Spark NZ Shareholder Newsletter

A message from our Chair, Justine Smyth
As many of you will already have heard, on 2 April Simon Moutter
resigned from his positions as Managing Director and as a Director of
Spark, effective 30 June 2019, and we as Spark’s Board of Directors
have appointed Jolie Hodson, currently Customer Director, as our new
Chief Executive with effect from 1 July 2019.
In almost every respect, Spark today is a vastly different company to
the one that Simon re-joined in 2012. We are New Zealand’s leader
in wireless communications, with a rejuvenated mobile business
across both Spark and Skinny brands, a promising Internet of Things
(IoT) business and a determination to be at the forefront of 5G. We
have made exciting plays in entertainment and sports media, we
have invested in a modern, world-class technology stack and we are
generating interest in our adoption of an Agile way of working from
companies around the globe. We are making important progress with
diversity and inclusion in the workplace, and our financial performance
ranks among the industry’s best in this part of the world. And, of course,
Simon led the way in 2014 with the bold call to rebrand the Company,
hanging up on Telecom and logging onto Spark.
When Simon became Managing Director in August 2012, he did so
in the expectation of a likely five- to seven-year tenure. Accordingly,
the Board has been mindful of succession planning from within the
business by giving potential internal candidates opportunities over
time to demonstrate they have the right leadership capabilities.
The Board are particularly pleased to have a smooth and professional
succession arrangement that allows us to confirm a top-quality internal
candidate in Jolie. Jolie is an accomplished leader with a strong record of
delivering results and managing complex business units and to be able to
appoint an executive of her calibre and experience is a testament to the
quality of the talent within the company. She has had experience across
most major parts of Spark’s business since she joined the Company in
2013. As Board Directors, we have had the opportunity to work closely
with her over recent years on a range of important Company matters
and we have been consistently impressed with her business acumen, her
strategic vision and her quality decision making.
We are delighted to have confirmed an internal candidate, which
speaks to Spark’s desire where appropriate to develop and promote
talent from within.
I am personally looking forward to working with Jolie as we continue the
transformation of Spark into a digital service business which is achieving
our purpose of helping all of New Zealand win big in a digital world.
UPDATE
SHAREHOLDER
M ay 2019

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Modern Family

2
Shock and devastation following events in Christchurch
Like the rest of New Zealand and many around the world, we at Spark were
shocked and devastated by the horrific terrorist attack in Christchurch.
In the aftermath, we have been supporting those of our people who
were directly or indirectly affected by the event. This includes those
whose family or friends were caught up in the attack, and those who
were in lockdown for many hours on the day the attack took place. We
are incredibly grateful that our people in the region are all safe, but our
hearts go out the families who have lost loved ones in these most terrible
of circumstances.
As the news of the attack was unfolding, we were deeply disturbed to
hear a video of the terrible act was being distributed online. To prevent
this content being viewed or spread further, Spark’s cyber security team
joined with other major New Zealand broadband providers to block
access to websites where the video appeared. This is not something we
have done before and it was not done lightly, but we believed it was the
only responsible course of action in the circumstances.
It was clear, however, that in situations like these Internet Service Providers
are very much the ambulance at the bottom of the cliff. That is why in the
week following the attacks we joined with Vodafone NZ and 2degrees
to write an open letter to the owners of the global major social media
platforms – Facebook, Twitter and Google – asking them to prevent this
terrible use of livestreaming happening again. We recognise the speed
with which social network companies sought to remove Friday’s video
once they were made aware of it but believe more needs to be done to
prevent content like this being made available in the first place.
In response to the tragedy itself, Spark opened access to our WiFi
network in Christchurch and put in place free mobile calling in and out
of the area for 24 hours. We wanted to make sure those people who
needed to contact family and friends could do so without worrying
about the cost.
Our Givealittle team was inundated with requests for pages to support the
victims and their families. The official Victim Support page on Givealittle
has since received more than $10 million from generous donors. Spark
Foundation is making its own donation to offset most of the Givealittle
service fee, covering everything except third-party transaction costs such
as credit card charges.
We hugely value and respect the Muslim members of our team and view
this attack on them and their faith as an attack on our values. Our answer is
to strengthen our unity, connect with each other, show support and love.
As-Salaam-Alaikum. Peace be upon you and peace be upon all of us.
