Spark NZ Shareholder Newsletter

UPDATE
SHAREHOLDER
A pril 2018
Dear Shareholder
In February we announced our financial
results for H1 FY18, which show that
Spark is making good progress on
its transformation strategy and the
three focus areas that underpin it: an
emphasis on wireless technologies;
using our suite of brands to better serve
price-sensitive customers; and driving
improvements in customer experience
and cost-to-serve through simplification,
digitisation and automation.
Revenues were up 1.6%, to $1.82 billion for the half year, despite intense
competition in all our markets. This is on the back of continued strong
performance in mobile, up 8.0%, together with cloud, security and service
management, up 17.5%.
As we indicated at the end of the previous financial year, our
transformation programme does have associated costs of change,
and revenue growth over the half was partially offset by $13 million of
such costs. As a result, earnings before interest, taxation, depreciation
and amortisation (EBITDA) over the period declined by $8 million
to $463 million.
The performance in mobile was a big highlight of the half. We saw
increases in mobile connections, revenues and margins – with overall
mobile ARPU returning to growth for the first time in two years. The
successful launch of our unlimited mobile data plan, which set a new
benchmark for value, encouraged customers to upgrade to this higher-
value offer, and the online-only Skinny Direct service helped grow mobile
margins at the price-sensitive end of the market.
Our Upgrade New Zealand programme is progressing well, with wireless
broadband in 104,000 premises and large numbers of our customers
migrating from copper to fibre. We now have 45% of our broadband
customers on these newer technologies, keeping us on track to be mostly
ex-copper by 2020. This shift improves customer experience and is already
delivering around $46 million annually in reduced access costs.
We also saw strong performance in cloud, security and service
management revenues, as a result of customer demand for the flexibility
and benefits offered by “as a service” cloud-based products. Mobile and
cloud growth continues to more than offset the declines in voice, managed
data and networks.
Spark’s sub-brands Big Pipe and Skinny continue to resonate well with
price-sensitive customers. Skinny and Bigpipe secured most of our
broadband connection growth in the half year and
Skinny Direct continues to grow in the mobile market. Skinny’s
excellent customer service was once again recognised, with Skinny
named the winner of Consumer NZ’s People’s Choice award for the
third consecutive year. As a company that was “born digital” Skinny
has been showing the way for Spark as we ramp up our simplification,
digitisation and automation initiatives.
These initiatives continued at pace over the six months to
31 December 2017. We’ve now dramatically simplified the plans
we offer across Home, Mobile & Business (HMB) and Spark Digital
– migrating more than 166,000 HMB customers on to new fit-for-
purpose plans, offering better value and digital self-service options,
and stopping further sales of more than 5,000 outdated managed
data plan variants through Spark Digital.
We have 35 “bots” performing sometimes very complex tasks – from
managing security functions to proactively resolving broadband
faults, and we’ve improved our customer self-service tools with
enhancements to the Spark App, the MySpark self-service platform
and the simplification of our online “Help” section. As a result, we’ve
seen an increase in customer satisfaction, alongside an 18% reduction
of calls into our customer care centres.
Based on the results from the first half of FY18, we have affirmed
full-year EBITDA guidance of 0-2% growth versus FY17 actual EBITDA
(excluding net gain from sale of Mayoral Drive Carpark) and declared
a total H1 FY18 dividend per share of 12.5c, made up of a 75%
imputed ordinary dividend per share of 11.0c and a 75% imputed
special dividend per share of 1.5c.
We note however that we are considering accelerating our business
transformation to further strengthen the FY19 result. No decision
has yet been made, but if the programme is accelerated then FY18
guidance may reduce due to the associated costs of change. We will
update the market if appropriate.
For more details on our financial results, see our Investor Centre
at investors.sparknz.co.nz.
Simon Moutter
Managing Director

