Spark New Zealand Ltd.

Overview Key strengths Key risks Strong and well-established position in New Zealand's telecom market. Competition across mobile and fixed-line broadband. Commitment to a conservative capital structure. Lumpy capital requirements for new technologies and mobile spectrum and for establishing new earnings streams. Solid operating cash flow, coupled with disciplined financial policies. Shareholder-friendly dividend policies. . In our view, the company's data center strategy and 5G stand-alone enhancements will solidify its business profile and support incremental growth. Spark has allocated about NZ$350 million of the proceeds from the sell-down of its tower business (TowerCo) to new investments for data center portfolio expansion (about NZ$300 million) and 5G enhancements to accelerate rollout of a 5G stand-alone network (about NZ$50 million). These projects could

...The company's market shares in key segments are likely to remain quite stable. Spark leads by a thin margin in the mobile segment, with about 41% market share in New Zealand, but it maintains a significant lead in the fixed-line business with about 39% market share. Although, New Zealand's telecom market remains competitive, we expect Spark's competitive advantage to be durable. The company has broader 5G coverage than peers', with 90% 5G population likely to be covered at the end of 2023. We expect Spark to scale up its fixed wireless coverage to about 35% (from about 29% the first half of fiscal 2023) once its 5G investments are complete by fiscal 2026 (ending June 30, 2026). This should increase upside to earnings. A mix of fixed and wireless broadband services should improve Spark's business economics and support cross-selling and up-selling of services, compared with mobile alone. Achieving significant wireless coverage enables Spark to bypass the national fixed-line network of Chorus...

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