Spark of interest in acquisition flickers out for Telstra

Spark on Thursday said it had secured $NZ314m for a sale of the mobile towers business it previously owned.

Australian-listed telecoms giant Telstra is understood to have weighed an acquisition of New Zealand counterpart Spark in recent years, sources say.

However, it is understood to have passed on the opportunity, determining it was not the right priority for the No.1 listed Australian telco player, which has about 40 per cent of the local market share.

Spark, one of the largest listed companies on the NZX and NZ’s biggest telecoms service provider, has endured a 47 per cent share price fall this year.

It has lost traction as it struggles with large capital spending requirements, leaving chief executive Jolie Hodson, who has run Spark since 2019, and chair Justine Smyth under pressure.

Another prospective buyer of Spark, born out of the former government-owned Telecom business, could be Kohlberg Kravis Roberts.

KKR has purchased telcos globally, such as Telecom Italia and Telefónica Colombia fibre network business.

But some believe that while the group would be an attractive turnaround prospect, KKR would likely be unwilling to allocate so much capital to the New Zealand market.

It would also struggle on an exit, with another listing its likely only option. Asian telcos are also adverse to major New Zealand investment.

Spark has been in search of ways to get more funds into the business as its capital requirements remain substantial and it announced on Thursday it had secured $NZ314m ($284m) for a sale of the mobile towers business it previously owned.

Both Spark and Ontario Teachers’ Pension Plan offloaded a 50 per cent interest in the business – now named Connexa – for $NZ909m to CDPQ.

The sale includes Spark’s remaining 17 per cent stake and a 33 per cent interest offered by Ontario Teachers’ Pension Plan, and leaves Ontario and CDPQ each holding 50 per cent.

Spark will lease back the towers, as it has been doing.

Next on the list could be a sale of its fibre assets, but more likely is a focus on its plan to sell down its data centre interests. It is understood the data centres were more capital-intensive than anticipated and Spark opted against a capital partnership from the start. An equity raising is believed to be off the table.

CDPQ was advised by Citi and saw off competition from the Abu Dhabi Investment Authority to win the right to enter exclusive negotiations.