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Dear Shareholder
Our results for the six months to
31 December 2018 show Spark’s
combined focus on innovation and
efficiency across our products and
services is now flowing through to our
financial results.
We were particularly pleased to see
further evidence of our improved digital
customer experience. Our customers
are moving to digital interactions in
bigger numbers – we have seen a 30% decline in the number of voice
calls into our customer care teams, and the number of live chats handled
by virtual assistants increased eightfold. At the same time, iNPS, which
measures the satisfaction of customers who have come to us for help,
went up.
Agile ways of working are now embedded across our whole business and
at this early stage we are already seeing Agile delivering for our customers.
It has allowed us to keep bringing to market new products and services that
are aligned with customers’ high expectations, despite us operating on a
significantly lower cost base than previously. This is because Agile gives our
people a clear view of what customers want and the structure to get on and
deliver this with clear focus.
Let’s take a look at the numbers:
Revenue saw a slight (0.4%) decline to $1,754m for the half. There were
continued revenue increases in our growth products – mobile and cloud,
security and service management – but growth wasn’t at the levels we’ve
seen over the past couple of years. On the other side of the equation, we
saw bigger declines in revenues from our legacy products (such as landlines
and managed data). This was because one of our big wholesale customers
moved a large number of connections off our PSTN network. This happened
in the last financial year (FY18), but as expected we’re seeing the full effect
in our revenue numbers now.
Reported EBITDAI (earnings before finance expense and income, income
tax, depreciation, amortisation and net investment income) was up by
7.2% to $489m. This growth was the result of improved margins in mobile,
broadband, and cloud, security and service management – as well as the
benefits from our programme of simplification, digitisation and automation.
The mobile story is interesting, because while revenue growth has slowed
slightly, we have seen margins improve as customers choose higher value
mobile plans. The number of customers on our unlimited plan doubled
in the period, and Skinny saw a 16.1% increase in the number of their
customers who are on a recurring top-up plan.
Likewise, in broadband we have made some deliberate decisions that
have put margins back on a more sustainable track. We changed copper
pricing, reflecting the higher cost of providing this service; we introduced
the “Unplan” which emphasises value in the core offer rather than relying
on acquisition or retention incentives; and we kept growing Wireless
Broadband, which is helping to reduce our access costs.
Reported NPAT (net profit after tax) was down 5.6% to $153m. In the prior
period (H1 FY18) our NPAT included a $28m dividend from our investment
in Southern Cross. However, Spark and its joint venture partners are
working to agree terms with Telstra on a deal that would see Telstra invest
in the Southern Cross Next cable. If this deal proceeds, and the cable goes
ahead, then Southern Cross will need capital to invest in building it. For this
reason, Southern Cross decided to withhold dividends for the six months
to 31 December 2018. We believe the build of Southern Cross Next will be
an excellent long-term investment for shareholders, but not receiving the
dividend has impacted on our net profit for this half.
We announced an H1 FY19 total dividend per share of 12.5c, which will be
made up of a 75% imputed ordinary dividend per share of 11.0c and a 75%
imputed special dividend per share of 1.5c.
For more details on our financial results, see our Investor Centre website
at investors.sparknz.co.nz.
On a personal note, you will have already heard that I will be stepping down
from the positions of Managing Director and Director of Spark at the end
of this financial year. I have given my absolute best to putting Spark onto a
positive track over the last seven years, so the Company can fully deliver on
its purpose to ‘help all of New Zealand win big in a digital world’. I feel it’s the
right time to pass the leadership baton on and I am delighted the Board has
chosen an outstanding leader in Jolie to succeed me. I haven’t made any
decisions about what I’ll do after I finish at Spark, other than committing the
first couple of months to spending some quality time with my family.
I’d like to thank you for your support and engagement over the past seven
years. I know that I am leaving your Company in the very best of hands.
Simon Moutter
Managing Director

3
Spark Sport platform launches in beta; on track for RWC2019
Just under a year ago, we announced we’d secured the broadcast rights to
Rugby World Cup 2019 and other premium rugby tournaments. In the time
since, we have been working hard towards the launch of our Spark Sport
service – from which we believe we can build a viable, standalone sports
media business.
