Shares in Spark New Zealand (ASX.SPK) continue to drift, down 11% dividend-adjusted since reporting its interim results on Feb. 18, 2026. They have underperformed Telstra (up 4%) and TPG Telecom (down 2%) in Australia over the period. We delve into potential catalysts to realize Spark’s intrinsic value.

Why it matters: In a market beset with economic and political uncertainties, Spark shares should be beacons of defensive resilience. Alas, fundamentals betray the thematic, with fiscal 2026 EBITDAI on track to be down 12% from its fiscal 2023 high and DPS reset 42% below their fiscal 2024 peak.

  • This is in stark contrast to One NZ, Spark’s main competitor in New Zealand, whose EBITDA in fiscal 2026 (ended March) was up 15% from fiscal 2023. In fact, while One NZ’s revenue since then is flat, its EBITDA margins have lifted to 30% from 27%.
  • By contrast, we forecast Spark’s revenue CAGR to fiscal 2026 from fiscal 2023 to be negative 2% and project its EBITDAI margins to fall to 29%, from 31%. Spark has been overearning and overpaying dividends out of those earnings, while One NZ has become more efficient and focused.

The bottom line: This is why Spark is in the midst of a simplification and cost-out program, the belatedness of which, compared with peers, coincides with a persistently weak Kiwi economy. With few progress updates, investors are assuming the worst and materially undervaluing the stock.

  • We retain our NZD 3.60 ($2.90) fair value estimate, with our fiscal 2026 EBITDAI forecast at NZD 1,049 million. The result may test the low end of the NZD 1,010 million to NZD 1,070 million guidance range, with execution possibly hampered by the tough economic backdrop.
  • But execute it must. Management’s credibility and tenure hinge on delivering guidance and the annualized savings target of NZD 110 million to NZD 140 million by the end of fiscal 2027. Post cost-out, Spark should grow EBITDAI by 3% per year, given the rational, tight industry structure.

Spark New Zealand shares remain undervalued

Spark New Zealand generates steady cash flow, has a solid position in the New Zealand telecommunications market, and has the infrastructure to offer a diverse range of products. Although competition is intense in the New Zealand market, we believe Spark’s scale provides a competitive advantage. Furthermore, private equity ownership of Vodafone New Zealand has heralded in a new age of rational competitive behavior in mobile.

However, Spark is currently navigating a tough economic environment in New Zealand, and management is scrambling to cut costs to adjust to the weak revenue environment. Noncore operations such as data centers, IT, and cloud are also taking up management resources. Construction of an ultrafast broadband network has also lowered barriers to entry in fixed-line and broadband, and represents a risk to Spark’s broadband business. Successful execution of product bundling that leverages the mobile network could help defend broadband market share, as will continuing growth in fixed wireless broadband.

Spark’s moat is supported by cost advantage and economies of scale in a relatively small market. Spark is the equal-largest player in mobile with over 40% service revenue market share. The dominant market positions of Spark and Vodafone may make it difficult for new players to enter the market and establish necessary scale.

Given the small New Zealand market, we believe there is a low risk that a new player will enter as an infrastructure network operator. Any new players may adopt a wholesale access mobile virtual network operator model, selling mobile services using the infrastructure of another network. Spark captures part of the revenue by wholesaling its infrastructure to MVNOs, and operates the Skinny service to compete in the value-end of the broadband market.

Other operations in IT services, managed data, and international fiber are supportive. This includes cloud computing services and international connections offered to corporate and government entities.

Bulls say

  • Spark New Zealand is the largest telecom provider in New Zealand, where it provides the most diverse range of telecommunications services. These characteristics provide reasonable diversity and will allow the company to execute a product-bundling strategy.
  • Spark New Zealand has a high-quality mobile network and has secured the greatest capacity in recent spectrum auctions. These attributes provide a valuable competitive advantage in the New Zealand market.
  • Free cash flow generation is strong, despite ongoing requirements to invest in networks, technology, and spectrum.

Bears say

  • Aggressive competition could place downward pressure on earnings and cash flow.
  • Growth in mobile, broadband, and IT services may not offset structural declines in fixed-voice telephony.
  • Failure to stay in front of the technology curve, and adjust cost base to respond to structural revenue pressures could crimp earnings.