Spark New Zealand Limited H2 FY21 Results
Spark New Zealand Limited
ARBN 050 611 277 Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand
MARKET RELEASE
18 August 2021
Spark New Zealand delivers to guidance despite ongoing
Covid-19 disruption, in first year of new strategy
• Top-line revenue decline driven by the loss of roaming revenues
• Strong underlying performance in mobile and cloud, security, and service management revenues
• Delivered FY21 EBITDAI
1
growth at the top end of the guidance range through disciplined cost management
• NPAT
2
decline driven by higher depreciation and amortisation costs and increase in tax expense
• Declared FY21 dividend of 25 cents per share, 100% imputed, supported by resilient free cash flow
• Accelerated 5G rollout and datacentre capacity expansion mark a significant investment into New Zealand’s
connectivity and resilience
Spark New Zealand (Spark) today announced that resilient revenues and disciplined cost reduction had
delivered EBITDAI growth of 1% to $1,124 million, towards the top end of the guidance range.
The loss of $38 million in roaming revenues led to a revenue decline of 0.8% to $3,593 million, masking a
strong underlying performance in mobile and cloud, security, and service management.
Mobile service revenue grew 0.5%, or 4.3% when adjusting for the impact of roaming, while mobile service
revenue market share grew 1.1 percentage points to 41.5%. Cloud, security, and service management revenue
grew 5.5%, as businesses continued to digitise.
The broadband market remained challenging, with continued competitive pressure and slower overall market
growth leading to a revenue decline of 1.5%. Wireless broadband growth was below target, however
momentum picked up in the final quarter with Spark finishing the year with connection growth of 19,000.
Spark New Zealand Chair Justine Smyth said: “The New Zealand economic recovery has been stronger than
expected, but with recent travel bubble pauses, uncertainty remains. Closed international borders continue to
impact Spark through the loss of roaming revenues, lower overall growth in some markets, and talent scarcity
within the technology sector.
“In this context, we’re pleased with the strong underlying growth we are experiencing in our core markets, and
in Spark’s ability to adapt at pace and execute disciplined cost management to deliver EBITDAI growth. This
resilience in customer demand for our core services has supported free cash flow and enabled us to maintain
the total FY21 dividend at 25 cents per share for our shareholders.”
NPAT declined by $36 million, or 8.6%, primarily driven by higher depreciation and amortisation costs due to
the shift to shorter asset lives and increased customer and commercial lease activity, as well as a $21 million
increase in tax expense as Spark cycles the one-off decrease in FY20
3
.
While the loss of roaming negatively impacted free cash flow, disciplined cost and capital management
mitigated the majority of the impact, with Spark generating $433 million of free cash flow
4
for the year.
Spark announced an H2 FY21 dividend per share of 12.5 cents, bringing the total FY21 dividend to 25 cents
per share, 100% imputed. Spark will continue to operate the Dividend Re-investment Plan for H2 FY21
5
.
1
Earnings before finance income and expense, income tax, depreciation, amortisation, and net investment income (EBITDAI) is a non-Generally Accepted Accounting
Practice performance measure that is defined and reconciled to net earnings in Spark New Zealand’s Financial Statements
2
Prior year net earnings have been restated to reflect a reduction in net earnings of $7 million for the amortisation of reacquired rights that were previously regarded as
indefinite life and therefore not amortised
3
A one-off decrease in tax expense was recorded in FY20 for depreciation allowances being reintroduced for commercial building structures, plus a higher proportion
of non-taxable gains
4
Spark’s free cash flow is defined as underlying free cash flow plus movements in working capital. This excludes dividends from Southern Cross; proceeds from asset
sales; payments for business acquisitions; and payments for mobile spectrum
5
Shares issued under the DRP will be issued at prevailing market price as determined around the time of issue.
Spark New Zealand Limited
ARBN 050 611 277 Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand
CEO Jolie Hodson said Spark was already seeing progress against its strategy translate into improved
customer experiences and growth in the market.
“We are simplifying our business to make it easier for our customers to interact with Spark. The number of
customer journeys completed digitally increased 32%
6
during the year, and we retired 210, or 30%, of our
legacy mobile and broadband plans.
“A key enabler of better customer experiences is having a deep understanding of what our customers need,
and when they need it, and we finished FY21 with a robust data capability that is providing us with that insight –
increasing our marketing efficiency by 16%.”
Spark continued to invest in the infrastructure underpinning its products and services during the year, with 5G
wireless broadband and mobile services launching in nine locations, rural connectivity expanding, and
improved automation and resilience of the optical transport network.
With the first phase of the Company’s infrastructure asset review complete, further significant infrastructure
investments are planned for FY22.
Jolie continued: “We have a clear view of the infrastructure assets that are currently critical to our competitive
advantage and resilience, and that we want to invest in – including the ‘active
7
’ components of our mobile
network, multi-access edge compute
8
, our critical network exchanges, and datacentre capacity.
“We have today announced an additional $35 million investment to accelerate our 5G rollout, bringing our total
investment in mobile connectivity to $125 million in FY22 and supporting us to deliver 90% population coverage
by the end of calendar year 2023, assuming the necessary spectrum is made available by the Government.
“We will be upgrading our Mayoral Drive exchange and intend to invest in approximately 10MW additional
capacity at our Takanini datacentre – which will make it the largest in New Zealand once completed. We are in
advanced negotiations to contract at least 60% of this capacity.”
The infrastructure review also identified assets that can be shared, such as the ‘passive
7
’ components of
Spark’s mobile network and fibre. Spark is actively exploring shared ownership models; however, discussions
are ongoing and there is no certainty that any transaction will proceed.
Spark continued to grow its position in future markets, with Spark Health supporting the digitisation of the
healthcare sector and delivering cloud, telecommunications, and collaboration revenue growth of 10.6%. IoT
connections grew to over 450,000, an increase of 83%, and Spark Sport delivered its first cricket season in
partnership with NZ Cricket, with 99.9% platform availability and positive reception to the new production
format.
Jolie pointed to the strength of Spark’s people in delivering the results: “We have a talented and passionate
team at Spark, and I am particularly proud of the progress we made building a high-performing and inclusive
culture during the year. We have invested significantly in learning and development to build a culture of
innovation and growth, we have grown engagement 10 points
9
, and we have made solid progress towards our
40/40/20 gender target – with 42% of senior roles outside the Board and Leadership Squad now held by
women.
“We continue to focus on how we can support the growth of the digital economy in New Zealand, which will be
a critical enabler of productivity and progress in a ‘Covid-normal’ world. We are investing in critical
infrastructure, working to build digital skills locally, including the digitisation of small businesses, helping to
improve digital equity, and supporting the establishment of a digital trust framework.”
6
Across sales and plan changes
7
Active assets include anything in the core network, as well as the radio equipment that creates the mobile network, including the antennas and their connection back to the core network. Passive
assets include the physical towers that support the active equipment, including standalone lattice towers, rooftops, and lamppost towers.
8
Multi-access edge compute reduces the physical distance from an end user to compute and networking service, reducing latency, and supporting new use cases that require real-time
performance to work e.g. cloud gaming
9
eNPS grew +10 from FY20 to 76
Spark New Zealand Limited
ARBN 050 611 277 Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand
Authorised by:
Al astair White
GM Capital Markets
- ENDS –
Media queries: Investor queries:
Lucy Fullarton Chante Mueller
Corporate Relations Lead Partner Head of Investor Relations
+64 (0) 21 070 6197 +64 (0) 27 469 3062
---
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Results for announcement to the market
Name of issuer Spark New Zealand Limited
Reporting Period 12 months to 30 June 2021
Previous Reporting Period 12 months to 30 June 2020
Currency NZD – New Zealand Dollar
Amount (000s) Percentage change
Revenue from continuing
operations
$3,593,000 -0.8%
Total Revenue $3,593,000 -0.8%
Net profit/(loss) from
continuing operations
$384,000 -8.6%
Total net profit/(loss) $384,000 -8.6%
Final Dividend
Amount per Quoted Equity
Security
NZD$0.12500000 (comprised only of an ordinary dividend)
Imputed amount per Quoted
Equity Security
NZD$0.04861111
Record Date 17 September 2021
Dividend Payment Date 1 October 2021
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
As at 30 June 2021
NZD$0.34
As at 30 June 2020
NZD$0.34
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Movements from the prior year are compared to restated
amounts for the 12 months ended 30 June 2020 following the
reassessment of useful lives of reacquired rights. The prior
comparable period for net tangible assets per Quoted Equity
Security is also based on restated amounts following the
reclassification of work in progress.
The change in Spark’s earnings before finance income and
expense, income tax, depreciation, amortisation and net
investment income (EBITDAI) is provided in the addendum.
Authority for this announcement
Name of person
authorised
to make this announcement
Stefan Knight, Finance Director (CFO)
Contact person for this
announcement
Chante Mueller, Head of Investor Relations
Contact phone number +64 (0) 27 469 3062
Contact email address investor-info@spark.co.nz
Date of release through MAP
18 August 2021
Audited financial statements accompany this announcement.
Addendum:
Amount (000s) Percentage
change
Earnings before finance income and expense, income tax,
depreciation, amortisation and net investment income
(EBITDAI)
NZD$1,124,000 1.0%
---
Distribution Notice
Section 1: Issuer information
Name of issuer Spark New Zealand Limited
Financial product name/description Ordinary shares
NZX ticker code SPK
ISIN (If unknown, check on NZX
website)
NZ TELE0001S4
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies Yes
Record date 17 September 2021
Ex-Date (one business day before the
Record Date)
16 September 2021
Payment date (and allotment date for
DRP)
1 October 2021 AUST & NZ;
15 October 2021 USA
Total monies associated with the
distribution
NZD $233,390,637
(1,867,125,093 shares @ $0.125 per share)
Source of distribution (for example,
retained earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution NZD$0.17361111
Gross taxable amount NZD$0.17361111
Total cash distribution NZD$0.12500000
Excluded amount (applicable to listed
PIEs)
N/A
Supplementary distribution amount NZD$0.02205882
Section 3: Imputation credits and Resident Withholding Tax
Is the distribution imputed Fully imputed
Partial imputation
No imputation
If fully or partially imputed, please
state imputation rate as % applied
28%
Imputation tax credits per financial
product
NZD$0.04861111
Resident Withholding Tax per
financial product
NZD$0.00868056
Section 4: Distribution re-investment plan
DRP % discount (if any)
0%
Start date and end date for
determining market price for DRP
16 September 2021 22 September 2021
Date strike price to be announced (if
not available at this time)
23 September 2021
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
New Issue
DRP strike price per financial product
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
20 September 2021
Section 5: Authority for this announcement
Name of person
authorised to make
this announcement
Stefan Knight, Finance Director (CFO)
Contact person for this
announcement
Chante Mueller, Head of Investor Relations
Contact phone number +64 (0) 27 469 3062
Contact email address investor-info@spark.co.nz
Date of release through MAP
18 August 2021
---
Moving forward
Spark Annual Report 2021
WHAKAMUA
WHAKAAHU
Look around you.
A lot has changed.
The pandemic is still about and we’re not
out of the woods yet, but we’re looking
forward to what lies ahead. It hasn’t been
easy, but we’ve learned to adapt to
rapidly changing alert levels, and with the
vaccine rollout underway, there is change
on the horizon.
Covid-19 has accelerated new ways of
working, learning, connecting, and the role
technology plays in our lives. As we face
into the greatest challenge of our
generation, climate change, we will need to
harness the power of technology to solve
new problems and do things differently.
Both Covid-19 and climate change bring
the need for transformative, system-wide
change across New Zealand, and bold,
decisive action – so we can build back
better and accelerate our progress as a
nation. We’re ready to play our part to
create a low carbon, high-tech Aotearoa,
and a positive digital future for all.
1
Spark New Zealand Annual Report 2021
Whakaahu whakamua
FY21 highlights
Improved
digital
customer
experiences
leading to a 32%
increase in customer
journeys taken digitally
across sales and
plan changes.
Mobile
revenue
grew $23M
despite the loss of roaming
revenues. Pay monthly
mobile connections grew
by 56,000.
5G rollout
moving
at pace
with 5G wireless
broadband and mobile
services now available
in nine locations,
including Auckland,
Hamilton, Christchurch,
Dunedin, and
Palmerston North.
Cloud,
security,
& service
management
revenue
grew $23m
as we supported
businesses to digitise
and transform.
2
Spark New Zealand Annual Report 2021
FY21 highlights
Set a verified
science-
based
emissions
reduction
target
to support global
climate change action.
Employee
engagement
up 10 points
with our eNPS at +76.
IoT
connections
grew 83%
to over 450,000, with the
launch of our Innovation
Studio driving the adoption
of new technologies.
Skinny Jump
connections
grew 58%
to 15,121, helping to lift
digital equity by
connecting those in need.
