Shareholder Update – October 2018

UPDATE
SHAREHOLDER
October 2018
Dear Shareholder
I was delighted to announce to
the market in August that Spark
had delivered against operational
and financial targets in FY18,
while undergoing one of the
biggest change programmes
in our company’s history as we
transitioned to an Agile way
of working.
As in prior years, during FY18 we saw a moderate
improvement in revenue, up 1.0% to $3,649m. This was driven
by outstanding growth in our mobile business and in cloud,
security and service management, but as in prior years, we
continued to see a decline in our legacy voice, managed data
and networks revenues. The good news is that while legacy
revenues were down $100m, revenue from our new growth
areas was up $132m – more than offsetting the decline.
The other big thing affecting our result was we chose to
accelerate our “Quantum” business improvement programme,
by taking on more cost this year to set ourselves up for a
strong FY19. We made this decision because as we began
the transition to Agile ways of working, we became
increasingly confident we can operate more efficiently
under this model. The implementation cost from this change
programme of $49m meant our EBITDA (earnings before
interest, taxation, depreciation and amortization) result for the
year was down 2.7% to $989m.
This year we continued our focus on three strategic pillars: an
increased emphasis on wireless technologies; leveraging our
multiple brands to win in all customer segments; and being
the lowest cost operator through simplification, digitisation
and automation.
This helped drive a number of highlights over the 12 months.
Spark was the only mobile operator to see growth in mobile
market share, revenue and margins in FY18. We also grew
to 116,000 customers on our wireless broadband product,
which is helping make broadband more profitable by
reducing wholesale costs.
Our programme of simplification, automation and
digitisation helped us make some big improvements to
digital self-service channels. The introduction of artificial
intelligence, through chatbots and other automation tools,
reduced customer service voice calls by almost a quarter
year-on-year. At the same time, we’ve seen customer
satisfaction (measured by Net Promoter Score) improve
for both the Spark and Skinny brands.
Our multi-brand strategy continued to help us win
customers across different market segments – particularly in
price-sensitive markets. Low-cost brands Skinny and Bigpipe
drove the majority of our FY18 broadband customer growth
of 13,000 net new connections. Skinny’s dual commitment
to low prices and high customer satisfaction also drove
continued growth in mobile, with innovations
like its Data Binge product proving very successful.
I would like to thank you for your continued support over
the year. We believe our strategy sets us up for a strong
FY19. As we look ahead we are confident we can continue
to deliver for you as shareholders, while making a wider
contribution as we help all of New Zealand win big in a
digital world.
For more details on our financial results, see our Investor
Centre at investors.sparknz.co.nz.
Simon Moutter
Managing Director

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Going Agile
Over the past few months, Spark has undertaken one of the biggest
transformations in our company history, as we transitioned to an Agile
way of working.
Agile is a business organisational model that has been used for a number
of years by some of the world’s largest digital services businesses. It
replaces the traditional “pyramid” type management structure with small,
multifunctional teams (called “squads”) of around 6-10 people who
are focused on achieving a particular thing for customers (for example,
building a new product or service, or improving an existing product or
service). These teams work in 2-weekly cycles to make small changes
quickly and continuously. They use customer satisfaction data and other
tools to understand how customers are responding to our products and
services and where any sources of frustration might be – and then they
work to fix those sources of frustration.
Multifunctional teams and a flat structure mean there is no need to
‘hand over’ work to another part of the business or seek approvals from
above. Teams have all the people and skills they need to deliver for
customers, fast. Furthermore, by focusing our work on Spark’s overall
purpose – to help all of New Zealand win big in a digital world - and our
contribution to customers, Agile ensures all of our people are engaged
and feel empowered to make a difference.
While it is very early days, we are already seeing some positive
indicators from those teams who have fully adopted Agile ways of
working. Early data and anecdotal evidence shows they feel more
engaged with and positive about their work, are spending less time in
meetings or managing emails and have substantially sped-up the time
it takes to deliver products and services for customers.
