Analysts split on merit of Spark rebranding

Analysts are divided over Telecom's Spark rebrand and foray into internet TV with some labelling it a "bold approach" and others a "minor distraction".

Telecom announced last week that it would change its name and spend $20 million launching a new Netflix-style television service called ShowmeTV.

First NZ analyst Greg Main said it was a big call for Telecom to imply that its brand had little value and did not reflect its future or resonate with the younger market but he believed they would pull it off.

"While there may be some execution risk we factor in little risk of Telecom dropping the ball during the transition."

Forsyth Barr analyst Blair Galpin questioned in his report whether Spark signalled fireworks or fizzle.

"The decisions by Telecom to change its name to Spark and develop an online content service have attracted significant media attention. From our perspective these are minor distractions requiring minimal investments by Telecom."

Macquarie analysts questioned whether the move would provoke Sky TV into entering the telecommunications space.

"This product looks set to pitch Telecom in direct competition with Sky on the TV front. While Telcos haven't always been strong at executing in media space, this endeavour seems an opportunity worth trying.

"But let's hope they haven't poked a bear, and that Sky stays out of the telco space."

Craigs Investment Partners analyst Arie Dekker said the rebranding was consistent with Telecom's overall approach to be a lot bolder but said it also raised some risks.

"The level of investment suggested means that Telecom clearly intends to get some reasonable content. However, exclusive content is going to be critical."

Dekker said without exclusive premium content he viewed the move as a "risky venture" because the barriers to entry were low for library content and Telecom would be at risk of others entering the same market.

Telecom shares closed up 7.5c at $2.45 yesterday.

- Tamsyn Parker of the NZ Herald

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