3
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Contents
Whakaahu whakamua
About this report
5
How we create value
6
Spark’s operations
8
Spark performance snapshot FY21
9
Chair and CEO review
10
Our strategy
14
Our performance
16
Creating value for our customers
20
Creating value through our network & technology
28
Creating value with our people
32
Creating value for our environment
38
Creating value for our communities
42
Our Board
46
Our Leadership Squad
50
Our governance and risk management
52
Our suppliers
57
Leadership and Board remuneration
58
Financial statements
Financial statements
62
Notes to the financial statements
66
Independent auditor's report
105
Other information
Corporate governance disclosures
109
Spark managing risk framework roles and responsibilities
118
Stakeholder engagement
119
Global Reporting Initiative (GRI) content index
120
Glossary
123
Contact details
124
4
Spark New Zealand Annual Report 2021
Contents
About this report
We have evolved our approach to reporting over the past three years to
show an integrated view of our performance across financial and
non-financial measures.
• Our 2019 Annual Report combined our financial statements with
non-financial performance measures, adopting the Global Reporting
Initiative (GRI) Standards, the most widely used global sustainability
reporting standard.
• Our 2020 Annual Report also adopted the International <IR>
Framework for integrated reporting. Integrated reporting considers
the creation of value over the short, medium, and long term, thinking
holistically about the resources and relationships the organisation
uses or affects, and the dependencies and trade-offs between them
as value is created.
• This 2021 report is prepared in accordance with the International
<IR> Framework and with the GRI Core Option. It also incorporates
climate risk disclosure aligned to the recommendations of the Task
Force on Climate-related Financial Disclosures (TCFD).
We have not sought external assurance over the non-financial information
in this report. We intend to adopt external assurance of our key
sustainability measures, including our emissions reporting, in FY22.
This report covers the activities of Spark New Zealand Limited and its
subsidiaries. The report is for the period 1 July 2020 to 30 June 2021.
This report is dated 18 August 2021 and is signed on behalf of the Board
of Spark New Zealand Limited by Justine Smyth, Chair and Charles Sitch,
Chair Audit and Risk Management Committee.
Justine Smyth, CNZM
Chair
Charles Sitch
Chair Audit and Risk
Management Committee
Our Te Korowai Tupu
Strategy
Te Korowai Tupu (our Māori Strategy) is
about finding the shared space between
Te Ao Māori and the corporate world.
In this spirit of partnership, threads of
Te Korowai Tupu have been woven
throughout this report and content
relating to this strategy has been
highlighted using the Kora Aotearoa
(Spark New Zealand) logo.
Relates to
Te Korowai Tupu
Key dates
Annual Meeting 05 November 2021
FY22 half-year results announcement 23 February 2022
FY22 year-end results announcement 17 August 2022
5
Whakaahu whakamua
Spark New Zealand Annual Report 2021
98
Connections matterSpark New Zealand Annual Report 2020
Spark New Zealand Annual Report 2020
How we create value
How we create value
WHAT WE RELY ON
OUR BUSINESS MODEL
Āwhinatia ngā tāngata katoa o Aotearoa kia
matomato te tipu i te ao matihiko.
TO HELP
WIN BIG
IN A DIGITAL WORLD
Our Values
Whakamana, We Empower
Matomato, We Succeed Together
Tūhono, We Connect
Māia, We are Bold
Our customers
Social capital
Consumers and organisations that are
enabled by our products and services
Financial capital
Financial capital
Equity, debt and cash generated
through our operations
Our network
and technology
Manufactured + intellectual capital
Our mobile sites, data networks, systems,
processes and digital services capability
Our people
Human + intellectual capital
Engaged, adaptive and inclusive teams
that are the heart of our business
Our environment
Natural capital
Energy, materials and impacts
of our operations
Our communities
Social + human capital
Our communities around New Zealand and the
communities across our global supply chain
A culture that
develops and
empowers
our people
Our Purpose
6
Spark New Zealand Annual Report 2021
How we create value
OUTPUTS FY21
Enhanced network
and technology
• 40% increase in wireless broadband traffic
• 10% increase in mobile calling at peak
• 5G rolling out at pace
See page 28
Supporting our customers’ own business models
and their value creation for New Zealand
Connected customers
• 2,421 million mobile connections
• 701,000 broadband connections
• Increase in customer interaction Net Promoter Score
See page 21
Financial returns
• $3,593 million operating revenues and other gains
• $384 million net earnings
• 25 cents per share dividend
See page 16
Engaged and inclusive teams
• Positive growth in employee
Net Promoter Score to +76
• 50/50 gender split on Leadership Squad and
57% female and 43% male on the Board
• 42% women in senior leadership roles
• Investment in training
See page 32
Environmental impact
• Net emissions 25.9 kilotonnes CO
2
-e
• 638 tonnes e-waste recovered
• 28,715 mobiles recycled
See page 38
Supported communities
• Skinny Jump reaching 15,121
high-need households
• 445 connections under the Digital
Marae Initiative
See page 42
98
Connections matterSpark New Zealand Annual Report 2020
Spark New Zealand Annual Report 2020
How we create value
98
Connections matterSpark New Zealand Annual Report 2020
Spark New Zealand Annual Report 2020
How we create value
Providing leading
products and
services that
connect and enable
New Zealanders
Innovation to create
value for Spark and
our customers
Investment in
resilient, adaptable
infrastructure for
New Zealand’s future
OUTCOMES
7
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Fibre Transport Network
Data Centres
Earth Station Satellite Link
Corporate Offices
Tasman Global Access Cable
Connections to Australia
Connection to USA
Southern Cross Cable
Spark is New Zealand’s largest telecommunications and
digital services company. Our customers range from
consumers and households to small businesses, government,
and large enterprises. Across all our services – mobile,
broadband, cloud services, digital services, and entertainment
– we have relevance for almost every New Zealander.
In addition to our Spark brand, we operate
the following brands and businesses
ConsumerBusinessOther brandsGrowth markets
Spark’s operations
98%
of New Zealanders
reached by our
4G network
1,500
mobile sites
supporting more
than 2.4 million
mobile
connections
67
retail
stores
24
regional
business hubs
5,083
1
employees
18
datacentres
701,000
broadband
connections
1. Total headcount including full-time,
part-time and fixed-term employees.
8
Spark New Zealand Annual Report 2021
Spark’s operations
1 Earnings before finance income and expense, income tax,
depreciation, amortisation and net investment income
(EBITDAI) and capital expenditure are non-Generally
Accepted Accounting Practice (non-GAAP) measures. These
measures are defined and reconciled in note 2.5 of the
financial statements. Capital expenditure excludes spectrum
additions of $51 million and $3 million of finance lease
receivable assets being reclassified to property, plant and
equipment due to lease terminations.
2 Prior year net earnings have been restated to reflect a
reduction in net earnings of $7 million for the amortisation of
reacquired rights that were previously regarded as indefinite
life and therefore not amortised.
3 Interaction Net Promoter Score, a measure of customer
engagement.
4 FY20 iNPS has been restated to +22 as detailed on page 58.
5 Employee Net Promoter Score, a measure of employee
engagement.
Spark performance snapshot FY21
Operating revenues
and other gains
$3,593m
0.8%
EBITDAI
1
$1,124m
1.0%
Net earnings
$384m
8.6%
2
Mobile revenue
$1,311m
1.8%
Broadband revenue
$670m
1.5%
Cloud security and service
management revenue
$443m
5.5%
Voice revenue
$308m
20.2%
Capital expenditure
1
$354m
5.3%
Employee NPS
5
+76
10 point s
Consumer and
small business iNPS
3
+23
1 point
4
9
Whakaahu whakamua
Spark New Zealand Annual Report 2021
While significant uncertainty remains as a
result of Covid-19, overall, the New Zealand
economy fared better than expected.
Unemployment remains low and GDP is
back in growth. We recognise however that
some sectors have been more impacted than
others and recent pauses to the trans-Tasman
bubble have demonstrated how quickly our
situation can change.
For Spark, the impacts of Covid-19 on our
business persist in some areas. Sustained
border closures continue to impact roaming
revenues and have contributed to lower
overall growth in the broadband and
prepaid markets.
Reduced migration has also contributed to
labour shortages within the technology
sector. We are working collaboratively with
industry groups and tertiary institutions to
create pathways to employment that will help
meet our demand in the future, but we
anticipate the pressure to remain in the
short-term.
Within this context, our purpose – Āwhinatia
ngā tangata katoa o Aotearoa, kia matomato
te tipu i te ao matihiko – to help all of
New Zealand win big in a digital world – is
more important than ever before as the shift
from physical to digital accelerates.
We have continued to create a culture of
inclusion and invested in the development
and wellbeing of our people. This has grown
engagement, with our eNPS increasing 10
points to +76.
Over the past year Spark embarked on its new three-year
strategy, with a clear focus on building the core capabilities
that will fuel our growth in our established markets and those
of the future.
Tēnā koutou
Chair and CEO review
Justine Smyth, Chair (right) and
Jolie Hodson, Chief Executive (left)
Moving forward
10
Spark New Zealand Annual Report 2021
Chair and CEO review
With a high-performing and highly engaged
team, and a common purpose, we have been
able to maintain our momentum in key
markets and adapt at pace to our changing
competitive landscape – delivering EBITDAI
growth towards the top end of our
guidance range.
Our FY21 performance
The loss of $38 million in roaming revenues
led to a revenue decline of 0.8% to $3,593
million, masking a strong underlying
performance in mobile and cloud, security,
and service management.
Mobile service revenue grew 0.5%, or 4.3%
when adjusting for the impact of roaming,
while mobile service revenue market share
grew 1.1 percentage points to 41.5%.
Our cloud, security, and service
management revenue grew 5.5%, with
demand increasing from businesses looking
to digitise and transform. We were proud to
support our customers and stand behind
some of the most important events and
services New Zealanders relied on this year –
including Whakarongorau Aotearoa’s
Covid-19 hotline, the digital delivery of APEC,
and the Marae Digital Connectivity Initiative.
In broadband our revenue declined 1.5% in a
market that remains highly competitive, with
continued pricing pressure and lower overall
market growth. Our wireless broadband
performance was below target; however,
momentum picked up in the final quarter and
we finished the year with connection growth
of 19,000. With a focus on maintaining our
base, we remain the number one broadband
provider in the market.
We continue to grow our position in future
markets. Spark Health is supporting the
digital transformation of the New Zealand
healthcare sector, and delivered cloud,
telecommunications, and collaboration
revenue growth of 10.6% during the year.
We grew our IoT connections to over 450,000
– an increase of 83% – and Spark Sport
delivered its first cricket season in partnership
with New Zealand Cricket, with 99.9%
platform availability and widespread positive
reception to our production.
In FY22 we have an ambition to return to
revenue growth through continued strong
performance in established markets and
accelerating growth in future markets.
Operating expenses decreased $41 million,
or 1.6%, due to our cost out programme,
lower bad debt expense as the economy
recovered faster than anticipated, lower
marketing expenses, and reduced
travel costs.
With our long-term focus on disciplined cost
reduction, EBITDAI grew 1% to $1,124 million,
towards the top end of the guidance range.
NPAT declined by $36 million, or 8.6%,
primarily driven by higher depreciation and
amortisation costs due to the shift to shorter
asset lives and increased customer and
commercial lease activity, as well as a $21
million increase in tax expense as we cycle
through the one-off decrease experienced in
FY20 when depreciation allowances were
reintroduced for commercial building
structures.
With resilient customer demand for our core
services during ongoing Covid-19
uncertainty, we generated $433 million of
free cash flow, which supported a total FY21
dividend at 25 cents per share, 100%
imputed, for our shareholders.
Delivering the highest
value from our
infrastructure assets
At our half year results we announced a
review of our infrastructure assets to drive
greater capital efficiency, increased
resilience, and better experiences for
our customers.
We have completed the first phase of this
review, and now have a clear view of the
infrastructure assets that are currently
important for competitive advantage and
resilience, that we want to invest in. These
include the ‘active’ components of our
mobile network, multi-access edge compute,
our critical network exchanges, and
datacentre capacity.
We have announced an additional $35
million investment to accelerate our 5G
rollout, bringing our total investment in
mobile connectivity to $125 million in FY22
and supporting us to deliver 90% population
coverage by the end of calendar year 2023,
assuming the necessary spectrum is
made available.
We will be upgrading our Mayoral Drive
exchange and intend to invest in
approximately 10MW of additional capacity
at our Takanini datacentre – which will make it
the largest in New Zealand once completed.
We are in advanced negotiations to contract
at least 60% of this capacity.
For assets that can be shared, such as the
‘passive’ components of our mobile network
and fibre, we are actively exploring shared
$1,124M
EBITDAI grew 1% to $1,124
million, towards the top end of the
guidance range
41.5%
Mobile service revenue
market share up 1.1
percentage points to 41.5%
11
Whakaahu whakamua
Spark New Zealand Annual Report 2021
ownership models; however, discussions are
ongoing and there is no certainty that any
transaction will proceed.
Clear progress against our
strategy
We are now a year into our three-year
strategy to FY23, and we are already seeing
our progress against our core capabilities
translate into better experiences for our
customers and growth in the market.
