Spark New Zealand Ltd.

The stable outlook relies on Spark maintaining a conservative capital structure. That said, we expect Spark's adjusted debt to EBITDA to exceed 1.5x in fiscals 2019 and 2020. This reflects, in part, the company's adoption of new NZ International Financial Reporting Standards (IFRS). In particular, the inclusion of cancellable office lease options will increase Spark's adjusted leverage metrics. As market practice evolves, we will monitor whether Spark's early adoption of the standard led to its option period and leverage calculation being overstated relative to peers'. We expect Spark to carefully manage its capital expenditure (including spectrum payments) and working capital position while growing earnings to fully fund its dividend payment for fiscal 2020. The outlook also anticipates steady earnings growth

...Stable operating environment for Spark New Zealand Ltd.'s core products and services underpins its performance.We forecast flat underlying revenue growth in the year ending June 30, 2019, and low single-digit growth thereafter. Mobile and IT growth will drive revenue expansion, partially offset by declines in fixed voice and managed data. We expect margins to be relatively stable due to firmer wireless broadband margins and continued mobile and IT services growth. Competition limits near-term upside. New Zealand mobile markets are competitive and dominated by a handful of competitors across fixed and mobile retail markets. We believe that pricing power in the mobile market remains limited, although Spark's competitors do not appear to be aggressively pursuing market share. Margins in the highly competitive fixed broadband market are likely to remain under pressure, countered by Spark's strong market position. We believe Spark will maintain its conservative financial policies and low leverage,...

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