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Broadband bargain-hunting forces rethink

NZ Newswire logoNZ Newswire 16/02/2017 Paul McBeth

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

Government data show prices for telecommunications services have dropped 15 per cent 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 per cent 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 CEO in 2012 and tasked his team with competing aggressively to maintain broadband share. The roll-out 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 that 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," he 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."

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