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