Broadband bargain-hunting forces Spark to change tack

Spark chief executive Simon Moutter
spkadd to my Stocks

New Zealanders holding out for the cheapest broadband they can find is forcing Spark New Zealand to compete more aggressively on price.

Government data show prices for telecommunications services have dropped 15 percent over the past five years. In that time, there has been a major overhaul of the sector with a third mobile phone operator gaining traction, network operator Chorus carved out of Telecom, and the roll-out of a government-sponsored fibre network.

Spark, the services business that decoupled with Chorus in 2011, has been focusing on the higher-value end of the broadband market in recent times. However, a two percentage point fall in its market share to 42.3 percent of connections in 2016 has prompted a rethink and the country's biggest telecommunications company plans to chase price-sensitive customers, initially with its Skinny brand.

"A growing portion of the market is choosing to buy primarily on price – we're seeing that across all telco portfolios irrespective of whether its consumer, SME, or big business," chief executive Simon Moutter told analysts. "We can't continue to try to steer our whole proposition to high-value markets."

The move is a throwback to when Mr Moutter was first appointed chief executive in 2012 and tasked his team with competing aggressively to maintain broadband share. The rollout of fibre has seen more effort put into migrating customers to the higher-value fixed line delivery.

Mr Moutter said there are more gains to be made migrating customers to fibre and his rivals were paying too much to acquire new connections in what's largely a saturated market.

"It is something that frustrates us, the degree of competition driven by acquisition, which is just driving market churn," Mr Moutter said. "That is the state of the market today and we have to play in it and over time I guess it will become a bit more orderly."

Spark is rethinking its wider strategy and Mr Moutter plans to put it to investors by the middle of the year.

The company is keen to shift its customers from the copper lines owned by Chorus, which have regulated wholesale prices. Of its 675,000 broadband connections, 138,000 are on fibre and more than 40,000 are on Spark's wireless broadband.

Spark has previously signalled it wants to cut its reliance on Chorus's copper lines and beefed up its call centre service capability after harsh winter conditions caused an increased number of faults last year. It also wants to have more control over fibre assets in central business districts, and this month kicked off a takeover bid for Wellington-based TeamTalk which owns the CityLink fibre business and Farmside rural internet service provider.


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3 Comments & Questions

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Please give credit where it is due. I rang Spark to check if bringing xtra back home would reduce the spam getting thru. Yes I was told with stronger controls on spam. It was right as up to last week my bulk email collected 25-30 spams a day. Since Tuesday it is 5 or 6 a day. Much easier to delete every day; thank you Spark!

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Shifted addresses last month, simple switch of phone and broadband. No connection day one, no connection day two, told that I needed a new number day three (having been told I did not need one previously), land line in place. No broadband, would be on by 5pm. Then 7pm, then 12pm the next day, then told it was connected. Then told it was not connected, then told maybe I should buy a new modem (which I had previously on Sparks advise to fix a problem "I had" which in the end turned out to be Sparks problem) - so decided that was not an option. Then they would send a tecnican in 2 days to see what the issue was - possible $150 call out fee plus costs. Offered to give me 20 GB of free mobile data if I was on Spark - which I am not.

Canned it and went to Skinny 4G Broadband (no cooper wire). Result - saving around $80 a month, and got access in one day with delivery of the modem. The only regret was I am still with Spark. funny thing is a couple of days later saw Spark had the same product, if the Spark help desk was smart enough they would have offered that as a solution. So thanks Spark for making life so hard that I found a much better option.

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Worth noting that Skinny is part of Spark.

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