How Will Spark’s Data Centre Sale and Core Focus Reset Shape Its Future?

FY25 Financial Performance Amid Economic Headwinds

Spark New Zealand Limited has announced its FY25 financial results, reporting an adjusted EBITDAI of NZD 1,060 million and an adjusted net profit after tax (NPAT) of NZD 227 million. These figures reflect declines of 8.9% and 33.6% respectively compared to FY24, primarily due to challenging economic conditions, structural market changes, and competitive pressures.

Reported revenue stood at NZD 3.725 billion, down 2.5% year-on-year, with mobile service revenue decreasing 2.3% amid price competition and the removal of an insurance product. Broadband revenues stabilized with a slight 0.8% decline, while cloud services grew 4.4%, highlighting ongoing digital transformation trends.

Strategic Portfolio Simplification and Capital Recycling

In response to these challenges, Spark has accelerated its transformation programme, focusing on portfolio simplification and cost reduction. The company completed the sale of its remaining stakes in Connexa and Hutchison Telecommunications (Australia) Limited, generating combined proceeds of NZD 356 million. These divestments are part of a broader strategy to recycle capital into Spark’s core connectivity business and reduce net debt.

Additionally, Spark entered into a landmark agreement to sell a 75% interest in its data centre business to Pacific Equity Partners (PEP), valuing the business at up to NZD 705 million. The transaction is expected to deliver initial cash proceeds of approximately NZD 486 million upon completion, with additional deferred payments contingent on performance targets. Spark will retain a 25% stake, maintaining long-term exposure to this high-growth sector.

Refocusing on Core Connectivity with a New Five-Year Strategy

Recognizing the need to adapt to a rapidly evolving market, Spark has unveiled a new five-year strategy, SPK-30, which refocuses the company on its core connectivity business; mobile and broadband services; while simplifying and optimizing adjacent digital services. This strategic reset aims to restore stable, annuity-like returns with predictable free cash flow and growing dividends.

The strategy emphasizes investment in network reliability, customer experience, and operational efficiency, supported by four global technology partnerships with Nokia, Infosys, HPE, and Microsoft. These partnerships underpin Spark’s technology delivery model transformation, enabling cost savings and enhanced service innovation.

Capital Management Reset and FY26 Outlook

Spark’s Board has also reset its capital management framework to align dividends with a new definition of free cash flow (FCF), which incorporates changes in working capital and capital expenditure related to the core business. The dividend payout ratio target has been updated to 70–100% of FCF, providing flexibility for future market conditions.

For FY26, Spark guides adjusted EBITDAI between NZD 1,010 million and NZD 1,070 million, free cash flow of NZD 290 million to NZD 330 million, and a dividend payout ratio of 100% of FCF. Capital expenditure is forecasted at NZD 380 million to NZD 410 million for business-as-usual investments, with an additional NZD 50 million to NZD 70 million allocated to strategic investments in the data centre business.

Sustainability and Governance Commitments

Beyond financials, Spark continues to advance its environmental, social, and governance (ESG) agenda. The company maintains a science-based target to reduce scope 1 and 2 greenhouse gas emissions by 56% by 2030, supported by a ten-year renewable energy partnership with Genesis Energy. Spark also reports comprehensive climate-related disclosures and a robust human rights and modern slavery framework, including supplier audits and training programmes.

Board renewal is underway with three new independent directors joining in FY26, enhancing governance depth amid strategic transformation. The company’s leadership remains committed to delivering value for shareholders while navigating the complexities of a digital and climate-conscious future.