 2% driven by long‑term plan uptake.
Capital Expenditure Discipline
H1 total CapEx $271 million (includes $54 million strategic CapEx for data center land); BAU CapEx $217 million down 8.8% year‑on‑year as 5G rollout matured; FY26 BAU CapEx guidance reaffirmed in $380–410 million range.
Dividend and Financial Guidance Maintained
Interim dividend declared of $0.08 per share (50% imputed); FY26 EBITDAI guidance reaffirmed at $1,010–1,070 million and free cash flow guidance maintained at $290–330 million.
Operational and Customer Experience Gains
Network improvements included 100+ site builds/upgrades and transition to 5G standalone core delivering ~75% improvement in peak speeds; iNPS rose 5 points year‑on‑year reflecting improved CX and digital experiences.
Productivity and Cost Savings Delivered
Cost program delivered $51 million net savings in H1 (including $55 million net labor cost reduction and $12 million product cost reductions), enabling reinvestment in network and CX while FY26 cost‑out target narrowed to $40–50 million.
Sustainability and Inclusion Progress
Scope 1 & 2 emissions are 32% lower than the path required to meet the 2030 target; Skinny Jump now supporting >34,500 households and ethical supply chain management advanced.
Recurring & One‑off Balance Sheet Actions
Sale of interest‑free payments (IFP) receivable book for $240 million provides working capital flexibility and an ongoing financing arrangement to support growth of the IFP book without working capital strain.
Negative Updates
Adjusted Revenue Decline
Adjusted revenue of $1.917 billion was down 1.1% (≈ $22 million), with roughly $10 million attributable to the prior divestment of Digital Island and the remainder driven by muted business project spending and legacy voice declines.
Weakness in IT Services / Service Management
Service management revenue declined 19.7% year‑on‑year as customers defer or scale back larger IT projects, reflecting softness in parts of the IT services market.
Legacy Voice and Other Connectivity Pressures
Voice revenue down 16.7%; other connectivity down 10.4% (about one third of that due to Digital Island divestment and the remainder from managed data/network migration to lower ARPU solutions).
Enterprise & Government ARPU Decline
Enterprise and government ARPU remains under pressure, down 7.8% year‑on‑year (an improvement versus -13.4% at end FY25) driven by contract renewals, fleet shrinkage and 3G shutdown impacts.
Mobile Market Share Slight Contraction
Spark's mobile service revenue grew slower than the market, resulting in a small market share contraction of ~0.5 percentage points during the period.
Increased Other Operating Expenditure
Net increase in other OpEx of $16 million in H1, primarily driven by $11 million higher marketing to support growth and costs associated with the new technology delivery model.
Service Revenue Transition & Longer Term Drag
Managed data, networks and legacy products continue to migrate to lower‑ARPU alternatives; this structural transition creates ongoing revenue pressure until migrations complete.
Timing Risk on Cash Tax and FCF
H1 free cash flow benefited from a significant reduction in cash tax paid (timing related) which is expected to normalize with higher cash tax payments in H2, creating some timing risk to FCF phasing.
Ongoing Uncertainties / Operational Risks
Areas flagged include continued competitive intensity in prepaid and wireless broadband, uncertainty around the Meta project funding/path and an open COO recruitment (interim cover in place); these introduce execution and governance risks.
Concentration of CapEx on Strategic Items
H1 included $54 million of strategic CapEx related to the data center activities; while strategic proceeds de‑risk balance sheet, such concentrated spends can distort near‑term BAU CapEx comparatives.