We are a simpler business than a year ago,
with the number of customer journeys
completed digitally across sales and plan
changes increasing 32% and 210 legacy
mobile and broadband plans now retired. A
key enabler of better customer experiences is
having a deep understanding of what our
customers need, and when they need it, and
we finished FY21 with a robust data capability
that is providing us with that insight –
increasing our marketing efficiency by 16%.
We continued our 5G rollout at pace, with
services for both wireless broadband and
mobile now live in nine locations, including
major centres such as Auckland, Christchurch,
Dunedin, and Hamilton.
We have made significant progress creating a
culture of belonging where our people lean
into challenges, champion the customer, and
adapt at pace. Alongside engagement we
grew our Agile maturity, with 86% of squads
with a measure greater than 3.5 out of 5. To
further fuel our Agility, we have focused on
building a culture of innovation, and
opportunities for progression through
comprehensive learning experiences.
The health and safety of our people is always
a priority. No Spark employees or contractors
suffered serious injury or death over the year,
and our TRIFR
1
was 3.69 for FY21, compared
to 4.11 in FY20. The external review of our
health and safety performance by IMPAC
demonstrated good progress against our
Gold Standards.
We continued to embed diversity and
inclusion into our business. We have been
intentional in weaving Te Korowai Tupu, our
Māori Strategy, throughout our business, and
our people continue to embrace our Blue
Heart Kaupapa, to celebrate diversity. We
have made strong progress against our
40/40/20 gender target – with 42% of senior
roles outside our Board and Leadership
Squad now held by women.
Our median pay gap has increased slightly to
our FY19 starting position of -28%, compared
to -26% in FY20. The driver of this difference
is the makeup of New Zealand’s technology
sector, which has a significantly higher
proportion of men than women, and this
challenge was exacerbated in recent years as
talent scarcity increased. This will be a focus
in FY22.
Supporting the growth of
Aotearoa's digital economy
Covid-19 continued to highlight the critical
importance of the digital economy in
Aotearoa.
Modernising our economy and making better
use of technology to grow productivity and
transition our workforce to smarter ways of
working will deliver clear and compelling
benefits. We believe we should be focusing
on four key areas – smart infrastructure
investments; helping to build digital skills
within New Zealand, including through the
digitisation of small businesses; taking
meaningful steps towards digital equity; and
establishing a digital trust framework.
We launched a new Innovation Studio in
Auckland to showcase use cases for
emerging technologies like 5G and IoT,
supporting Kiwi businesses to bridge the
gap between understanding and action and
harness technology to adapt, transform,
and grow.
We joined the Digital Boost Alliance – a
collaboration between the Ministry of
Business, Innovation and Employment (MBIE)
and private sector organisations – to
accelerate the use of digital business tools and
new technologies by small businesses across
the country.
Our subsidiary MATTR is leading the
conversation on digital trust in Aotearoa and
globally and making a significant contribution
to the global mahi on the next generation of
internet standards.
And through the work of the Spark
Foundation, we continue to champion digital
equity by focusing on digital access, digital
skills and pathways, and digital wellbeing.
We grew connections to our not-for-profit
wireless broadband product, Skinny Jump,
to 15,121 – a 58% increase on FY20.
Supporting Aotearoa’s
climate change ambitions
We have matured our approach to
sustainability in FY21 and continue to improve
our environmental, social, and governance
performance.
We undertook a significant programme of
work to establish and verify an emissions
reduction target through the Science Based
Target initiative (SBTi). This ensures we are
supporting global efforts to keep warming
below 1.5 degrees. We commit to reduce our
absolute Scope 1 and 2 GHG emissions by
56% by FY30, from a FY20 base year, and will
focus on our supply chain to ensure that at
least 70% of our suppliers by spend for
purchased goods and services and capital
goods have science-based targets in place
by FY26.
Chair and CEO review
1 Total Recordable Incident Frequency Rate.
12
Spark New Zealand Annual Report 2021
Chair and CEO review
This is an ambitious target, but achievable
over time. We expect to see efficiency gains
as we decommission legacy equipment such
as the PSTN, shift to electric vehicles, and
optimise our office footprint, which will be
offset by the rollout of our 5G network,
expanded datacentre operations and
investment in our core infrastructure.
Electricity accounts for over 80% of our
emissions and we are therefore highly reliant
on the decarbonisation of the national grid.
As is the case for our peers both locally and
globally, the transition to renewable electricity
production is critical to our ability to meet our
reduction target.
Thank you
We are both personally very proud of how
Spark has responded to another unique and
challenging year. This would not have been
possible without the dedication and hard
work of our people and the support of our
customers, suppliers, and partners – and of
course our shareholders.
Spark is an enabling business, which means
our success is measured in the success of
others. We will grow by helping our
customers do what they do best. In the
coming year, as New Zealand looks to rebuild
and transform our economy, we have an
opportunity to accelerate into what we know
will be an increasingly digital future. We are
ready to move forward and support
New Zealand to build back better.
Noho ora mai
Justine Smyth, CNZM
Chair
Jolie Hodson
Chief Executive
13
Whakaahu whakamua
Spark New Zealand Annual Report 2021
14
Spark New Zealand Annual Report 2021
Our strategy
Our strategy
During the year we launched our three-year
strategy, which sets out our ambitions for
FY23 and how we will grow in our
established markets of wireless, broadband,
and cloud, and accelerate in the markets that
we intend to be a bigger part of our business
in the future – including digital health, IoT,
and sport.
SPARK’S
PLAN ON A PAGE
Our strategy identifies four world-class
capabilities that will give us a sustainable
competitive advantage:
1. Simple intuitive customer
experiences
We will offer customers a simple range of
modular products, and customer interactions
with Spark that “just work”. Our customer
journeys and internal processes will be
simple, intuitive, and primarily digital.
2. Deep customer insights
We will offer customers the right products at
the right time, by using data to drive our
decision-making.
3. Automated smart
network
Working towards our ambition of
unconstrained capacity across high quality
and low latency networks, supporting the
growing demand for data from
our customers.
4. Growth Mindsets
Our people will lean into challenges,
champion the customer, and adapt at pace.
Our ambition for FY23:
• A primarily wireless business, with
approximately 80% of our customer
relationships on wireless technology
(across mobile and broadband).
• ‘Digitally native’ – meaning our
customers will predominantly choose
digital channels and we will deliver the
same consistent experience no matter
how they choose to engage with us.
• A leading cloud provider, with expertise
in on-shore and off-shore cloud
platforms, experience in helping large
organisations migrate sizeable
workloads successfully, expert in-
country support and service desk
capabilities, and ongoing digital
transformation consultation services.
• Delivering unconstrained capacity
across high quality and low latency
networks, with 5G and IoT
deployed nationwide.
• A top decile, inclusive culture, where all
our people feel they can bring their full
selves to work each day.
A positive digital future for all of New Zealand
15
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Our 3 Year Goals
• Brand Strength
• Improve Customer
Engagement (iNPS)
• Grow Employee
Engagement (eNPS)
• Sustainable Free Cash Flow
Growth and Top Decile TSR
• Best Cost
• Lift Digital Equity
Our Values
• Whakamana, We Empower
• Matomato,
We Succeed Together
• Tūhono, We Connect
• Māia, We are Bold
Our Strategic Pillars
• World Class Capabilities
and Culture
• Grow Established Markets
• Accelerate Future Markets
• A Positive Digital Future
for all of NZ
Āwhinatia ngā tangata katoa o Aotearoa kia
matomato te tipu i te ao matihiko.
Our Purpose
Our strategy includes our commitment to
sustainability, and improving our
environmental, social, and governance
performance. Our ambition is to create
A positive digital future for all of New Zealand,
with clear focus areas outlined in our
Sustainability Framework and Māori Strategy.
Spark’s Sustainability Framework
Our Sustainability Framework guides how we
will harness the power of technology to
create a positive digital future for all of New
Zealand. We will do this by ensuring that we
are environmentally, financially, and socially
sustainable ourselves; doing our part to help
New Zealand transform to a high-productivity,
low-carbon economy; and by championing
digital equity.
Spark’s Māori Strategy
Te Korowai Tupu o Kora Aotearoa (the
cloak of growth of Spark New Zealand) is
inspired, driven, and led by kawa
(protocol), tikanga (process), and
kaupapa Māori. It takes the threads of a
tangata whenua world view that can be
woven across Kora Aotearoa – into our
strategic pillars, business strategies, Spark
values and shared Māori values to
embrace the physical and spiritual nature
of te ao Māori.
Our performance
1 EBITDAI is a non-Generally Accepted Accounting Practice (non-GAAP) measure
and is not comparable to the New Zealand Equivalents to International
Financial Reporting Standards (NZ IFRS) measures. This measure is defined in
note 2.5 of the financial statements.
2 Endless plans are Spark’s mobile plans with unlimited calling minutes, unlimited
SMS and an allowance of data to use at the maximum available speed, after
which they are able to continue using mobile data but at a reduced speed.
Operating revenues and other gains
• Mobile revenue growth of $23 million, or 1.8%, has been
driven by non-service revenue which has increased by
$19 million, or 4.3%, due to increased handset and
accessories revenue. Service revenue has increased by
$4 million, or 0.5%, due to pay monthly connection growth
and existing customers transferring to our Endless plans
2
.
These were largely offset by declines in outbound roaming
revenue of $31 million due to ongoing Covid-19 travel
restrictions and border closures. Additionally, included in
non-service revenue was a decline of $7 million in inbound
roaming revenue.
• Cloud, security and service management revenue growth of
$23 million, or 5.5%, was driven largely by strong growth in
annuity revenues and service management revenues.
• Voice revenues declined due to a combination of continued
connection losses as voice becomes a smaller part of the
business, lower voice usage of existing customers, and
non-recurring refunds of $16 million for historic wire
maintenance charges.
• Other gains of $28 million, down $7 million from FY20, were
mainly generated from the sale of mobile network
equipment and gains on lease modifications as we
renegotiated property leases.
$ MILLION
MOBILE
BROADBAND
VOICE
CLOUD, SECURITY
AND SERVICE
MANAGEMENT
PROCUREMENT
AND PARTNERS
MANAGED DATA,
NETWORKS
AND SERVICES
OTHER OPERATING
REVENUES AND
OTHER GAINS
FY21
FY20
400
600
800
1,000
1,200
1,400
200
0
$3,593m 0.8% year-on-year
EBITDAI
1
$1,124m
1.0%
16
Spark New Zealand Annual Report 2021
Our performance
300
325
350
375
400
425
450
475
500
525
550
1500
1550
1600
$ MILLION
PRODUCT
COSTS
LABOUROTHER
FY21
FY20
Operating expenses
• Product costs decreased by $4 million, driven by declines in
voice and in broadband as our wireless base grew. Other
product costs also fell as the prior year included costs for
Lightbox which has been divested. However these declines
were mostly offset by increased costs in mobile and cloud,
security and service management that supported our
revenue growth.
• Labour cost reduction of $20 million, or 3.9%, was due to a
combination of Spark needing fewer employees and
contractors, as services transition to digital and customers
can access an expanded range of self-service options.
• Other operating expenses decreased by $17 million, or
4.2%, due to lower bad debt expense as the predicted
economic impacts of Covid-19 were less than expected,
lower marketing expenses, and reduced travel costs. This
was partially offset by increased expenditure on direct
contractors for projects and increased repairs and
maintenance on cell towers.
$2,469m 1.6% year-on-year
Other
• Depreciation and amortisation was $13 million higher for
property, plant, and equipment and intangibles, reflecting
shorter asset lives, and $22 million higher for right-of-use
assets and leased customer equipment assets due to
increased customer lease activity and property leases.
• Net finance expense decreased by $11 million due to
lower interest rates on debt and lower interest expense on
leases modified or entered into in the year.
• Tax expense increased by $21 million largely due to one-off
decreases in tax expense recorded in the prior year for
depreciation allowances being reintroduced for
commercial building structures, plus a higher proportion of
non-taxable gains.
0
100
200
300
400
500
600
DEPRECIATION
AND AMORTISATION
NET FINANCE
EXPENSE
TAX
EXPENSE
$ MILLION
FY21
FY20
1 Prior year net earnings and earnings per share have been restated to reflect a
reduction in net earnings of $7 million for the amortisation of reacquired rights
that were previously regarded as indefinite life and therefore not amortised.
Net earnings
$384m
8.6%
1
Earnings per share
20.7cents
9.6%
1
Dividends per share
25.0cents
No change
17
Whakaahu whakamua
Spark New Zealand Annual Report 2021
800
820
840
860
880
900
920
$ MILLION
PAYMENTS FOR
INCOME TAX
FY20
RECEIPTS FROM
CUSTOMERS
RECEIPTS
FROM INTEREST
PAYMENTS FOR INTEREST
ON LEASED CUSTOMER
EQUIPMENT ASSETS
PAYMENTS FOR
INTEREST ON DEBT
PAYMENTS
FOR INTEREST
ON LEASES
PAYMENTS TO
SUPPLIERS AND
EMPLOYEES
FY21
Operating cash flows
$858m 5.0%
Cash flows
• Operating cash flows decreased by $45 million, with the
primary driver being a $48 million year-on-year increase in
tax payments due to an increase in provisional tax paid
during the period. Lower receipts from customers were
largely offset by lower payments to suppliers and employees
in line with movements in operating revenues and expenses
relative to last year.
