Spark NZ Shareholder Newsletter

UPDATE
SHAREHOLDER
April 2021
Kia ora,
I hope you have been keeping
well as COVID-19 has continued to
challenge us across the globe.
In New Zealand, our borders remain
largely closed, Auckland has moved
into lockdown on three separate
occasions, and the rest of the
country has also faced periods of
heightened COVID-19 restrictions.
Once again, the critical importance
of our services has been front and centre, and each time our team
has adapted quickly – moving seamlessly to working remotely
or in a safe, socially distanced way, and keeping our customers
connected at a time when a digital connection is essential.
While New Zealand is in a fortunate position compared to many
other countries, border closures in particular have had an impact
on our wider economy, and Spark has not been immune from that.
In February we announced our financial results for H1 FY21,
where we saw revenues decline 1.5% - largely driven by the loss
of higher-margin mobile roaming revenue. The contraction of
broadband and prepaid markets - the result of 44,000 fewer
people migrating to New Zealand versus the first half of FY20 – also
had an impact. We also recognised a non-recurring provision to
refund historical wire maintenance charges during the half.
Despite this, our underlying performance remains strong. When
you strip out the impact of roaming revenue losses, we have strong
underlying momentum in mobile – with service revenues up 3.8%.
Cloud, security and service management revenues also grew by
4.6% year-on-year, as the new ways of working established during
COVID-19 lockdowns continue to support demand for business
transformation and digitisation services.
While our growth aspirations in the broadband market were
impacted by lower migration in the first half of FY21, our
longer-term wireless ambitions have not changed. There remains
a significant addressable market for wireless broadband, which
continues to grow as we roll out 5G – and we are now live
in Christchurch. Precision marketing is helping us to identify
customers who are best suited to wireless broadband – a strategy
that has been very successful in improving our marketing efficiency.
Our disciplined cost management saw our operating expenses
decrease 2.3%, offsetting revenue declines and holding our
EBITDAI steady.
Net profit after tax was down 11.4% - this was driven by an increase
in depreciation and amortisation charges resulting from the
shorter asset lives of new digital technologies, and an increase in
depreciation related to customer and property leases.
The implications of COVID-19 for Spark have become clearer
during the first half, with the overall FY21 EBITDAI impact
now expected to be $50 million, versus the original estimate
of $75 million.
As a result, we have narrowed our FY21 EBITDAI guidance range
which has now been set at $1,100 million to $1,130 million
[1]
, and
confirmed full year dividend guidance to the top end of the range at
25 cents per share. At our H1 FY21 results we announced an interim
dividend per share of 12.5 cents, 100% imputed, and will also
continue to operate the Dividend Re-investment Plan with a
2% discount.
We are now six months into our new three-year strategy,
which identifies four core capabilities that will make Spark truly
world-class: a simple, intuitive customer experience; deep customer
insights; smart automated network; and growth mindsets. We have
already made great progress in each of these areas – and you will
find more about our progress throughout this newsletter.
These capabilities will give us a competitive advantage across both
our established markets of wireless, broadband and cloud, and in
our future growth markets of IoT (internet of things), digital health
and sport.
Our team is focussed on closing out FY21 and delivering what we
said we would for you, our shareholders.
We expect FY21 to continue to present us with challenges, but our
people have shown a commitment and determination to deliver
for Spark customers that I am very proud of. On behalf of the
Leadership Squad and all our people, I would like to thank you for
your continued support in these difficult times. I wish you and your
families all the best in the coming months.
Ngā mihi
Jolie Hodson
Chief Executive
1
[1]
Previously $1,090 million to $1,130 million. Subject to no adverse change in operating outlook.

