Analyst yet to fire up over Spark

Andrew Rooney
Andrew Rooney
Spark is the new name for the telecommunications company formerly known as Telecom, but Forsyth Barr broker Andrew Rooney remains to be convinced a new name will spark up the market.

The change of name had a price tag of about $20 million, in addition to regular brand refresh activities.

''While for many the name change may seem unnecessary, the target is clear. Spark is about having a brand attractive to the younger market - something Telecom would never be. It is also about signalling internally to staff the company is something new.''

New value-added benefits such as Spotify were smaller-scale innovations while services such as Lightbox, Bigpipe and Appserv showed the new path Spark was taking, he said.

The risk the company must manage was not alienating those customers who had a long association with Telecom and its brand, ensuring they stayed with the company, Mr Rooney said.

The rebranding was more than a simple name change. It represented a decision by Telecom to step beyond its history of fixed line, broadband and mobile.

The company had to make it clear it intended offering innovative new propositions to its customers, levering its investment in core transport, mobile spectrum and eventually new operational functionality.

''The test will be seeing if Telecom can use this investment to deliver margin improvement,'' he said.

While Spark was about now and the future, investor focus would be on the company's full-year results. Mr Rooney expected a positive story about increasing cost cuts through a combination of continued reductions in staff numbers and savings from suppliers and other areas.

Mobile broadband connections should be a positive story as the company had been aggressive in entry level for mobiles and had a strong advertising presence for broadband.

However, continuing pressure on its average mobile revenue was expected, along with continued margin pressure for Gen-I/Spark Digital in fixed line calling and data areas, Mr Rooney said.

That would highlight the continuing tension between taking costs out and reducing traditional revenue streams.

What's changed

Earnings: No change
Target price: $2.40 per share, no change
Rating: unchanged at underperform

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