• Investing cash outflows were $23 million lower than the prior
year due to fewer contributions to long-term investments.
• Financing cash outflows decreased by $42 million as a result
of lower payments for dividends due to uptake of the
dividend reinvestment plan, partially offset by net
repayments of debt, compared to net proceeds in the
prior year.
20212020
YEAR ENDED 30 JUNE$M$M
Net cash flows from operating activities858903
Net cash flows from investing activities(388)(411)
Net cash flows from financing activities(451)(493)
Net cash flows19(1)
18
Spark New Zealand Annual Report 2021
Our performance
1 Capital expenditure is a non-GAAP measure and is defined in note 2.5 of the
financial statements.
Key capital expenditure projects for the year included:
• Continued investment in Spark’s mobile core and radio
access network (RAN) delivering an uplift in network capacity
and coverage and, through the 5G rollout, faster home
wireless broadband and mobile speeds.
• IT systems investment included lifecycle investment and
licensing for internal IT systems, enhancements to products
and IT systems to improve the customer experience and
work to integrate the new enterprise resource planning
solution into Spark systems.
• Plant, fixed network and core sustain included investment in
the fibre build programme, Optical Transport Network
(OTN), fixed network broadband and Carrier Ethernet
expansions to meet customer demand for services and
traffic growth across the network, as well as various
investments in Spark-owned properties; FY21 also saw the
introduction of OTN 2.0, which provides more resilient
technology and significant capacity increases.
• Continued investment in the converged communication
network (CCN), advancing our exit of the legacy PSTN
network, will enable us to deliver IP-based voice services in
the future.
This excludes Spectrum additions of $51 million and $3 million
of property, plant and equipment additions from finance lease
receivable terminations.
$354m
Capital expenditure
1
Capital expenditure to operating revenues
9.9% (FY20 10.3%)
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$
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4
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$
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$
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7
M
$
9
M
$
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0
6
M
$
1
2
2
M
19
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Creating value for
Our customers
As New Zealand’s largest
telecommunications and digital services
company, we have relevance for almost
every New Zealander. Our services span
mobile, broadband, IT and managed services
(including cloud services and security), and
sports streaming. Our customers are
individuals and households through to small
businesses, government agencies, and large
enterprises.
We want to support New Zealanders as our
country recovers from the impacts of
Covid-19 and transitions to a high-
productivity, low-carbon economy. We will
connect and empower our customers,
supporting them to become more productive
and sustainable through technology.
Customer experience
Over the course of FY21, we further
embedded our ‘Unified Frontline’ operating
model. This is an approach to customer
experience which sees our customer care and
retail teams move between different
customer touchpoints (such as online chat,
call centres or retail stores) depending on
where the customer demand is at the time. It
offers our customers skilled assistance
through a channel that works best for them,
builds the capabilities of our team members,
and makes the best use of our customer
care resources.
We launched the next generation of our
MySpark App – the remote control to your life
with Spark – alongside a range of new digital
features. We now have 600,000 unique
MySpark App users, completing 3.6 million
interactions per month.
When combined with a broader shift of
customers towards digital self-service
interactions, we saw a 32% increase in
customer journeys taken digitally across sales
and plan changes during the year. This
delivered a corresponding 4% decrease in
customer interactions with our teams through
call centres or online messaging. Our
self-service channels empower customers by
giving them direct access to trouble-shooting
information where and when they need it,
without having to wait for assistance from a
team member.
As a result of customer feedback, we
enhanced our messaging functionality to
enable customers to contact Spark via a
messaging service of their choice – such as
Supporting our customers’ own
business models and their value
creation for New Zealand
20
Spark New Zealand Annual Report 2021
Creating value for Our customers
the MySpark app, WhatsApp, Facebook
Messenger, iMessage or Google chat.
We continue to invest in our in-store
experience with the opening of new stores in
Auckland’s Commercial Bay, Cuba Mall in
Wellington, and Palmerston North.
An enabler of better customer experiences is
having a deep understanding of our
customers and their needs. In FY21 we
developed a robust data capability that
generates insights into what New Zealanders
want and need from our products and allows
us to improve the relevance of our offers. We
developed approximately 22 core machine
learning models that match our products and
services to the customers who are most likely
to want them, which supported a 16%
improvement year-on-year in our
marketing efficiency.
Our Consumer and SME iNPS is the measure
we use to determine the level of satisfaction
our customers have with their interactions
with Spark. At the end of FY21 our iNPS was
+23 which is a change of +1 on FY20.
Connecting with
New Zealanders
Spark continued to engage with
New Zealanders through our brand
campaigns and experiences, bringing to life
how technology can help them to win big
in a digital world. With our 5G rollout
underway, the next generation of mobile
technology was a big focus in FY21.
Emirates Team New Zealand
We were proud to sponsor Emirates Team
New Zealand in their successful campaign to
defend the 36th America’s Cup. We helped
the boat go faster through the power of 5G,
building a dedicated 5G network for
the team.
Technology and innovation have always been
critical elements of successful America’s Cup
campaigns and our 5G network provided
Emirates Team New Zealand with new ways to
collect and visualise essential data – helping
them to predict the course and set the boat
up to make the most of the conditions.
5G Starter Fund
In October, we selected four innovative New
Zealand businesses as winners of Spark’s 5G
Starter Fund, securing a share of $625,000 to
bring some of the country’s first 5G-powered
ideas to life.
Selected from more than 200 entries that
spanned four categories – Next Gen Health,
Good for New Zealand, Industry Disruptors,
and Immersive Experiences – these
businesses demonstrated how 5G is an
enabling technology that has the potential to
solve some of today’s biggest problems.
Robotics company Rocos, VR gaming creator
Beyond, and health businesses – Objective
Acuity and oDocs Eye Care – were the
successful recipients of a share of the funding
and technology support from Spark. This
involved an exclusive opportunity to test and
co-create each 5G-powered solution inside
Spark’s Innovation Studio.
5G-powered Esports Hub
In April we opened our 5G-powered Esports
gaming hub at Eden Park, in partnership with
Guinevere Capital. Gaming is a large and
growing opportunity for Spark, and the hub
will be the home training ground for both
professional and aspiring gamers, offering
them a dedicated space connected via both
fibre and 5G. The space is fully equipped with
dedicated training rooms, broadcast
capabilities, a 5G mobile gaming area, and a
venue to host future major Esports events.
5G Race Zone
We also teamed up with Emirates Team
New Zealand to create a 5G Race Zone
in Auckland’s Wynyard Quarter. Spark’s
5G Race Zone brought together sailing
and technology in seven interactive
zones, each showing the different
benefits of 5G – speed, low latency, and
mass connectivity. The free showcase
was available to all and gave Kiwis a
multi-sensory experience – including a
visualised wind tunnel and an immersive
experience on board Te Aihe as it took
flight on the harbour. Over 30,000
people went through the Race Zone.
In partnership with the Genesis School-
gen programme, over 900 Auckland
students from low decile schools visited
the 5G Race Zone for a technology-
focused, Emirates Team New Zealand-
themed learning experience. Students
got to see and experience the latest in
digital innovation, computational
thinking, and robotics – learning
opportunities falling under the Science,
Technology, Engineering, and Maths
(STEM) umbrella. The collaboration
between Spark and Genesis brought to
life our shared vision of encouraging and
enabling young New Zealanders to
access and engage with STEM learning,
to better arm them with skills for
their futures.
21
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Supporting the growth of
Aotearoa’s digital economy
Covid-19 has accelerated the shift from
physical to digital and highlighted the critical
importance of the digital economy in
Aotearoa. The Government has recognised
this by expanding the Minister for
Communications’ portfolio to include the
digital economy; a move we welcomed.
Modernising our economy and making better
use of technology to grow productivity and
transition our workforce to smarter ways of
working will deliver clear and compelling
benefits. We believe we should be focusing
on four key areas:
1. Smart infrastructure investments, including
the rollout of 5G and IoT;
2. Helping to build digital skills in
New Zealand, including the digitisation of
small and medium businesses;
3. Taking meaningful steps towards
digital equity;
4. Establishing a digital trust framework.
In FY21 we pursued a number of initiatives
to support the growth of our digital economy.
Our work to improve digital equity and skills
is outlined in the community section on
page 42.
Digital Boost Alliance
We signed up as members of the Digital
Boost Alliance – a collaboration between the
Ministry of Business, Innovation and
Employment (MBIE) and private sector
organisations. The Alliance is focused on
motivating and inspiring small businesses
across Aotearoa to accelerate their use of
digital business tools and new technologies,
with the aim of helping New Zealand reach its
economic and social potential. As part of this
work, we partnered with Microsoft to offer our
business customers Microsoft Office 365 free
for 12 months if they joined our Endless
Mobile and Business Flexible
Broadband plans.
Spark Innovation Studio
We launched our new Innovation Studio
during the year at our head office in
Auckland, to support Kiwi businesses to
identify how emerging technologies like
IoT and 5G can help them adapt,
transform, and grow.
The Studio is the first place in New Zealand
where businesses can test technology
solutions on all networks (4G, 5G, Cat M1,
NB IoT, LoRaWAN) and co-create their own
solutions alongside some of the best
technology engineers and experts New
Zealand has to offer.
The Studio bridges the gap between
understanding and action by demystifying
emerging technology and showcasing
real-life examples of how they can help
solve business challenges across a range
of sectors and use cases – such as end-to-end
fleet management and asset visibility, and
real-time water quality monitoring.
The studio is open to businesses, councils,
and government to explore how technology
solutions can enhance productivity, improve
sustainability outcomes, and
accelerate digitisation.
Spark Sport
Spark Sport offers a range of local and
international sporting options including
rugby, football, cricket, tennis, motorsports,
basketball, MMA, racing, boxing, golf,
hockey, e-sports, and athletics.
During FY21 we delivered our first
‘summer of cricket’ in our seven-year
partnership with New Zealand Cricket –
streaming over 3 million hours of live
cricket into New Zealand, with nearly
240,000 Spark Sport viewers tuning in to
watch the BLACKCAPS and WHITE FERNS.
We gained broadcast rights to the MotoGP
for the next three years and ventured into
the pay-per-view arena, exclusively
streaming fights from some of the
industry’s biggest names including Joseph
Parker, Dillian Whyte, Alexander Povetkin,
and Israel Adesanya.
In June, we acquired the full and exclusive
New Zealand rights to the UEFA (Union of
European Football Associations)
Champions League, UEFA Europa League
and UEFA Europa Conference League for
the next three seasons.
22
Spark New Zealand Annual Report 2021
Creating value for Our customers
Spark Health
The digitisation of New Zealand’s healthcare
sector will be a critical enabler of its
transformation. We identified digital health as
a future growth market in our three-year
strategy, and in FY21 we announced our new
industry vertical, Spark Health.
Spark Health seeks to help all New
Zealanders live healthier lives through the
power of technology and has a 2023
ambition to deliver an open, modern,
cloud-based Digital Health Platform.
The Digital Health Platform, named ‘Kete
Waiora’ (the basket of health and wellness),
will enable health providers to access a range
of services across chronic disease
management, population health
management, consumer and patient
activation, remote patient monitoring, and
customer insights.
In FY21 Spark Health launched its brand
identity into the market, with
telecommunications, IT and business
transformation solutions tailored to the
healthcare sector. A vendor was selected to
support the development of Kete Waiora,
with a launch to customers targeted for the
first quarter of FY22.
Supporting digital trust
Our subsidiary MATTR provides the
infrastructure to solve historically difficult
challenges facing digital security, privacy, and
data verification. During the year it worked as
part of the global standards community at
W3C (World Wide Web Consortium), DIF
(Decentralised Identity Foundation) and OIDF
(Open ID Foundation) to contribute to the
development of next generation
internet standards.
In March, MATTR launched the first version of
MATTR VII – an extensible platform for
verifiable data and digital trust – and the team
is working with a range of partners and
customers locally and globally. MATTR has
also been selected by the US Department of
Homeland Security, Silicon Valley Innovation
Programme and has successfully completed
phase one of this four-phase programme.
Partnering with
New Zealand businesses,
big and small
Spark is an enabling business, and our
success is measured in the success of others.
This is particularly the case for our business
customers – who are more reliant than ever
on our technology and services as they
rebuild from the impacts of Covid-19 and
prepare for a low-carbon future. In FY21 we
have worked to improve our offer to New
Zealand businesses – from SMEs (small and
medium enterprises) through to large
enterprise and government customers.
Supporting small-medium kiwi businesses
We work with our SME customers through
our locally-owned and operated Business
Hubs, which provide a local point of
connection and support for customers.