2
3
5G update
In February we were excited to launch 5G in central Christchurch.
Christchurch is now the sixth location in New Zealand to have
access to Spark’s 5G on both wireless broadband and mobile,
alongside Te Awamutu, New Plymouth, Palmerston North,
Dunedin and Auckland as well as six South Island towns who have
access to Spark’s 5G wireless broadband services.
Spark Technology Lead Renee Mateparae says the team is excited
to begin 2021 by launching 5G in the largest city in the South
Island. “We’ve come a long way since we launched our first 5G
service in September 2019 and are well on track to achieve
our goal of 90% 5G coverage by 2023, provided we secure the
necessary long-term rights to 5G spectrum. “We’re excited about
our plans for 2021 - as we deploy 5G to new locations it is great to
see real-life examples of people and businesses benefiting from
the faster speeds and low latency that 5G provides.”
Last year, the first of our 5G rollout, we worked with Toyota in
Palmerston North to provide virtual reality test drives; partnered
with Animation Research Limited to bring street art to life through
augmented reality in Dunedin; offered a glimpse into the future of
smart cities with Auckland Transport in Wynyard Quarter; helped
Kiwi businesses to build future 5G applications through the 5G
Starter Fund and introduced 5G to local businesses like Aon
Insurance to enable them to do what they do best.
We also teamed up with Emirates Team New Zealand to bring a
first-of-its-kind race experience to Auckland at Spark’s 5G Race
Zone showcasing how Spark 5G was powering ETNZ to defend
the 36th America’s Cup. The engaging space located at Auckland’s
Wynyard Quarter brought together the best of sailing and
technology in seven fully interactive zones, each showcasing the
different benefits of 5G – speed, low latency, and mass connectivity.
Making life easier for customers with Spark’s new
smartphone app
The Spark smartphone app was recently redesigned and rebuilt
from the ground up to make it a simpler, better experience for
our customers. Customers can use the app to keep track of their
usage, pay their bills, make changes to their plans, contact our
care team, and enter exclusive competitions and giveaways.
The app has been designed to make it more accessible, including
for customers with hearing or vision challenges, and will offer
a more personalised experience. Using individual customer
insights, the News Feed will showcase stories and benefits
tailored to each customer, based on their preferences and
requirements. And very soon, customers will be able to see what
value-added services like Netflix, Spotify, Spark Sport or Neon
they can activate, directly from the app itself.
22 million reasons to love Spark IoT
During the first half of FY21, Spark’s IoT connections grew 65%,
helped in part by a new brand campaign that brings to life the
real-life, tangible benefits of what IoT can do for a business.
The campaign focuses on 4 key products – asset tracking,
construction, temperature monitoring and water metering –
and illustrates the change that will be possible when 500,000
businesses and 22 million things are connected, which is what is
predicted to occur by 2021.
A great example of IoT in action is St John medical alarms,
which have traditionally relied on a customer’s landline for an
emergency call out. The latest version of the alarm is a medallion
which stays charged for up to a month and communicates
wirelessly to the contact centre, through the mobile network (with
the landline used as a back-up). For customers, this means as long
as they are within a mobile coverage area they can use their alarm
- even when they are outside mowing the lawn, spending time in
the garden, or in the community.
This is a great example of what IoT is all about – empowering
better decision making, balancing technology with human
interaction and delivering tangible and meaningful ways to run
more efficient operations.
New Zealand’s cricket teams have enjoyed one of their most
successful seasons on home soil and Spark Sport has been
bringing Kiwi cricket fans all the action, live and on-demand.
Spark Sport has streamed over 3 million hours of live cricket into
New Zealand since the season commenced in November.
Kiwis have welcomed the fresh, new look and the commentary
line-up including Scotty Stevenson, Sonia Gray, as well as
cricketing centurions Brendon McCullum, Stephen Fleming, Craig
McMillan and Rebecca Rolls, alongside fan favourites Frankie
Mackay, Katie Martin, Susie Bates and Grant Elliott.
Head of Spark Sport, Jeff Latch, says: “We are really happy with
how our subscribers are engaging with our content, and it’s great
to see so many watching on the go. Over 40% are watching on a
mobile device with the ability to cast and stream to a big screen at
home, watch on their smartphone at the beach or out and about
over summer.”
New Zealand White Ferns (left to right): Amanda Kerr, Hannah Rowe and Leigh KasperekSpark’s 5G Race Zone: An immersive insider experience for the fans
The latest medical alarms connect directly to St John
Spark Sport showcases successful summer of cricket
spark.co.nz/myspark

To find out more about Spark products and services, visit spark.co.nz or visit your nearest store.
SPA6129
4
Spark Foundation has launched a half-a-million-dollar initiative to
help address digital inequity in New Zealand by providing free
in-home internet access to eligible students in decile 1 high schools.
The ‘Ciena Jump for Students Fund’ is the result of a collaboration
between Spark and our partner Ciena. It will build on the work
Spark is already doing to further digital equity through Skinny
Jump – which provides low-cost wireless broadband to Kiwis who
find that cost is a barrier to having an internet connection at home.
As part of the new Fund, eligible students will be provided with a free
Skinny Jump wireless modem and broadband connection – including
150GB of free data per month, until the end of the school year.
Spark CEO Jolie Hodson says that as New Zealand transitions to more
digital ways of working, learning and connecting, Kiwis without an
internet connection at home are at a significant disadvantage.
“This is particularly acute for high school students, who need
access to the internet to learn and study and will be entering a
workforce that is increasingly digital. We are excited that Ciena
has come on board to help us accelerate the rollout of Jump and
enable students to experience the benefits that digital connectivity
provides,” says Hodson.
“We currently have over 11,000 homes connected through Skinny
Jump, a more than 100% increase since COVID-19 first hit, and our
goal is to have 35,000 connected by 2023.”
Ciena Jump for Students Fund launched to provide
free broadband to students in Decile 1 schools