We are one of the first large businesses in New Zealand to transition all
our people to an Agile way of working. It’s a big and bold call, but we
are confident it’s the right one for Spark and are excited about what
this new model will help us achieve in the years to come.
Our 5G future
In our August 5G briefing paper “The Evolution Towards a Revolution”
we made it clear Spark is on track to start providing 5G services to
New Zealand consumers and businesses from 2020.
Our technical and network planning is advancing, as we successfully
conducted outdoor and indoor trials earlier this year. We have already
begun a build programme to increase the number of cell sites in our
existing mobile network – which will enable us to meet near-term
capacity demand as well as lay the groundwork for the network
densification required for 5G.
5G is the fifth generation of wireless communications technology,
which is starting to be rolled out around the world. It will provide
additional mobile network capacity at a lower incremental unit cost
than under 4G and 4.5G, helping us keep ahead of growing
customer demand for more data at faster speeds.
Crucial to us planning for and building a 5G network is clarity on
when additional 5G spectrum will be available and in what bands.
We have urged government to allocate the two most likely spectrum
bands – mid frequency C-band and high frequency mmWave band
– as soon as possible. We are particularly keen to ensure 5G services
can be delivered in time for the 2020-21 America’s Cup in Auckland
as an international showcase opportunity.
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Spark is committed to being a key player in New Zealand’s
rapidly evolving media landscape. Our journey began in 2014
when we launched Lightbox, and this service has now reached
a new milestone with 355,000 subscribers at the end of FY18.
Lightbox has also developed new revenue streams with its pay-
per-view movie service and premium subscription service, both
of which launched in FY18.
We now see further opportunity in this space for a standalone
sports media business. We recently announced that we’d
secured the rights to Rugby World Cup 2019, the English
Premier League for three seasons from 2019, and Manchester
United TV – with more content announcements to come. We will
offer these sports via a subscription model and will stream them
via a specialist sports platform.
Our ambition is to transform the way sport is distributed and
viewed in New Zealand in the same way general entertainment
viewing has been transformed by the likes of Lightbox, Netflix
and YouTube. However, we continue to be disciplined when it
comes to these investments, with a focus on a package of rights
that we’re confident we can commercialise.
Our sports service will launch early in 2019 and we’ll have
details of pricing and packages closer to the launch date.
A standalone sports
media business
New Spark customers only. Spark, Netflix and Lightbox terms and charges apply. Sony TV offer
cannot be redeemed online. Early exit fee of $199 + the outstanding balance of your interest
free TV payments applies. See spark.co.nz for full terms and come in store for details.
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Spark Foundation announces
new partnerships
Spark Foundation is helping young New Zealanders successfully
navigate their digital futures through three new partnerships with
Code Club Aotearoa, Digital Natives Academy and 21C Skills Lab.
The Foundation is determined that no young New Zealander gets
left behind in the digital world. These partnerships aim to be the
catalyst for change that creates a lasting impact; working alongside
organisations to create and scale programmes that inspire kids to
build the skills and capabilities now required.
The partnerships follow the end of the Spark Foundation’s five-year
commitment to Manaiakalani Education Trust and the development
of Givealittle to become a largely self-funding platform.
A quick description of each organisation is below:
Code Club Aotearoa: a nationwide network of volunteer-led coding
clubs for kiwi kids aged 9-13 years old. Providing a fun way for
children to learn computer programming and software design,
the Code Club wants to grow the number of code clubs around
New Zealand and give every kiwi kid the opportunity to learn to
code, no matter who they are or where they live.
Digital Natives Academy: a living digital hub where tamariki can
learn code, rangatahi can join eSports leagues, whanau can integrate
virtual tikanga and kids of all ages can access the latest tech in a
safe environment. Aims to inspire young people and their families
to create, transform, shape and develop their own digital tools.
2IC Skills Lab: developing and launching the Like a Boss programme
across 30 schools in 2019 with a goal of equipping kids with the
knowledge and skills to succeed in a rapidly changing world of work.
The programme is an opportunity for secondary school students to
build their own people or planet-focused business and develop 21C
skills along the way. Each student is given $20 of start-up capital and
the tools to create, launch and operate their own venture allowing
them to make a difference in and outside of the classroom.