In FY21 we made changes to our Business
Hub operating model, to further improve
customer experience and efficiency. This
included consolidating 26 territories into 12
regions, with regional owners actively
involved in the day-to-day operations of our
24 local Hubs.
In recognition of the toll 2020 had taken on
many businesses across the country, we
launched our ‘Recharge’ campaign, which
encouraged SMEs to focus on their most
important asset – themselves. Customers who
took part received exclusive access to offers
and products from Spark partners designed
to boost their wellbeing.
We continued our long-running Spark Lab
event series, which provides our customers
with inspiration and capability building
opportunities. Throughout the year we
hosted speakers from Microsoft, Xbox,
Sidewalk Labs and Take a Breath, talking
about a range of topics including wellbeing,
diversity, the use of data, and cities of
the future.
Supporting New Zealand’s larger
enterprise businesses
We provide B2B services to our larger
enterprise customers through the Spark
Business Group – which unites Spark, CCL,
Leaven, Qrious, and Digital Island, and allows
our customers to access our full suite of
services through one key account lead.
Spark Business Group is locally unique in the
end-to-end support it can provide to
customers across the key areas of connect,
enable, and transform.
To connect our customers, Spark offers a
reliable and secure technology backbone
through services such as network,
connectivity, ICT, and security. Digital Island
provides voice, internet, and cloud
management services.
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Spark New Zealand Annual Report 2021
During the year Digital Island saw strong
demand for remote contact centre solutions
as a result of Covid-19 lockdowns and
responded by collaborating with Leaven to
launch Amazon Connect – a cloud contact
centre solution that brings together AWS
technology, a custom user dashboard, and
Digital Island’s extensive contact
centre expertise.
Our technology backbone is complemented
by CCL, a multi-cloud specialist. During the
year CCL’s cloud platforms and support
teams underpinned the technical delivery of
several high-profile events, including the
Electoral Commission and the systems
supporting New Zealand’s 2020 general
election. CCL achieved certification against
the ISO/IEC27001:2013 international
standard, demonstrating its commitment to
maintaining robust information security for
clients and partners.
Our cloud consultancy business Leaven
supports businesses to transform by
accelerating cloud adoption and digital
innovation. During the year Leaven supported
the creation of the national health index for
the Ministry of Health, helping to establish the
underlying technology that supported the
New Zealand Covid-19 Tracer App, and
helped the implementation and operation of
the vaccination platform rollout.
Qrious is a data, analytics, and artificial
intelligence (AI) business and during FY21
delivered a number of smart data solutions
for our customers – including a cloud-based
dashboard to improve patient care at ADHB,
and an AI solution to help save New Zealand’s
endangered Maui dolphins.
In October, Qrious was awarded the
international gold standard for privacy
information management, ISO 27701
certification, which is designed to ensure
organisations have robust processes and
systems in place to manage and protect
personal data.
The Spark Business Group had some notable
successes in delivering customer projects that
combine skill sets and capability from across
the group during the year.
Spark and CCL partnered with MFAT (Ministry
of Foreign Affairs and Trade) to pioneer the
concept of digital diplomacy and deliver the
first ever virtual APEC host year, which is
running throughout 2021. The combined
team helped design and deliver the technical
solution for a complex virtual conference that
runs over multiple months, supporting 21
member economies across 11 time zones,
and with up to 20,000 delegates.
Accelerating cloud
adoption, digital
innovation and
business
transformation.
Unleashing intelligence
through data, analytics,
AI and data powered
customer engagement.
New Zealand’s most
reliable and secure
technology backbone for
business; network,
connectivity, security and
ICT services.
Creating amazing customer
experiences by delivering
exceptional cloud communication
and collaboration services.
Tailored and trusted
expertise and support
for all your managed
services needs in a
multi-cloud world.
Spark Business Group
T
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F
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M
C
O
N
N
E
C
T
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N
A
B
L
E
Spark Business Group
brings together best in
class expertise and
capabilities to connect,
enable and transform
NZ business.
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Spark New Zealand Annual Report 2021
Creating value for Our customers
Cybersecurity, customer
safety and privacy
Spark puts cybersecurity, customer safety
and privacy at the forefront of everything
we do.
Cybersecurity
In the past 12 months, New Zealand has
seen an unprecedented number of
cybersecurity attacks across various
industries, which have caused severe
disruption to the affected organisations.
We govern our security programme using
the industry’s best practice frameworks,
including ISO27001 and NIST CSF (National
Institute of Standards and Technology
Cybersecurity Framework). All Spark
services and networks are built with multiple
checks in place during the ‘design’, ‘build’
and ‘operate’ phases, to ensure that they
are deployed with the appropriate levels
of security.
Spark people play a critical role in helping
Spark to detect and defend against all known
cybersecurity attacks. We have one of the
largest security capabilities in the country with
over 100 security subject matter experts.
We have processes in place to ensure that
appropriate ownership, oversight, and
ongoing risk management is applied to our
customers’ and Spark’s IT systems, data, and
risks, with our cybersecurity subject matter
experts providing oversight, and our
processes independently assured by our risk
and internal audit functions. We have
invested heavily in building up our threat
intelligence platform and adopting industry
best practise framework such as MITRE
ATT&CK (a curated knowledge base and
model for cyber adversary behaviour), to
ensure we continue to evolve our ability to
protect and detect potential threats. We have
also invested in security automation,
orchestration, and machine learning, to stay
ahead of ever evolving security threats.
Customer safety
We play an active role in limiting the number
of scam calls our customers receive by
monitoring unusual calling activity and
blocking offending numbers. Where possible,
our security and fraud teams work with law
enforcement to identify and shut down
scamming operations, but this is challenging
when they are located offshore.
We are a member of the NZ
Telecommunications Forum’s (TCF) Scam
Prevention Code, which improves the process
for the telecommunications industry to
identify and share scamming information.
Offending numbers are shared with members
of the TCF and blocked across all networks.
We also work with the TCF to prevent
customers receiving scam text messages.
When we identify illegitimate activity, we work
with the aggregator to block the messages.
We also block access to the URL featured in
the scam text to prevent customers
inadvertently clicking on the link.
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Spark New Zealand Annual Report 2021
The most effective way to keep our customers
safe is through education and awareness. We
take any opportunity to empower our
customers to be vigilant when it comes to
scams and keeping their personal information
safe – including through direct customer
communications, sharing alerts about
widespread scams on our social media
channels, and providing comprehensive
information about scamming on our website.
We have also partnered with Netsafe to
produce an educational scam call brochure to
distribute to organisations such as Age
Concern and retirement villages.
Protecting the privacy of our customers
The protection of our customers’ personal
information is a responsibility we take
seriously. Our approach to privacy is
informed by the values of customer centricity,
fairness, transparency, autonomy, and
simplicity, and we are continually working to
embed privacy capability across our
organisation.
We want to make it easy for our customers to
make informed decisions about their
personal information. We do this by being
clear and transparent about how we manage
personal information and the choices our
customers have when it comes to what data
they share and how we use it.
Our Privacy Policy
Spark’s Privacy Policy sets out our
commitment to our customers on how we will
handle their information – including how we
collect, use, share, and store it. In our policy
we commit to handling all personal
information appropriately in compliance with
the new Privacy Act 2020 (which came into
force in December 2020) and our customers’
expectations. We also set out customers’
rights and choices in respect of their personal
information. In FY21 we made our privacy
policy shorter, simpler, and easier for our
customers to read and understand.
See: www.spark.co.nz/help/other/terms/
policies/privacy-policy
Improving transparency
In FY21 we also brought more transparency
to our privacy management processes by
publishing information about our privacy
programme on our website. We also
launched Spark Transparency Reports, which
detail the way Spark manages requests by
New Zealand government agencies for our
customers’ personal information and the
number of instances we provided all, some,
or none of the information requested.
See: https://www.spark.co.nz/help/other/
about-your-privacy-with-spark/
Operationalising privacy capability into
Spark
Spark people are required to treat customer
information in a manner consistent with
Spark’s Privacy Policy and privacy-specific
values that were introduced in FY21. This
includes following Spark’s data governance
processes and standards for the collection,
use, and disclosure of personal information
and engaging with Spark’s privacy and
security teams for specialist guidance.
While we have senior expertise in privacy and
security within our business, we also
recognise the need for Spark people at all
levels and in all business areas to understand
what best practice in customer privacy entails.
We provide online privacy training for all of
our people to embed privacy competencies
across our workforce.
Compliance and reporting
In the past year we maintained our focus on
compliance and reporting and evolved our
processes to align with the new requirements
of the Privacy Act 2020. This included
building an online data breach reporting tool
for our people. The tool enables us to quickly
identify and manage breaches should these
arise, so we can take appropriate action to
resolve issues, and to notify our customers
and the Privacy Commissioner of any
breaches that could cause serious harm. It
also gives us a clear view of the opportunities
in our business to improve data protections.
Since launching the tool in December, Spark
people have reported 72 data breaches, the
vast majority of which were not deemed likely
to cause serious harm. The tool enabled us to
see that most data breaches were caused by
human error. As a result, we were able to
make system and process changes to help
reduce the occurrence of these kinds
of breaches.
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Spark New Zealand Annual Report 2021
Creating value for Our customers
In FY21 there were four incidents that met the
criteria for data breach notification under the
Privacy Act 2020. Spark notified impacted
customers and the Office of the Privacy
Commissioner (OPC) of these incidents. We
also notified impacted customers and the
Office of the Privacy Commissioner of
unauthorised access to some MySpark and
Xtra Mail accounts, which occurred because
Spark customers had used their Spark or Xtra
Mail login credentials (email and password
combination) on other platforms – and when
these other platforms were compromised,
their credentials were harvested. We continue
to educate our customers around best-
practice password management to help
protect against this scenario.
In FY21 Spark received 13 substantiated
privacy complaints from customers (some of
these complaints related to the data breaches
reported above) and no substantiated privacy
complaints via the OPC.
Marketing and legal
compliance
Under our Code of Ethics all Spark people
are responsible for ensuring we behave
ethically and comply fully with all applicable
laws and regulations. Spark’s Legal and
Compliance Policy sets out the specific
accountabilities that our people have for
complying with the law. Spark’s people
leaders make sure their teams have the
information and training necessary to meet
these standards, and our Legal and Digital
Trust teams support our people with
comprehensive frameworks, tools, training,
and advice. Every employee is required to
complete online training modules on the
Code of Ethics and how to apply it, and we
reinforce this training through regular one-on-
one and broader internal communication
across the business. See: www.sparknz.
co.nz/about/governance
Spark continues to engage constructively
with the Commerce Commission as
appropriate, both proactively and reactively,
on a case-by-case basis to ensure we are
complying with all applicable laws and
regulations. Spark did not receive any formal
sanction by the Commerce Commission in
FY21. No Advertising Standards Authority
decisions were upheld against Spark or
Skinny in FY21.
Our wire maintenance service
In FY21 we removed our wire maintenance
service from all fibre customers and
undertook a process to refund all current and
past customers who had paid for this service
on a fibre connection with Spark.
Wire maintenance service was created at a
time when our customers were predominantly
using copper-based services, which require
maintenance at times. The service had also
been available for fibre customers. While
some fibre broadband customers have
benefited from the service, overall this has
not been significant. As a result, the service
was removed from all existing fibre customers
in February 2021 and is no longer available
for new fibre connections.
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Spark New Zealand Annual Report 2021
Creating value through
Our network & technology
For New Zealanders to effectively
participate in the digital economy, they
need access to affordable, fast, and
reliable telecommunications and digital
services. Our networks and technology
provide the foundation for all the
products and services we offer our
customers, which in turn, creates value for
our business, and for New Zealand.
Smart, automated
networks
In our three-year strategy, we identify smart,
automated networks as one of our core
capabilities. Our ambition is to deliver
unconstrained capacity across high quality
5G and IoT networks deployed nationwide.
As 5G matures to a stand-alone network, new
use cases will be possible due to the benefits
of lower latency and mobile edge compute.
We will have a network that is highly resilient,
with a virtualised core and automated
management – and our customers will have
been migrated off legacy networks onto
future-proofed, modern technologies. We’ve
made significant progress towards this vision
over the past financial year.
Rolling out 5G to
New Zealand
Our 5G rollout has continued at pace, and we
are well on track to having 5G deployed
nationwide by 2023 – provided we can secure
the necessary long-term rights to 5G
spectrum.
Spark now has 5G live for both wireless
broadband and mobile services in nine
locations, including Auckland, Hamilton,
Christchurch, Dunedin, and Palmerston North.
At this point in our deployment, the primary
use case for 5G is to increase both speed and
capacity in our wireless broadband and
mobile products. However, as 5G matures
and we deploy stand-alone, we will unlock 5G
mobile edge compute and network slicing.
These new technologies will allow for a big
step change in what we can offer our
business and enterprise customers – opening
up opportunities for cloud gaming, enhanced
virtual and augmented reality, industrial
automation and ‘massive IoT’, which we
define as more than 1 million IoT devices per
square kilometre – making things like smart
cities and connected factories possible.