In mid-March, this new service went live at sparksport.co.nz, in time to stream
the Australian Formula 1 Grand Prix. In keeping with our agile approach, we
launched the service in “beta” – which means the core functionality is working,
but improvements and additional features will continue to be added all the
time. During the initial launch period, we are offering customers a 30-day
free trial. After the 30-day trial, access to premium content will cost $19.99 a
month, excluding access to the Rugby World Cup 2019.
In the first few months of service, Spark Sport has already successfully
streamed hundreds of hours of live and on demand content, including
several Formula 1 Grand Prix, World Rally Championship rounds, NBA
games and FIH Pro League hockey matches.
Spark Sport offers a range of features and options. Customers can watch
live sporting events in real time, can pause at any point, and can ‘rewind’ up
to four hours. Once live events are complete, they will also be available on
demand for people who have missed them or want to watch them again.
From launch the service is available on most iPads and iPhones, Android
devices, AirPlay to Apple TV, Chromecast and popular web browsers. In the
coming months, we’ll be expanding this list, so that the service is available
on Apple TV, Samsung, Panasonic, LG and Sony Smart TVs, with further
platforms still to be announced.
We are now well into our planning for Rugby World Cup 2019 and in April
announced pricing and other details for the tournament. A Spark Sport
tournament pass for RWC2019 will cost $59.95 if purchased during May,
rising to $79.95 if purchased between June and September, and finally
$89.95 if you leave it to the last minute and buy in the last few days before
the tournament. These passes will provide live and on demand access to all
48 matches in the tournament, on a wide range of devices. Twelve matches
will be available for free with TVNZ and for Spark Sport free-to-view account
holders, including every New Zealand pool and knock-out match. Some of
these will be live and some delayed. All the details may be found on our
website at sparknz.co.nz/news/Rugby_World_Cup19.
We also have a full Help section on our Spark Sport website
(at https://help.sparksport.co.nz/faqs) for customers who want a bit of
guidance setting themselves up for streaming. This includes some
introductory help videos, featuring Scotty Stevenson:
https://help.sparksport.co.nz/getting-started/help-videos.
The next generation of mobile technology
The deployment of 5G, the next generation of mobile technology, will
be crucial for Spark’s future growth and a big driver of innovation. We
are working towards launching our 5G network by July 2020 at the latest.
One of the challenges we face when talking to our customers and wider
New Zealand about 5G is how to explain the benefits the network will
deliver when we are still more than a year from launch. That’s why in
November last year we opened New Zealand’s first interactive 5G test
lab in Auckland’s Wynyard Quarter.
The Spark 5G Lab has a dual purpose. It’s primarily designed to be a
collaboration space for New Zealand innovators, entrepreneurs and
companies like Emirates Team New Zealand to have early access to 5G,
so they can test and develop products and experiences that will define
the future. The lab will also host technologies that showcase some of
the possibilities and benefits of 5G such as robotics, virtual reality, facial
recognition, Internet of Things (IoT), smart cities, emergency services
drones and driverless cars.
At the opening of the lab we started an official countdown to Spark’s
proposed 5G network launch date, with Spark stating its goal to have 5G
live on Auckland Harbour by 1 July 2020 for Emirates Team New Zealand
to use as part of its preparation to defend the America’s Cup. Access
to the 5G network’s reduced latency and higher bandwidth means that
through the on-water testing stage the Emirates Team New Zealand
designers back at base will be able to get data and analytics in real-time.
This will be a big part of their planning and strategy – with scope for 5G
technology to truly “help the boat to go faster”.
“With 5G our design-thinking can evolve faster, allowing us to explore more
design options and buy us more of one of the most precious commodities
in the America’s Cup – time. This could be a game changer for us,” says
Dan Bernasconi, Head of Design at Emirates Team New Zealand.
Spark also collaborated with NZ autonomous vehicle company Ohmio
Automotion in March to test New Zealand’s first 5G-connected driverless
car on Auckland streets.
Dr Mahmood Hikmet, Ohmio’s Head of Research and Development
says, “A 5G network can be up to 100x faster than 4G, which unlocks
the true potential for autonomous driving, as messages need to be
transmitted and decisions made in real-time. A significant drop in latency
– or the reaction time when one device talks to another – will give cars
human-like reflexes and opens up multiple possibilities for connected
infrastructure and a smart city ecosystem.”
We believe this test was only the second of its kind in the world to date.