America’s Cup Partnership
Spark will be the official telecommunications and connectivity partner
for Team New Zealand and for the 36th America’s Cup event.
As America’s Cup racing becomes more and more driven by
technology innovation, the crew on the boat and the team back at
the base rely on the immediate availability of real time data to get the
best performance on the water. Seamless connectivity can make the
difference in gaining that competitive edge, and this is where Spark
hopes to make a real difference. We see a huge opportunity to align
the development of Spark’s 5G network and services with the spirit
of innovation that Emirates Team New Zealand has always shown at
the America’s Cup.
Later this calendar year we will launch a 5G Innovation Lab in
Auckland’s Wynyard Quarter Innovation Precinct, which will allow
partner companies to test and develop applications over a pre-
commercial 5G network. It will be just a few hundred metres from
the Emirates Team New Zealand base, which will create great
opportunities to start testing real world applications of 5G in
live environments.

We’ll do anything to
keep prices low and
customers happy
skinny.co.nz
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
SPA4449_A4_10/18
4
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.
Partnering with Netsafe
to stop scams
We’ve been working hard to reduce
scamming activity and raise awareness
for customers this year. Phone and
email scams are a global problem,
with scammers becoming increasingly
sophisticated when it comes to the
technology they use and the stories
they tell. While Spark plays an active
role in monitoring and blocking scams,
it’s not always possible to detect every
single scam call or email campaign.
The most effective way to keep our
customers safe is to help them identify
the difference between interactions
with us versus interactions with
a scammer. To do this, we have
partnered with Netsafe to develop
a brochure with simple guidance
on how to spot a scam, how to stay safe, and what to do if you think you
have been scammed. The brochure will be translated into Chinese to assist
the Chinese community, which has recently been targeted by scammers
posing to be from the Chinese embassy.
We are making education brochures and smaller wallet cards available
at Spark stores around the country, and they will also be dispatched with
every new phone purchased from Spark. As older customers may be more
targeted by scammers, we have placed brochures in branches of
Age Concern and Senior Net.
This is one of the many proactive initiatives Spark has put in place over
the past year. In April we launched a webpage that lists real-time scam
alerts, so customers could see the latest reports of scammers posing to
be from Spark. Soon after, we included a safety reminder on the bottom
of customer bills, so they are frequently reminded to think twice. We have
also trained frontline staff to help front-foot scam education with customers
on the shop floors – ensuring staff are prepared to discuss methods in
which a customer can protect themselves and their family.
A key message for our customers is that Spark will never contact you
out of the blue and ask for personal information like banking details or
passwords. We also recommend people avoid calling back international
numbers they don’t recognise and if they are unsure if a call is genuine,
it is best to hang up.
How to stay safe
• Be careful where and to whom
you provide your personal details.
• Make sure you keep your
software and anti-virus
programmes up to date.
• Use a different password for all
your online accounts.
• Change your passwords often
and don’t reuse old passwords.
• Use 2 Factor Authentication
(2FA) for online accounts where
it’s available.
• If you can’t tell if a call is
legitimately from a company
you do business with, hang up
Scammers are constantly changing their approach,
both
through the technology they use and the stories they
tell. Their goal is to obtain money or personal details
from you. Anyone can be caught out by a scam so the
best way to protect yourself is to be vigilant. Read on for
Scammers are constantly changing their approach, Scammers are constantly changing their approach, Scammers are constantly changing their approach,
through the technology they use and the stories they through the technology they use and the stories they through the technology they use and the stories they
tell. Their goal is to obtain money or personal details tell. Their goal is to obtain money or personal details tell. Their goal is to obtain money or personal details
from you. Anyone can be caught out by a scam so the from you. Anyone can be caught out by a scam so the from you. Anyone can be caught out by a scam so the
best way to protect yourself is to be vigilant. Read on for best way to protect yourself is to be vigilant. Read on for best way to protect yourself is to be vigilant. Read on for
YOURSELF
FROM
PROTECT
PHONE SCAMS