It is critical to ensure the rollout of 5G can
continue to happen at pace. 5G has the
potential to add between $5.7 billion and
$8.9 billion per year to the New Zealand
economy over the next decade and we
believe this technology will be critical as
New Zealand’s economy transforms.
Since the conclusion of FY21 we have
announced an acceleration of our 5G rollout
in FY22. We will invest an additional $35
million to deliver 5G coverage to
approximately 85% of Spark’s sites and 90%
of the New Zealand population by the end of
2023. This brings our total mobile network
connectivity investment to $125 million
in FY22.
Manufactured + intellectual capital
28
Spark New Zealand Annual Report 2021
Creating value through Our network & technology
Scaling the Internet
of Things
Spark has identified IoT as a future growth
market in our three-year strategy. We see
significant opportunities for growth as
New Zealand transitions to future ways of
working and pursues productivity
improvements across all sectors.
During FY21 we launched Spark IoT as a
brand, with a campaign showing the
tangible benefits IoT solutions offer
businesses. We grew IoT connections 83%
to over 450,000.
In October, we entered a Trans-Tasman
agreement with Australia’s longest running
LoRaWAN network operator, The National
Narrowband Network Co (NNNCo), which
enables mutual access across the
respective LoRaWAN IoT networks –
meaning businesses on both sides of the
Tasman can implement cost-effective smart
solutions without needing to set up
operations in the other country.
New Zealand’s
smartest street
The evolution to a stand-alone 5G
network is expected to underpin the
widespread deployment of IoT
technology with its increased capacity,
speed, low latency (or lag) and reliability.
To bring this potential to life Spark, in
partnership with AT (Auckland Transport),
has installed IoT-enabled infrastructure at
Auckland’s Wynyard Quarter – including
5G-connected lighting, smart benches
with charging capability, smart bins, and
parking sensors.
Smart lighting has been installed in the
streets surrounding Wynyard Quarter’s
Innovation Precinct, which can now
generate heat maps of foot traffic to help
AT identify any ‘choke points’ to better
inform future infrastructure investments,
as well as monitor air and noise pollution.
Some lights are fitted with 5G-connected
CCTV, which captures high-definition
video even at night, and can be dimmed
and brightened remotely to help reduce
energy consumption.
Solar powered smart benches with
convenient smart phone and electric
scooter charging capabilities have also
been installed at the Quarter, connected
over Spark’s low-powered IoT network.
Sensors attached to bins can now detect
when they’re full and could contact the
council for service, preventing overflow
and reducing the number of rubbish
trucks on the road.
Auckland Transport GM Digital and
Technology Delivery, Chris Creighton said
the installations at Wynyard Quarter were not
just shiny new tech, but real solutions to
existing and impending challenges.
“We’re learning how to use smart
infrastructure in a way that works for
Auckland so we can leverage applications as
they evolve and become more
commonplace.”
Creighton said that in the future, AT expects
IoT applications powered by 5G could be
used to detect incidents such as car crashes
or pedestrian accidents and notify the
appropriate authorities, reducing the time it
takes for emergency services to respond and
potentially saving lives.
Spark and AT have installed the IoT
technology at Wynyard Quarter with key
technology partners, NB Smart Cities,
Glowbal NZ, SmartSensor Technologies and
Parkable with the shared goal of using IoT
and data to make better decisions and
improve quality of life for people.
Solar powered smart
benches have smart
phone and e-scooter
charging capabilities.
We have installed smart bins
that alert council when these
need to be serviced.
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Spark New Zealand Annual Report 2021
Network resilience
Our customers rely on us more today than
ever before, and ensuring our network is
resilient in the face of high volumes and
unexpected events – such as extreme weather
events and Covid-19 lockdowns – is crucial to
delivering our products and services and
keeping New Zealand connected.
During FY21 we completed the first stage of
our next generation Optical Transport
Network, or OTN2 – which will strengthen our
network resilience and capacity. The OTN is
the fibre backbone of our network. It provides
core connectivity between the main cities in
New Zealand, transporting all our customers’
mobile, broadband, landline, and business
traffic, and connecting Spark’s network with
other service providers and with international
cable networks. The new OTN2 has ’self-
healing’ capabilities, which allow the light
signals that carry the data to automatically
change their path after a fibre cut,
automatically restoring services, where it is
possible to do so. OTN2 also has five times
the data capacity of the previous OTN, which
will support Spark’s 5G rollout and give our
network enough capacity to meet ongoing
growth in data consumption.
The OTN2 rollout is a two-year project, which
has started in Auckland, and will expand
towards Hamilton, Wellington, and
Christchurch – with completion expected by
FY23. Initially the new OTN equipment will
overlay the existing transport network,
however it will be gradually replaced over time.
Connecting rural
New Zealand
We have continued our investment into
connecting rural communities through the
Rural Connectivity Group (RCG) – a joint
venture between Spark, Vodafone and
2degrees. The RCG is contracted by Crown
Infrastructure Partners to deliver the
Government’s Rural Broadband Initiative
Phase 2 (RBI2) and Mobile Blackspot Fund
programmes. It is a unique partnership
developed to help bridge the digital divide
for rural communities, ensuring the rural
sector can remain competitive internationally.
To date, the RCG has built more than 260
sites, delivering 4G wireless broadband
coverage to 23,500 homes and businesses,
and has provided mobile coverage to more
than 600 kilometres of state highways.
The RCG model has attracted global interest
and is believed to be one of the first in the
world where three mobile operators share
spectrum, radio, and backhaul. It uses 4G
Multi Operators Core Network to deliver
broadband services, which helps make
the most efficient use of the radio spectrum
available, and lower network integration costs.
Marae Digital Connectivity Programme
Spark is working as a partner to
Government on the Marae Digital
Connectivity Programme.
The Marae Digital Connectivity
programme is providing iwi, hapū, and
whānau with access to key online services
such as digital health, business, social,
and educational services, helping to
create stronger, safer, and more
connected communities. With access to
connectivity through the marae it will be
easier than ever before to join zoom hui,
participate in remote learning or working,
or pay bills online.
Spark has taken an approach guided by
tikanga Māori to deliver this programme
alongside a range of partners including
Crown Infrastructure Partners, Te Puni
Kokiri and a handful of other broadband
providers including WISPS (Wireless
Internet Service Providers) and Satellite
Internet Providers.
A total of 445 marae have been
connected through the programme at
the end of FY21.
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Spark New Zealand Annual Report 2021
Creating value through Our network & technology
Migrating customers off
legacy technology onto
future-proof alternatives
We continue our work to migrate customers
off end-of-life voice calling technology, and
onto modern alternatives already used by the
majority of Kiwis across the country – voice
over wireless and voice over fibre. From a
network perspective, this means moving the
customer connections from the legacy PSTN
(public switched telephone network) on to
our new IP-based Converged Communication
Network (CCN), over which we will provide
the new services.
The Spark operated PSTN – the traditional
way of providing landline services – was built
in the 1980s and is rapidly reaching end-of-
life. The network’s components have not
been manufactured since 2003 and the
people with the skills needed to maintain it
are getting harder to find. The majority of
New Zealanders have already made the
switch proactively. In 2017 we had over a
million customers on the PSTN – by the end
of June 2021 we had just under 300,000,
with around 10,000 customers on average
migrating off this technology every month.
We are taking an area-by-area approach to
helping customers still using PSTN-based
services to shift to modern technologies.
Because Spark’s copper broadband services
also use systems associated with the PSTN,
we have made the decision to withdraw our
copper-based broadband services in these
areas simultaneously.
In September 2020 we initiated a pilot in
Devonport, Auckland and Miramar,
Wellington – working with our PSTN
customers in the area to migrate them on to
the new CCN network.
To ensure our customers had the support
they needed through this process, we
established a specialist customer care team
to provide extra support – offering in-home
visits where required.
This pilot was very successful, with great
feedback from customers and a number of
lessons to use as we moved into other areas
of the country. In the second half of FY21, we
took our programme into more suburbs in
both Auckland and Wellington, and to parts
of Christchurch, Dunedin, Lower Hutt, Kapiti
Coast and Ashburton.
Connecting New Zealand
with the world
Southern Cross Next Cable
Construction work is underway by Southern
Cross Cable Limited (SCCL) to build the NEXT
cable between Australia, New Zealand, the
United States and some of our neighbours in
the Pacific. The new cable will expand New
Zealand’s global connectivity by an additional
72 terabits per second – almost doubling
total international connectivity from what it
is today.
The existing Southern Cross Cable Network is
the primary connection for New Zealand with
the world, carrying the majority of our global
internet traffic.
Spark and Southern Cross celebrated a major
milestone in June with the first landing of the
new Southern Cross NEXT cable at Takapuna
Beach in Auckland. We expect the new cable
to be complete and live by the middle of the
2022 calendar year. The Southern Cross
NEXT project is the first step towards
replacing the existing cables, which are
planned to be retired by 2030.
Spark is a founding shareholder of Southern
Cross Cables Limited, and we continue to
hold a shareholding of approximately 40%
1
.
We have been working with Southern Cross
to maintain the existing cables in New
Zealand waters, and we will do the same for
the new NEXT cable. The remaining
shareholding in SCCL is owned by Telstra,
Singapore’s Singtel and US company Verizon.
Expansion of Tasman Global
Access network
In September 2020 we announced a new
access point for the Tasman Global Access
(TGA) fibre optic network. This new access
point, which is the first direct connection
between Sydney and Hamilton, offers
additional resilience to New Zealand’s
infrastructure and increases the amount of
capacity available to be used on the cable.
The TGA forms part of the mission critical
backbone of the internet, linking New
Zealand with Australia. The cable also serves
as an important digital link to Asia via the five
major international cable systems currently
connecting Australia.
Prior to this upgrade, the original TGA
network included the trans-Tasman
submarine cable and existing optic networks
which connected PoPs (points of presence) in
Sydney and Auckland only.
First transmitting data in 2017, the TGA
encompasses 2,288 km of submarine fibre
cable with a total design capacity of 20
terabits per second. It was built by a
consortium of Vodafone NZ, Spark,
and Telstra.
1 Our shareholding in Southern Cross Cables Limited will fluctuate through the Southern Cross Next
funding period, but we expect it to sit at 40% when the Southern Cross Next cable is complete.
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Spark New Zealand Annual Report 2021
Creating value with
Our people
Spark’s success relies on our talented and
diverse team. In our three-year strategy, we
identified ’growth mindsets’ as one of the
four world-class capabilities we will build
across our business for long-term success.
Growth mindsets is about creating a culture
where our people lean into challenges,
champion the customer, continuously grow,
and adapt at pace. Our goals here are to
improve engagement, our Agile maturity and
readiness for the future of work, and our
diversity and inclusiveness. We want our
people to feel they can bring their whole
selves to work, that they have opportunities to
grow and develop, and that they are
connected to our purpose – to help all of New
Zealand win big in a digital world.
Feedback from our people during FY21 has
been very strong – with our Employee Net
Promoter score (eNPS), a key measure of
engagement, tracking at +76. This exceeds
our FY23 target of +70 and is up 10 points
from FY20.
With New Zealand’s borders still mostly
closed to migration, the technology industry
is facing skills shortages in many areas. This
has brought the need to develop digital skills
that create pathways for New Zealanders of
all backgrounds into the technology sector,
into the spotlight. This is something we are
committed to helping New Zealand achieve
and are working with industry partners
to explore.
Living and working with
C ov i d -19
Responding to alert level changes – and
providing the necessary support to our
customers and our people – has become part
of business as usual in FY21. Spark continues
to refine our systems, protocols, and use of
technology during these changing alert levels
with a primary focus on our people’s
connection, safety and wellbeing, and the
continuity of service for our customers.
Teams across Spark continued to experiment
with the new ways of working forged during
FY20, mixing remote and in-office working
and trialling different ways to collaborate,
establish weekly schedules and share team
in-office time. We are proud that our Agile
ways of working have supported our ability to
adapt, and we will continue to learn and
experiment in FY22.
Human + intellectual capital
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Spark New Zealand Annual Report 2021
Creating value with Our people
Investing in the
development of our people
To fuel our agility, we are focused on the
growth of our people, a culture of
experimentation and innovation, and
opportunities for progression through
comprehensive learning experiences. We
pride ourselves on offering great experiences
on the job, which we know make up over two
thirds of development. We have evolved our
approach over the past year to increase the
digital delivery of our programmes, enabling
us to maintain learning and development
during changing alert levels and helping to
scale learning across the organisation.
During the year we redeveloped our Gold
Standard Leader Programme and delivered it
to 130 potential and new leaders, with a focus
on continuing to mature our agility. This
programme runs over three months and
combines self-directed learning with
structured learning in cohorts of peers, with
applied learning opportunities.
