Spark rethinks funding source after testing towers interest

Spark had offered its interest in newly formed Connexa, which owns the towers, to prospective investors. Picture: David Mariuz

Following DataRoom’s report on October 14 about key representatives from Spark being spotted on this side of the Tasman, there is more news about just what New Zealand’s largest telecommunications company has been up to.

DataRoom understands that Spark is more or less back to the drawing board over how it can secure additional funds after testing market interest for its stake in telecommunication towers.

Apparently, it has shopped its interest – thought to be about 17 per cent – in newly formed Connexa, which owns the towers, to prospective investors.

The other owner of Connexa, Ontario Teachers’ Pension Plan Board, is also prepared to sell down its holding after buying a stake in 2022 for $814m.

After the Spark transaction, Connexa purchased the towers of 2Degrees from Macquarie Asset Management and Aware Super for $NZ1.1bn.

That deal saw Spark’s holding in the company diluted from 30 per cent to 17 per cent.

The understanding is that Spark and Ontario, which were marketing the stakes through Bank of America, received a lukewarm reception.

Now attention turns to other options for Spark, run by Jolie Hodson and chaired by Justine Smyth, who have had meetings in Sydney in recent weeks. The thinking has been that Spark may look to its fibre assets as it seeks ways to boost its balance sheet.

The share price of the $5bn company has fallen from $5 highs in recent months to less than $3.

Some comparisons can be drawn with the Australian-listed TPG Telecom, which has sold its fibre network infrastructure assets for $5.25bn to Macquarie-backed Vocus and has seen its share price fall over time.

TPG Telecom also sold off mobile phone towers, and received plenty of cash for the assets, but they both now have onerous lease liabilities. Spark’s net debt at June 30 was $NZ1.6bn.