Company Guidance
Guidance for FY‑26 was reaffirmed and detailed: adjusted EBITDAI guidance of $1,010m–$1,070m (midpoint $1,040m) implying a normal H1/H2 split of ~45/55; free cash flow guidance of $290m–$330m; BAU CapEx guidance of $380m–$410m (H1 BAU CapEx $217m, H2 implied $163m–$193m) and updated strategic CapEx of $55m (H1 strategic spend $54m + $1m in January); interim dividend of $0.08 per share, 50% imputed; FY‑26 cost‑out target narrowed to $40m–$50m (H1 delivered $51m net savings including $55m labor and $12m product savings offset by $16m other OpEx); H1 operational/financial baselines to note that underpin guidance include adjusted revenue $1.917bn (‑1.1% y/y), adjusted EBITDAI $471m (+5.1% y/y), adjusted NPAT $73m (+30.4% y/y), free cash flow H1 $107m (+84% y/y), total CapEx H1 $271m; balance sheet actions supporting guidance: initial data‑centre cash proceeds ~$453m (plus up to $98m deferred) which pro forma reduces net debt ex‑leases from $1.39bn (‑5% since 30‑Jun‑25) to ~ $940m and net‑debt/EBITDAI from 2.2x to ~1.7x, IFP receivable sale $240m (growth in IFP book ~$27m), expected full‑year other asset sale gains ~ $30m (H1 $24m), and healthy interest cover ~8x.Spark New Zealand Financial Statement Overview
Summary
Stable profitability and improved cash generation (free cash flow growth +39.54%) support the score, but revenue is declining (-5.7%) and leverage is elevated (debt-to-equity 1.55), which adds risk.Income Statement
Spark New Zealand's income statement shows a declining revenue trend with a negative growth rate of -5.7% in the latest year. Despite this, the company maintains a stable gross profit margin around 50%, and a modest net profit margin of 7.18%. The EBIT and EBITDA margins have decreased over the years, indicating potential challenges in operational efficiency.65
Positive
Balance Sheet
The balance sheet reflects a high debt-to-equity ratio of 1.55, suggesting significant leverage. However, the company has a reasonable return on equity of 17.11%, indicating effective use of equity to generate profits. The equity ratio is moderate, showing a balanced asset structure.70
Positive
Cash Flow
Cash flow analysis reveals a strong free cash flow growth rate of 39.54% in the latest year, indicating improved cash generation. The operating cash flow to net income ratio is 0.64, showing adequate cash flow relative to net income. The free cash flow to net income ratio of 0.35 suggests a healthy conversion of profits into cash.75
Positive
| Breakdown | TTM | Jun 2025 | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 3.60B | 3.62B | 3.76B | 3.88B | 3.69B | 3.56B |
| Gross Profit | 664.31M | 1.81B | 1.94B | 2.01B | 1.94B | 1.89B |
| EBITDA | 1.08B | 1.03B | 1.10B | 1.75B | 1.18B | 908.00M |
| Net Income | 289.82M | 260.00M | 316.00M | 1.14B | 410.00M | 384.00M |
Balance Sheet | ||||||
| Total Assets | 4.38B | 4.53B | 4.63B | 4.48B | 4.19B | 4.11B |
| Cash, Cash Equivalents and Short-Term Investments | 84.90M | 34.00M | 59.00M | 100.00M | 71.00M | 72.00M |
| Total Debt | 3.04B | 2.35B | 2.36B | 1.86B | 1.87B | 1.91B |
| Total Liabilities | 3.02B | 3.00B | 3.04B | 2.54B | 2.71B | 2.61B |
| Stockholders Equity | 1.35B | 1.52B | 1.59B | 1.94B | 1.48B | 1.50B |
Cash Flow | ||||||
| Free Cash Flow | 584.97M | 240.00M | 164.00M | 310.00M | 408.00M | 461.00M |
| Operating Cash Flow | 1.01B | 680.00M | 764.00M | 791.00M | 833.00M | 847.00M |
| Investing Cash Flow | -94.70M | -112.00M | -550.00M | 425.00M | -492.00M | -388.00M |
| Financing Cash Flow | -930.28M | -593.00M | -255.00M | -1.20B | -350.00M | -451.00M |
Spark New Zealand Technical Analysis
Neutral
6.72
Price Trends
6.63
Positive
6.65
Positive
6.79
Negative
Market Momentum
0.02
Negative
50.17
Neutral
77.32
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SPKKY, the sentiment is Neutral. The current price of 6.72 is above the 20-day moving average (MA) of 6.64, above the 50-day MA of 6.63, and below the 200-day MA of 6.79, indicating a neutral trend. The MACD of 0.02 indicates Negative momentum. The RSI at 50.17 is Neutral, neither overbought nor oversold. The STOCH value of 77.32 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for SPKKY.
Spark New Zealand Peers Comparison
UnderperformOutperform
Sector (60)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $5.06B | 9.02 | 25.20% | 7.78% | 0.59% | 8.86% | |
75 Outperform | $3.78B | -7.14 | 53.38% | ― | 6.42% | ― | |
75 Outperform | $18.77B | 16.17 | 15.54% | 6.14% | -5.21% | -7.45% | |
69 Neutral | $2.55B | 16.56 | 15.54% | 19.27% | -5.97% | -21.81% | |
68 Neutral | $4.97B | -5.39 | -2.95% | 0.40% | 15.38% | -292.52% | |
60 Neutral | $48.67B | 4.58 | -11.27% | 4.14% | 2.83% | -41.78% |
* Communication Services Sector Average
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.