Our Agile Leaders Programme aims to create
the conditions for innovation and
adaptiveness across Spark by investing in the
capability of our people in key leadership
roles and those identified for development
and succession planning. The programme
runs over six months in cohort groups of up
to 12 people, with a focus on leading
innovation, inclusion and coaching for high
performance. To date, seven cohorts, and a
total of 80 leaders, have completed the
programme and we will continue to roll it out
in FY22.
Over the course of the year Spark has also
improved the accessibility of learning
enterprise-wide, to strengthen our future
capabilities. In addition to our leadership
programmes many of our employees have
benefited from targeted learning
opportunities that support our strategic
ambitions focussed on storytelling,
commercial acumen and both coaching and
mentoring experiences, creating an
environment which enables growth,
movement, and progression for our people.
Ways of working – Agile
A key measure we focus on is our Agile
maturity – which is the extent to which our
people are using and integrating Agile best
practice into their daily work. We evaluate this
using a measure called our ’Agile Maturity
Score’ or AMA, which we rate on a scale of
one to five. We have made steady progress
and now have 86% of squads with an AMA of
greater than 3.5 out of 5 (compared with 2.5
out of 5 in FY19). Spark is particularly strong
in several areas of Agile best practice –
including the use of quarterly objectives and
key results (OKRs) across the business;
heightened collaboration between and within
teams; connection of daily work to strategic
business goals and purpose; and better
incorporation of experimentation and
stakeholder engagement in the delivery
of work.
In addition to the network of Agile Coaches
we have within the business, who focus on
developing and growing Agile maturity
day-to-day, we have integrated Agile
principles throughout our suite of induction,
training, and development programmes.
Spark also operates formal Agile
development programmes to further embed
Agile best-practice into our business
including our ‘Leading Agility Foundations
Programme’, which runs over three months
and combines self-directed learning with
structured group learning, and opportunities
to learn ‘on the job’. In the past year 120 of
our people completed the programme.
Future of work and skills pathways
With increasing labour and skills shortages,
we are re-thinking how we mobilise, grow,
and retain our talented people.
We have a programme of partnerships with
tertiary institutions designed to help us
identify, upskill, and recruit the best people
with the skills we need, while also building
diversity in our business. This includes direct
engagement with lecturers and students at
major universities, and in some cases working
in partnership with lecturers to provide
research assignments related to Spark’s
business issues to students.
In the coming financial year we will be testing
a proof of concept called the Talent
Marketplace. The marketplace will enable our
people to share the depth and breadth of
their experience company-wide, and will
show all our internal job openings, links to
smaller projects and mentoring opportunities
across Spark.
Spark Contribution Models
The Spark Contribution Models are a key part
of how we empower our people to grow and
progress in their careers and how we drive
pay equity. The Contribution Models are
linked to our adoption of an Agile model that
encourages flat organisational structures and
focus on an individual’s ‘craft’ over traditional
titles and hierarchy – providing an objective
system for remuneration. They define the
skills, knowledge, experience, behavioural
and mindset requirements for people
working in different teams across Spark. The
models guide our people on what Spark
values, giving a clear description of how they
can move to the next step in their role, while
providing leaders with a tool to help coach,
review and support their people to develop.
33
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Health, safety, and
wellbeing – the Spark Gold
Standard
Health and safety
Spark has a well-established Health and
Safety management system, focussed on our
continuous improvement. Our Health, Safety
and Wellbeing strategy is built around the
four pillars of our Gold Standard:
• a strong health and safety management
framework
• a proactive ‘owners’ approach to health
and safety and the management of critical
hazards and associated risks
• a culture of empowerment at every level
• a commitment by the business to
ensuring the resources and capabilities
are in place to deliver the health and
safety strategy.
No Spark employees or contractors suffered
serious injury or death over the year, and our
TRIFR (Total Recordable Incident Frequency
Rate) was 3.69 for FY21, compared to 4.11 in
FY20. Our target for FY22 is to reduce our
TRIFR to 3.0. No notifiable events were
reported under current NZ Health and Safety
legislation, or health and safety prosecutions
or notices issued to Spark by WorkSafe (NZ
Regulator) during the same period.
In FY21 we asked IMPAC health and safety
consultants to review the progress we have
made against our Health and Safety Gold
Standard and ascertain the effectiveness of
our systems and maturity levels of our current
health and safety culture at Spark. IMPAC
found that good improvements have been
made since its first review undertaken in
December 2018. The IMPAC report found
that we have increased our health and safety
culture maturity, with specific improvements
demonstrated by:
• positive business outcomes from our
handling and management of Covid-19
lockdowns, where it was found we had
consistently demonstrated a clear focus
on the care and wellbeing of our people;
• clear and continued demonstration of
focussing on and working alongside
several of our key business areas to
effectively manage high risk health and
safety matters; and
• our work to enable and empower a
significant proportion of our people and
leadership teams to take ownership of,
manage and deliver health, safety and
wellbeing outcomes in their areas of
the business.
In the year ahead we will continue to work
with our Wider Leadership Group to further
foster health and safety employee
empowerment and participation as part of
our Tribe, Unit and Centre of Excellence (CoE)
meetings and routine events. We are always
looking for continuous improvement of
highly visible health and safety leadership for
our people. We will also continue our work
with our wholly owned subsidiaries to identify
the areas of greatest priority to support the
development, application, and monitoring of
a health and safety continuous
improvement framework.
Spark’s health and safety system and injury
management programme was reviewed by
the Accident Compensation Commission
(ACC) under the Employers Accredited
Programme (AEP) in June 2021. The audit
outcome was positive with Spark retaining its
Tertiary status and remaining accredited in
the same programme for another 12 months.
1| Confidential –Leadership Team Only
@ SPARK
WELLBEING
Energy
Recognising and offering ideas
and ways for our people to unlock
their impactful energy for optimal
performance, potential & their
own personal growth
Mind
Providing support and
expertise to navigate Mind
Health challenges and
fuel our growth mindset
Fostering strong connections,
radical collaboration and
community spirit through the
ways we work and
come together
Connection
Collaboration
Community
Building a healthy “place” to
belong – physically, mentally
and socially
Healthy Work
Environment
4 WELLBEING PILLARS
34
Spark New Zealand Annual Report 2021
Creating value with Our people
Te Korowai Tupu
We have been intentional in weaving
Te Korowai Tupu, our Māori Strategy,
throughout our business informing how
we develop strong connections with
Māori businesses and partners, as well as
uplifting our own understanding of Te Ao
Māori. We have launched cultural
responsiveness modules, Te Ara Reo
(Language Pathway) classes, and other
learning resources in line with our growth
mindset commitment.
Our partnerships with established Māori
organisations have ensured we remain
authentic in our desire to uplift our
capability in this domain. Our key
partners include: Te Wānanga o Aotearoa,
Whāriki, Kōkiri, Arataki Systems, Kiwa
Digital, Te Taura Whiri and Te Ipukarea.
Spark’s Blue Heart Kaupapa in action
Our Blue Heart Kaupapa sets the standard of
behaviour and the values we stand for,
creating a culture of belonging. It is a visible
icon of our heart-led approach to diversity
and inclusion.
Cultural celebrations and mental health
awareness events remain an important part of
bringing our people together. We celebrated
the wide range of cultures and communities
Spark’s Wellbeing Strategy
With the uncertainty brought about by
Covid-19, there has never been a more
important time for us to focus on authentic
and holistic wellbeing, and we have evolved
our strategy to respond to this need. We
know a deep sense of wellbeing allows our
people to bring their best self to work,
supporting sustained healthy performance
and results for everyone at Spark. Our new
programme moves away from a traditional
policy-based approach to one based on
individual empowerment, connection,
and empathy.
Wellbeing at Spark is focussed around four
pillars – building a healthy work
environment, helping people foster strong
connections, fostering a healthy mindset,
and giving our people ways to unlock
energy. The programme seeks to support
Spark people to look after themselves and
each other, which we know will lead to
higher performance, a more engaged,
growth mindset culture, and ultimately
better business outcomes.
As one of our first initiatives under this
framework, we launched a partnership with
Take a Breath. This is an app-based tool that
teaches users how and why they need to
breathe correctly – to manage stress and
anxiety, and to improve focus, energy levels
and performance. Under the partnership,
we have given every one of our people
access to the app at no cost.
Diversity and inclusion
We aspire for diversity and inclusion to be
“how things are done at Spark” – embedded
into our day-to-day activities, standards, and
business practices. We have maintained our
focus on gender and ethnic representation
as well as addressing our median pay gap
over the last year. In the year ahead we have
several new initiatives to drive further
improvements in representation and
reductions in the pay gap, while also
focussing on more opportunities to address
enhanced accessibility.
that make up the Spark whānau over the
course of the financial year. This included key
moments such as International Women’s Day
(IWD) in March – when we ran a number of
events and workshops for our people. This
year’s IWD theme was “choose to challenge”,
and we broadened this to encourage our
people to “choose to challenge yourself” –
asking them to look for ways to challenge
their own beliefs and behaviours.
Pride
Spark has demonstrated its support of the
Rainbow Community by endorsing several
regional activations and events, including the
annual Auckland Pride and Spark
Empowerment Initiative – a month long
festival celebrating rainbow events. This
initiative helped resource Auckland’s diverse
rainbow communities by supporting those
producing events for the festival.
We also continued our ongoing support of
OUTline NZ, a national charity that offers a
free support line for members of the
LGBTQIA+ community and family and friends.
This included the renewal of Genesys Cloud
support for a further three years, the
activation of an OUTline Chat service, and
assistance with OUTline’s rebranding.
www.outline.org.nz/workplace
35
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Our diversity performance
Over the past year we have seen positive
improvements in our gender diversity and
gender pay ratio measures. By FY23 our
ambition is to achieve 40:40:20 representation
Spark-wide, which refers to 40% men, 40%
women, and 20% of any gender (as well as
gender diverse representatives), and to reduce
our median gender pay gap by 10 percentage
points to 18%.
Our Board is 57% female and 43% male, with
four female directors (including our CEO) and
three male directors. Over the past year our
Leadership Squad has remained unchanged
with a 50% female and 50% male split. We
have also seen an increase in females in other
senior roles, up 3% to 42%. Our Diversity and
Inclusion Policy sets out our framework in this
area. See: www.sparknz.co.nz/content/
dam/telecomcms/sparknz/content/
governance/Diversity-Policy.pdf
Our median gender pay gap increased slightly
during the year to our FY19 starting position of
-28%, compared to -26% in FY20. The median
gender pay gap is based on the percentage
difference between the median hourly pay of
male and female employees. It is not to be
confused with equal pay for equal work, which
we adhere to and deliver through the use of
our Contribution Models.
At Spark there are two key drivers of our median
gender pay gap. The first being a greater
proportion of females in our customer
channels and secondly a lower number of
females in highly skilled technology roles.
We actively seek to address these challenges
over time by helping to build a New Zealand-
wide pipeline of female technology qualified
employees – including through Women in
Technology scholarships, and partnerships
with external technology educators.
Spark is committed to encouraging authentic
ethnic participation in our business, and we
are working alongside credible partner
organisations Diversity Works, Champions for
Change, Global Women, and the Sustainable
Business Council, to develop a framework and
subsequent actions to support positive change.
A key enabler of establishing meaningful
approaches within our own business is having
a clear picture of workforce ethnicity data,
which we currently lack.
We are currently refreshing our Enterprise Resource Planning (ERP) systems across Spark,
including our people systems. This will provide an opportunity to encourage our people to
share their ethnicity data, to support our work in this space.
We are also currently participating in the Diverse Digitech 2040 Design kaupapa alongside Spark
Foundation – an initiative focused on creating employment pathways for Māori and Pasifika youth.
Gender pay ratio
CategoryNumber of
employees
in category
Pay Ratio:
Mean
1
(Year-on-year
change)
Pay Ratio:
Median
2
(Year-on-year
change)
Leadership: Spark’s wider leadership group, including
the Leadership Squad
695% (+3%)
FY20: 2%
-4% (-2%)
FY20: -2%
Network, Infrastructure & Security: Employees that work
in technology focused areas of the business
2,256-15% (+3%)
FY20: -18%
-21% (+5%)
FY20: -26%
Customer Channels: People primarily employed within
our contact centres and retail operations
1,137-2% (-2%)
FY20: 0%
0% (No change)
FY20: 0%
Rest of Spark: including corporate, product, data,
automation, marketing and customer units
1,621-17% (-2%)
FY20: -15%
-25% (-4%)
FY20: -21%
Total5,083-16% (+1%)
FY20: -17%
-28% (-2%)
FY20: -26%
1 Pay Ratio = (mean female salary – mean male salary) / mean male salary
2 Pay Ratio = (median female salary – median male salary) / median male salary
Calculated using hourly On Target Earnings or Total Base Remuneration plus Short Term
Incentive Target values as at 30 June 2021. Negative pay gap values indicate that women earn
less on average than men.