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• In mid-March we officially switched on our low-power Internet
of Things network, which we have been trialling in the industrial
and agricultural markets. Our first IoT customer is Levno, a
resource management firm. The low-power network is suitable
for when sensors or devices are transferring small amounts
of data and are reliant on battery power. We are also testing
complementary IoT technology on our mobile network, which
is suitable for where sensors and devices are transferring
large amounts of data regularly and real-time access to that
data is critical.
• The Spark Foundation continued to expand its Spark Jump
programme, which is now connecting 676 families in areas
throughout New Zealand. The programme aims to bridge the
digital divide, by offering subsidised broadband to families
with school-aged children who are not currently connected.
• Spark has added contact centre, unified communication, cloud
security access brokerage and site connectivity services to
its already expansive Telecommunications as a Service (TaaS)
portfolio. These additions have further strengthened Spark’s
ability to offer government agencies seamless end-to-end
TaaS solutions that deliver improved business outcomes and
leverage various common capability agreements.
• Over summer, we trialled a “portable” version of our wireless
broadband product, which allowed customers to use their
home broadband on holiday. Customers on the trial were
able to simply unplug their modem at home and plug in at
their New Zealand holiday destination. We’re now working
through feedback from customers about the trial product
and considering next steps.
2
News in Brief
Agile ways of working:
what it is all about
For some time, we have been looking at how adopting Agile ways
of working might help us reach our aspirational targets for customer
satisfaction and company culture. Agile is a way of working created
by software engineers in the 1990s. It replaces traditional hierarchical
control with a flatter structure and self-managing teams, and involves
working on smaller, faster incremental improvements (to products,
services, etc.) and a focus on end-to-end outcomes.
While we previously planned to “scale up” to Agile ways of working,
our investigations – including looking at how Agile has benefited large
companies offshore – have led us to see significant benefit in adopting
Agile across the whole organisation. We are now working through the
implementation of this and expect the new model to be in place during
Q1 FY19.
We’ve made huge progress over the past few years transforming the
business into one that is focused on the customer and can respond
quickly to changes in the market. Moving to an Agile way of working
will help us take the next step, by creating a faster rhythm for designing
and delivering digital customer experiences, strengthening our focus
on our customers, and energising our company culture with a much
bigger focus on “doing”.
Our success to date has come from taking big, bold decisions, and
the move to Agile is another big step forward for us. We’re taking the
best learnings from around the world and adapting them to the New
Zealand and Spark context. We have an opportunity to do something
quite remarkable and set ourselves up to become a leading player in
New Zealand’s digital future.
Watch now
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As part of our H1 FY18 results we announced that Lightbox
is upgrading its technology platform and will shortly launch
some new features and services. These include an on-demand,
pay-per-view movie service called Lightbox Movies; an option
for either standard and premium TV subscription options –
with premium including enhanced features such as temporary
downloads; and Lightbox Kids – a dedicated safe area for
children’s content.
The upgrade will be completed in April and will see Lightbox
migrated to the Brightcove platform. This is a standardised media
platform used by other organisations like TVNZ, which will give
us the capability to expand and develop Lightbox in the future.
By offering on-demand movies through Lightbox, we are adding
a capability known as Transactional Video On Demand (TVOD)
to our existing Subscription Video on Demand (SVOD) model.
This will mean that both existing Lightbox subscribers and
casual visitors will be able to rent the latest movies without a
subscription – giving us a new revenue stream, as well as making
Lightbox an even better proposition for existing customers.
Existing Lightbox TV subscribers will be able to log in to Lightbox
and rent pay per view movies. People who don’t have a Lightbox
TV subscription will be able to create a profile and rent pay per
view movies with no contracts or strings attached.
Customers on the premium service will be able to download
content to their mobile devices, making it available to view
offline when they’re travelling or away from an internet or
mobile connection. They will be able to seamlessly watch over
multiple devices and enjoy higher quality viewing at lower
bandwidth requirements. Spark customers on eligible mobile
and broadband plans will continue to get a standard Lightbox
subscription included in their plan – or they can choose to pay
a small top up charge to access the Premium subscription.
All Lightbox TV customers will be able to access the dedicated
Kids TV area. TV content will be available via the normal
subscription packages, while children’s and family movies will be
available to purchase through Lightbox Movies but only once an
adult has consented to the purchase. Password pin protection
between adult and child profiles will make it easy for parents to
keep their children entertained and safe at the same time.
Movie titles for launch are still being confirmed, but Lightbox
plans to have hundreds of titles immediately available with many
more added every week.
Changes to the Spark Board
We were delighted to announce
Pip Greenwood will join the
Board as an independent, non-
executive Director from 1 April.
Pip has significant experience
in capital markets, mergers and
acquisitions, telecommunications,
and governance. We very much look
forward to her joining the board, at
which time our Board of Directors
will be 50% female. We are proud
of this milestone and believe it reflects the pipeline of strong, capable
female leaders available for us to draw from and demonstrates
commitment to our long-term aspiration to have >50% of Directors
and leaders at Spark being female or non-New Zealand European.
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A resilient and
flexible network
Our success in mobile and in offering wireless broadband is only
possible because of the massive investment we’ve made in our
mobile network.
We’ve continued rolling out 4.5G across New Zealand and now
have it live on 38 large sites in 30 locations. This technology is an
enhanced version of 4G, delivering three to five times the speed and
network capacity. It also helps us prepare for a 5G future, by giving
us a deeper understanding of the more intensive data use-cases that
will be made possible by 5G. Spark is currently the only New Zealand
mobile operator rolling out 4.5G.
We have also strengthened the resilience and capacity of our core
network by adding a third mobile node or Evolve Packet Core (EPC).
We previously had two mobile EPC nodes handling large volumes
of traffic, based in Auckland and Christchurch. The new third node,
located in Porirua, gives us the flexibility to shift and re-route traffic
around as required, particularly in the case of a natural disaster or
emergency. This incremental increase in capacity supports our future
technology requirements, including the roll-out of 4.5G and
the expansion of our wireless broadband service.

To find out more about Spark products and services,
visit spark.co.nz or visit your nearest store.
We welcome any feedback, which you can provide
via email to investor-info@spark.co.nz
SPA3987_A4_04/18
4
Top picks from the world of social
Here’s a quick snapshot of how Spark is appearing on Twitter and Facebook.
Electronic
Shareholder
Communications
Spark New Zealand shareholders can choose to
receive all communications electronically. This
makes it more efficient and convenient for you,
plus it reduces environmental impact and cost.
You can select how you receive
communications from Spark New Zealand by
visiting the Link Market Services website.
NZ registered holders:
linkmarketservices.co.nz please select “Investor
Login” on the top right hand side of the page.
Please select “Spark New Zealand Limited”
from the issuer drop down box. You will need
your CSN/holder number and FIN to complete
the investor validation process.
AU registered holders:
Go to linkmarketservices.com.au please select
“Investor and Employee Login” on the top right
hand side of the page. Please select “Spark
New Zealand Limited” from the issuer drop
down box. You will need your holder number
(SRN or HIN) and postcode to complete the
investor validation process.