ASX 200 telco marches higher on $820 million asset sale

S&P/ASX 200 Index (ASX: XJO) listed telco Spark New Zealand Ltd (ASX: SPK) is marching higher in early trade.

Spark shares closed yesterday trading for $4.45 each and are currently at $4.54 a share, putting the company’s shares up 2.02% for the day so far.

This comes after the New Zealand-based telecommunications service provider reported a NZ$900 million (AU$820 million) divestment.

What asset is the ASX 200 telco selling?

The Spark share price is marching higher after the company reported the Ontario Teachers’ Pension Plan Board will acquire a 70% interest in its TowerCo business.

The transaction values the business – with some 1,263 sites in New Zealand – at NZ$1.18 billion. According to Spark, this represents an FY23 pro-forma earnings before interest, taxes, depreciation and amortisation (EBITDA) multiple of 33.8 times.

The acquisition, subject to approval from the Overseas Investment Office, is forecast to occur in the first half of the 2023 financial year. On approval, the ASX 200 telco expects net cash proceeds of NZ$900 million.

Spark reported that the deal includes a 15-year agreement with TowerCo for access to existing and new towers, along with a commitment to build 670 new sites over the coming decade.

What did management say?

Management at the ASX 200 telco believes the deal will maximise shareholder value.

According to Spark chair, Justine Smyth:

The establishment of TowerCo will accelerate Spark’s strategic objective of delivering a smart, automated network, while maximising value for shareholders.

The transaction will deliver proceeds of $900 million, enabling direct shareholder returns and investment in future growth opportunities that will accelerate Spark’s transition from traditional telecommunications to higher growth digital services.

Bruce Crane, senior managing director at Ontario Teachers added, “This investment builds on our long track record of investing in superior businesses in New Zealand and will draw on our deep experience investing in digital infrastructure businesses globally.”

Spark CEO Jolie Hodson noted that the ASX 200 telco will “continue to own all the ‘smarts’ of our network – such as radio equipment and spectrum – which is what drives our competitive advantage and differentiation in the market”.

How has the ASX 200 telco share been performing?

Spark has been a strong performer in difficult market conditions this year.

Since the opening bell on 4 January, the Spark share price has gained 6%. That compares to a year-to-date loss of 13% posted by the ASX 200.

At the current share price, Spark shares pay a 5.8% trailing dividend yield, unfranked.

The post ASX 200 telco marches higher on $820 million asset sale appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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