Spark's market cap slips, as investors weigh competition
Spark's market cap slips, as investors weigh increased competition
By Suze Metherell
April 24
(BusinessDesk) - Spark New Zealand, formerly Telecom Corp,
has slipped from being the country’s largest listed
company, as investors mull its transformation away from
telecommunications and the risk of increased
competition.
Earlier this week, the Auckland-based
company's share price dropped to its lowest level since last
August. Spark has fallen from being the NZX’s largest
listed company by market capitalisation, valued at $6.51
billion in February, to the third largest at $5.17 billion
today. Fletcher Building has the largest market cap, at
$5.65 billion, followed by Auckland International Airport,
at $5.45 billion.
Spark is chasing earnings growth in a shift away from its bread and butter land line and telecommunications service to focus on data, mobility and cloud services. Last year it launched its online streaming service, Lightbox, to compete against global giant, Netflix and the local Sky Network Television's Neon offer.
“It's hard to see because of the way the digital
landscape is changing so much, it might just be that
investors in that stock need to get used to the fact that
you're not going to get black and white scenarios
anymore,” said James Smalley, a director Hamilton Hindin
Greene. “They're almost going to have to trust management
on its ability to navigate what's probably going to be
challenging waters going forward."
In 2014, Spark’s
share price gained some 32 percent on the New Zealand stock
exchange and in early February, its share price climbed to a
near eight-year high of $3.535. But since then the share
price has declined, with Spark being the fourth-worst
performer on the benchmark index over the past three months,
having fallen some 12 percent.
"Uncertainty is one
thing that share markets and share prices do not like,”
Smalley said. "Until that uncertainty is removed, you might
see continued selling.”
Adding to Spark’s
transformation uncertainty, Smalley said, was the legal
proceedings New Zealand broadcasters, including Sky TV and
Spark's Lightbox, launched earlier this week, against
internet service providers, Bypass Network Services,
CallPlus Services, Orcon and Flip Services. The broadcasters
say the 'global mode' service, which gives customers access
to offshore online content, breaches the local content
providers' copyright.
Meanwhile, the arrival of
ASX-listed M2 Group, the voice and data services company, in
the local market, after it agreed to buy New Zealand's
CallPlus, the country's third-biggest broadband and
telecommunications services company, had investors worrying
about increased competition during Spark's business
transformation.
"Anything that could potentially mean
more competition for what was a nice, almost like duopoly
between Spark and Vodafone, could be seen as further
competition and erosion of margins," Smalley said.
Shares of Spark rose 1.1 percent to $2.83. The stock
is rated an average of 'hold' based on the consensus of 10
analysts surveyed by Reuters, with a target price of $2.94.
(BusinessDesk)