Why Spark New Zealand Ltd could be a better bet than Telstra Corporation Ltd

Spark New Zealand Ltd (ASX: SPK) could be a better bet than Telstra Corporation Ltd (ASX: TLS) given the company’s recent strong growth in mobile subscribers.

According to an announcement this week, Spark says mobile revenue is up 11.7% over the second half of the 2015 calendar year, and has not only closed the gap to market leader Vodafone, but surpassed the mobile company in terms of mobile revenues.

Spark says Vodafone will earn NZ$1.065 billion in mobile revenue (excluding wholesale customers) in the 12 months to 30 June 2016. Spark is expected to post comparable mobile revenues over the same period of $1.1 billion.

Vodafone NZ is currently in the process of merging with Sky Network Television Ltd (ASX: SKT) – the New Zealand equivalent of Australian pay TV operator Foxtel.

Spark managing director Simon Moutter says the company has now added almost half a million new mobile customers in the 3 years to 31 December 2015 – while Vodafone only added 44,000 in the same period.

At the current share price of $3.24, Spark is trading on a P/E of ~16x and after paying a dividend of 18.76 cents in the 2015 financial year, boasts a dividend yield of 5.8%. That could grow too after the telco upped its first half of FY16 dividend by NZ 3.5 cents to NZ12.5 cents (including a special dividend of 1.5 cents).

Spark also reported earlier this year that for the first time in many years, mobile and IT services revenue growth was more than offsetting the ongoing decline in landline and legacy data products. It’s a similar situation Telstra is in, as more customers move off the telco’s highly profitable copper network onto the NBN. New Zealand is also rolling out a national fibre network – conducted by Chorus Ltd (ASX: CNU).

Chorus and Spark were once Telecom New Zealand but were split into wholesale and retail businesses.

Foolish takeaway

New Zealand-based companies are often overlooked by ASX investors, but Spark might be one deserving a closer look.

Discover the 'new breed' of blue chips that could take your portfolio higher in 2016

Forget BHP and Woolworths. These 3 "new breed" top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

The report is free! No credit card required.

Motley Fool writer/analyst Mike King owns shares in Telstra Corporation. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.