Profitability in the IT sector in New Zealand has shrunk to a trickle, a new report has found.
IT staff Photo: RNZ
The report from the Telecommunications Forum found the average return on assets was just 0.6 percent in 2015.
The Telecommunications Forum is an umbrella group for major industry industry players including Vodafone, Spark, Chorus, Kordia and Enable.
It regularly looks at its member companies' earnings and found there was a recent peak of 3.5 percent in 2012.
But Telecommunications Forum chief executive Geoff Thorn said that slipped to 1.8 percent in the next year and then kept falling.
"The return on assets is reduced for the entire sector down to just 0.6 percent," he said.
Mr Thorn said the problem stemmed from large numbers of companies all seeking business in the constantly growing IT sector.
"The low return on assets is an indication of very strong competition," he said.
"When you look at the prices that the companies are getting, telecommunications is going down, consumers are getting a better deal, they are getting more data at faster speeds for lower prices."
While low prices were good for consumers, they could starve companies of money for new projects, as well as affecting dividends that kept shareholders loyal to their investments.
Mr Thorn predicted companies would just have to find the money for new projects - especially with 5G just over the horizon - because they could not afford to be left behind.
Vodafone chief executive Russell Stanners explained the problem by saying that new technology already invested in had proved to be expensive.
"Through the investment in fibre, through the investment in rolling out 4G, we have put a lot of money into the infrastructure of New Zealand," he said.
"The returns reflect that, in other words we are investing ahead of the curve."
Mr Stanners would not say what Vodafone's own return was, although he said it was above the average.
In the meantime, Vodafone's shareholders would just have to accept the realities of their industry, he said.
"We are long term investors, we invest in 15 year cycles.
"It's not unusual to see an initial return lower than you would expect, but in the long haul we have great faith in the fact that our industry is an enabler and therefore hopefully we can look for better returns in the future."