As we have stated several times over the past few months, our 5G
network deployment is contingent on Spark securing additional 5G
spectrum, with the frequencies known as C-Band and mmWave the
most referenced bands globally when it comes to 5G. We were pleased
in February to hear the Minister reaffirm the Government’s intention to
auction 5G spectrum in early 2020. While we were hoping this auction
might have taken place later this year, we remain committed to our
launch timeline and to rolling out 5G network capabilities as soon as the
necessary spectrum becomes available.
You will be charged $19.00/month after trial ends, unless you suspend before. Compatible devices only. Terms apply.

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
SPA4908_A4_05/19
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.
Spark Future Director appointed as
Director on New Zealand Post Board
Nagaja Sanatkumar, GM of Global E-commerce at clothing retailer
Icebreaker, joined the Spark Board in September 2017 as a Future Director.
This appointment was extended in September 2018 for a further six months,
until June 2019.
Since her appointment, Nagaja’s strong retail, digital and customer
experience has been highly valued by the Spark Board. We were therefore
delighted that Nagaja has taken the next step in her governance career,
having been appointed to the New Zealand Post Board. She began this
appointment in March 2019.
Spark Board Chair Justine Smyth said “it’s been a privilege working with
Nagaja over the past 18-months, she’s contributed a huge amount to
discussions, sometimes helping us to see a completely different perspective
on a particular issue. We are delighted about her appointment to the NZ
Post Board and wish her all the best for that role.”
The Future Director programme is run by the New Zealand Institute of
Directors and aims to give talented people with an interest in corporate
governance the opportunity to observe and participate in boardroom
discussions for a 12-month period. These aspiring directors attend all board
meetings, although they do not have voting rights and are not involved in
decision-making.
Nagaja says her role as Future Director at Spark has been a great step in her
governance career.
“Sitting on the board of New Zealand’s largest digital services company was
an incredible experience and opportunity. I learned a lot from accomplished
leaders on the Board and management team of Spark and I look forward to
bringing this to my new role on the New Zealand Post Board.”
With Nagaja’s new appointment, her final Spark Board meeting was in April
2019. The Spark Board will consider the appointment of another Future
Director in the coming months.
News in brief
Spark launches kids watch that phones home
In November, Spark launched SPACETALK, a kids’ all-in-one
smartphone, watch and GPS device. The kids watch is designed for
children aged 5-12 years who are becoming more independent
but are not yet ready for a full functioning, expensive smartphone.
The watch is equipped with a wide range of practical features
including the ability to stay connected throughout the day via text
messages voice messages, calls and interactive emojis.
Mainfreight uses Spark’s first IoT Asset Tracking service
Kiwi businesses can now track valuable assets with Spark’s new
Internet of Things (IoT) Asset Tracking service. The service is
already providing New Zealand’s largest freight and logistics
company, Mainfreight, with crucial real-time data on the
segregation bins they use to transport hazardous goods.
Mainfreight’s CIO Kevin Drinkwater said before IoT, locating
valuable assets was very much a manual process with the team
undertaking stock takes around depots and sending reports
back to the office. By the time this happened the data was
already out of date.
“Now, we see GPS locations of bins mapped to one dashboard
and are alerted in real-time when something is where it shouldn’t
be or has been stationary for too long.”
Spark launches the broadband plan that flexes with you
We know broadband customers don’t always use the same
amount of data each month, so late last year Spark launched the
Unplan - which gives you the freedom to use more data when
you need to, and savings when you use less data. The plan gives
customers three pricing tiers based on actual data usage. You
can have as much data as you need for a fixed price, but then
also get the benefit of discounted pricing in months when your
data usage falls below 60GB or between 60GB and 120GB.
There is also a choice to include entertainment on your broadband
plan, with the option of Unplan Entertainment. This plan also has
three pricing tiers based on your usage and includes Lightbox
for the life of your plan, and Netflix for 6 months.
Every month, Unplan automatically moves you between
three price tiers based on your usage: $65 for less than
60GB, $75 for between 60GB and 120GB, and $85 for usage
above 120GB. Join Spark’s Unplan for 12 months today.
Unlimited on Fibre, restrictions on Wireless.
THE
UNPLAN
WITH YOU
BROADBAND PLAN THAT
NZ'S FIRST
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HOME
FLEXES
T&C’s apply. Not available in all areas and eligibility criteria applies.
Early termination fee applies. Ask us for more information.