Spark New Zealand releases three-year strategic plan

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Spark New Zealand releases three-year strategic plan

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On the 16th of September, Spark New Zealand Limited (ASX: SPK) released a strategy for the next three years for compound annual growth in shareholder returns by 13 per cent on the back of New Zealand coming out of the COVID-19 pandemic into a progressively digital world. An overview of the corporate strategy is a focus on streamlining the customer experience with deeper insights, developing automated smart networks, and committing to future growth.

Simplification of SPK and streamlining the customer experience is a cornerstone for the next three years, with a sophisticated use of data put into artificial intelligence and machine learning to identify megatrends. Some of these include the democratisation of AI, crowd-sourced innovations, and automatic reconfigurations of data management.

FY23 will see SPK aim to have complete back end architecture integrated fully into a cloud-based model, ridding the need for onsite storage. Simplification of structures will see all data in a ‘single scalable data repository’, as opposed to the current multi-platform approach currently used.

At the moment, 55 per cent of the customer base have data available on the ‘household view’ platform which allows for insights to generate more relevant offer propositions. By FY23, the target is to have around 90 per cent of customers on the platform.

In keeping with a personalised corporate strategy, FY23 will see a 40 per cent of marketing personalised in automatically generated campaigns, instead of the 95 per cent mass-market campaigns launched manually, which at the moment take one to three months to prepare.

Different strategies and objectives are outlined in the report to accelerate growth towards FY23. One of these strategies is to target competitor customers with the technologically supported tailored incentives to claim more market share, in line with the policy towards a personal approach to marketing. This approach will be carried over in the development of strategies to acquire small to medium business.

Financially speaking, revenue growth opportunity is forecast to be between $140 million and $160 million with cost efficiencies overhauled in the next 3 years. $500 million in free cash flow by FY23 is expected to help fund dividends through consistent growth and a cash conversion rate target of 98 per cent. Operationally, there is a forecast of 200 per cent increase in network capacity by FY23, and will be supported by a continued investment into wireless and fibre networks such as 5G.

At the moment Spark New Zealand Limited is a market leader in the pay monthly mobile market and in fixed and wireless broadband. It also leads in onshore cloud services and has upside in the use of data analytics to grow in target markets whilst 5G rolls out. These strengths will be bolstered through rolling out uncapped wireless and wired broadband services and uncapped mobile service as well as new partnerships with Spotify, Netflix, Xbox, Xero and Spark Sport.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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