Parental Leave
Spark provides a parental leave policy for eligible employees, regardless of gender, sexuality, age
or whether the employee is giving birth or adopting a child. If an employee has been employed by
Spark for a minimum of 12 months then Spark will top up the Government’s parental leave
payments, so the employee receives 80% of their salary for 26 weeks. As a guaranteed minimum
Spark ensures that the total amount someone receives, less any Government paid primary carer’s
payments, will not be less than the equivalent of six weeks of ordinary salary.
Eligibility for Parental Leave is in accordance with Government legislation.
FY21 Parental leave numbersFemaleMale
1
Employees who took parental leave831
Employees who returned to work after taking parental leave850
Employees who returned to work after taking parental leave that
remain employed 12 months after their return to work
421
Return to work rate
2
94%100%
Retention rate
3
64%33%
1 Males that took fewer than 30 days paternity leave have been excluded.
2 Return to work rate = Total number of employees who returned to work after parental leave divided by the total
number of employees due to return to work after taking parental leave.
3 Retention rate = Total number of employees retained 12 months after returning to work following a period of
parental leave, divided by the total number of employees returning from parental leave in the prior
reporting period.
36
Spark New Zealand Annual Report 2021
Creating value with Our people
Demographics of our workforce
Including permanent and fixed-term employees of Spark and its directors, as at 30 June 2021.
GenderAge
Number of
people
Female %Male %Female #Male #Under 30
years old
30 – 50
years old
Over 50
years old
Directors
1
757%43%FY21: 4FY21: 30%14%86%
-1+7%-7%FY20: 4FY20: 4No change-11%+11%
Leadership Squad
2
850%50%FY21: 4FY21: 40%100%0%
No changeNo changeNo changeFY20: 4FY20: 4No changeNo changeNo change
Other leadership roles
3
5942%58%FY21: 25FY21 343%75%22%
+2+3%-3%FY20: 22FY20: 35+3%-4%1%
Permanent starters71539%61%FY21: 281FY21: 43448%46%6%
-14+4%-4%FY20: 258FY20: 471+7%-5%-2%
Permanent leavers99933%67%FY21: 325FY21: 67431%53%17%
+55-10%+10%FY20: 402FY20: 542-2%-1%+4%
Total
4
5,08935%65%FY21: 1,770FY21: 3,319 24%56%20%
-142+1%-1%FY20: 1,769FY20: 3,462+3%+1%-2%
1 Mr Leffler ceased to be a director in November 2020.
2 Excludes the CEO as she is included as a Director in the line above. The Leadership Squad is considered ‘senior managers’ for the purposes of the
Financial Markets Conduct Act 2013 and ’senior executives’ for the purposes of the ASX Corporate Governance Council’s Principles and Recommendations.
3 Substantive roles that report directly to members of the Leadership Squad.
4 Includes non-executive directors. Spark’s employee headcount, including our CEO, is reported as 5,083.
5,083
1
Total employee
headcount
2,256
Employees that work in
technology focused areas
of the business
57%
Board – 57% female
and 43% male ratio
42%
Wider leaders group –
42% female (+3%)
and 58% male
50/50
Leadership Squad –
50% female and 50% male
1. Includes full-time, part-time and permanent employees.
37
Whakaahu whakamua
Spark New Zealand Annual Report 2021
FutureFit
In April we partnered with Auckland
Council to roll out FutureFit to our people.
FutureFit is an online tool to engage
people in sustainability and help them to
reduce their personal emissions.
Spark was one of the first businesses to
launch FutureFit. Over 600, or 10%, of our
employees completed the online carbon
footprint, with over 300 signing up for the
ongoing programme.
FutureFit was successful in bringing
environmental sustainability to life for our
people. By giving them a tool to calculate
their own personal carbon footprint and
see what a difference their choices and
actions make we’ve challenged people to
think differently. We encouraged our
people to join through a four-week
challenge where they could compete for
individual and team prizes.
BIG
CHANGE.
SMALL
RESULT.
By making small changes, you can do your part to help us to create
a positive digital future for all of New Zealand.
Click on FUTURE FIT under Links on the
intranet homepage to sign up or find out more.
JOIN FUTURE FIT TO DISCOVER YOUR IMPACT ON OUR PLANET.
New Zealanders throw
away 295 million single-
use cups per year...
Most of which can’t
be recycled.
DID
YOU KNOW
31996 Spark Future Fit A2 Posters_F.indd 131996 Spark Future Fit A2 Posters_F.indd 123/02/21 15:0123/02/21 15:01
Creating value for
Our environment
With a network distributed across
New Zealand, and technology sourced from
materials around the world, we are reliant
on natural capital to make our business run.
Over the past year we have focused on
maturing Spark’s approach to environmental
management, to build a strong foundation
for the future and to ensure we are doing
our part to help address Aotearoa’s
environmental challenges.
Our operational footprint is small compared
to some other industries, but we are
committed to playing our part in reducing our
direct environmental impacts and engaging
with our suppliers to address impacts in our
supply chain.
We also have a significant opportunity to use
technology to address environmental
challenges. A key pillar of our sustainability
framework is to help New Zealand transform
to a high productivity, low carbon economy.
We will do this through our investment in
infrastructure and innovation, and by
supporting kiwi businesses to adapt to be
more sustainable through technology.
Our approach to
environmental management
Although Spark has had long-standing
processes in place to manage many of our
environmental impacts, we recognised the
need to make improvements in some areas,
including our policies and our reporting. In
the past year we established a centralised
Environment Squad to be accountable for
environmental performance across Spark.
Aligned to Spark’s Agile ways of working the
squad is responsible for managing workflow
and a backlog of potential projects,
prioritising and allocating resources. In the
past year the squad delivered a number of
key initiatives to establish our baseline and
long-term pathway. This included the creation
of a new Spark Environmental Policy, and the
development of a science-based emissions
reduction target.
Spark’s Environmental Policy sets out our
expectations for our people to consider
environmental impacts when making
decisions at work, including examining our
business practices, understanding their
impacts, and taking reasonable steps to
reduce Spark’s environmental footprint. While
a policy alone does not drive improved
environmental performance, it is an important
enabler that allows Spark to show
commitment to environmental protection
from the highest levels of the organisation.
We launched the Environmental Policy
alongside the rollout of FutureFit across Spark
– a tool developed by Auckland Council
which allows employees to assess and reduce
their own carbon footprint and compete for
the largest reductions.
Natural capital
38
Spark New Zealand Annual Report 2021
Creating value for Our environment
Setting a science-based
emissions reduction target
The Science Based Targets initiative (SBTi) is
established as the global standard for
corporate emissions reduction targets. Over
800 organisations have set verified emissions
reduction targets since it launched in 2015.
All SBTi targets must have a strict absolute
reduction target for Scope 1 and 2 emissions,
and also include a separate Scope 3 target if
these emissions are greater than 40% of the
total footprint.
SBTi targets are set against sector-specific
emissions trajectories. The ICT sector
pathways were developed with the
International Telecommunications Union (ITU)
and provide specific emissions reductions for
mobile and fixed networks, and datacentres,
based on projected growth and efficiency
gains. These reductions are then calculated
against our own emissions profile and the
share of our emissions from each activity,
giving a reduction target of 56% over the next
decade. Our analysis shows this is ambitious,
but also achievable over time.
We expect to see efficiency gains across our
operations, although this will be offset by
growth as we rollout our 5G network, support
our customers to move to the cloud, and
invest in our core infrastructure.
56%
Spark New Zealand commits to
reduce absolute Scope 1 and 2
GHG emissions 56% by FY30 from
a FY20 base year.
70%
Spark New Zealand commits that
70% of its suppliers by spend
covering purchased goods and services
and capital goods, will have science-
based targets in place by FY26.
SPARK’S SBTi-VERIFIED EMISSIONS REDUCTION TARGET
Setting our scope 1 and 2 emissions target:
2020-2030 trajectories for ICT operators
Fixed
Networks
62%
reduction
Mobile
Networks
45%
reduction
Data
Centres
53%
reduction
Spark
Combined
56%
reduction
Source: Guidance for ICT companies setting science based targets, ITU, GESI, GSMA, SBTi
Electricity accounts for over 80% of our
Scope 1 and 2 emissions and our biggest
opportunity to reduce our emissions is
therefore renewable electricity production.
While we will benefit from expected grid
decarbonisation, we must still focus on
energy efficiency within our own operations
and addressing other sources of emissions.
For our value chain target we analysed our
Scope 3 emissions using a mix of supplier
data and New Zealand-specific
Consumption-based Greenhouse Gas
Emissions Input-Output Model factors. This
informed a target that 70% of our suppliers
by spend, covering purchased goods and
services and capital goods, will have
SBTi-aligned targets in place by 2026.
Analysis of our largest suppliers shows that
many are already leading the way, with
existing SBTi-aligned targets in place
covering approximately 25% of our current
spend, with a further 24% by spend in the
process of establishing SBTi-aligned targets.
Scope 1: Direct emissions from sources
owned or controlled by Spark.
Scope 2: Indirect emissions from
purchased electricity.
Scope 3: Indirect emissions from other
sources in the value chain.
39
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Our Greenhouse Gas Emissions
Year-on-year emissions changes
In order to set a SBTi target we refreshed our
FY20 emissions inventory and reporting
methodology, which has also been applied to
our FY21 emissions reporting. For information
on our historic emissions reporting, and more
detailed reporting on our energy usage,
please visit our website (see: www.sparknz.
co.nz/sustainability/environment/).
Over the past year dry hydrological
conditions have seen a significant increase in
non-renewable electricity generation on the
New Zealand grid, which has increased our
emissions per unit of electricity by 26%. This
has driven up our Scope 2 emissions by 22%.
Improvements in energy efficiency, and a
significant drop in business travel, have offset
some of this growth, with overall emissions
increasing 8%.
30,000
0
5,000
10,000
15,000
20,000
25,000
FY21FY20
FY21
FY20
PRODUCT
COSTS
DATA CENTRE
DATA CENTRE
CORPORATE/RETAIL
MOBILE NETWORK
FIXED NETWORKS
OTHER EMISSIONS
OTHER EMISSIONS
BUSINESS TRAVEL
BUSINESS TRAVEL
REFRIGERANTS
BUSINESS FLEET
TONNES-CO
2
E
DIESEL GENERATORS
DATA CENTRE
DATA CENTRE
CORPORATE/RETAIL
MOBILE NETWORK
FIXED NETWORKS
REFRIGERANTS
BUSINESS FLEET
DIESEL GENERATORS
NATURAL GAS
NATURAL GAS
Scope 3
VALUE CHAIN
Scope 2
ELECTRICITY
Scope 1
DIRECT
Scope 3
VALUE CHAIN
Scope 2
ELECTRICITY
Scope 1
DIRECT
Scope 1: Direct emissions from sources
owned or controlled by Spark.
Scope 2: Indirect emissions from
purchased electricity.
Scope 3: Indirect emissions from other
sources in the value chain.
Network efficiency
Over the past year we have continued our
programme of network simplification. The
programme includes the decommissioning of
legacy equipment such as the public
switched telephone network (PSTN). Each
PSTN switch decommissioned results in a
significant electricity saving, which is
contributing towards our emissions reduction
target and offsetting growth in other areas of
our infrastructure. Over FY21 we saw a 5%
reduction in electricity use across our
exchanges and main network sites. See page
31 for information on how we are engaging
with our customers on this change.
Business travel
We also saw an 80% reduction in emissions
from business travel, saving around 2,800
tonnes of CO
2
e. The impacts of Covid-19
restrictions continued from the previous year,
and alongside the continuation of many of
the good practices adopted through
lockdowns, with many of our interactions with
customers and other stakeholders moved
online. We recorded a significant drop in
domestic travel, and international travel
reduced to close to zero.
40
Spark New Zealand Annual Report 2021
Creating value for Our environment
Our fleet
Our fleet is responsible for around 5% of our
reported emissions. In the past year we
continued to transition our vehicles away
from traditional petrol and diesel vehicles to
hybrid, plug-in hybrid (PHEV) and pure
electric vehicles (EVs). Our focus for FY21 was
replacing older vehicles with newer hybrids,
including the introduction of Toyota RAV4
hybrids for many of our vehicles used for
longer journeys. We also transitioned all of
our pool vehicle fleet at our Auckland Spark
City offices to EVs.
At the end of FY21 we had only nine pure
petrol or diesel vehicles remaining in our core
fleet of 229 vehicles. We have a further 214
vehicles assigned to individuals
or subsidiaries.
Over the past year the share of EVs and
PHEVs in our core fleet increased to 44%.
Non plug-in hybrids make up 52% of the
remaining fleet.
E-waste and network
recycling
Spark has a comprehensive programme for
managing end-of-life network equipment
and technology. This is separated into
different waste streams – such as mobile
phones, printed circuit boards, copper
cables, lead batteries and all types of metals.
The different items are sorted, processed by
our recycling partners and then some
components are sent overseas for recycling,
reselling, or reusing.
In FY21 we recovered a total of 638 tonnes
of e-waste, an increase of 27% on last year.
Of this, 132 tonnes was network e-waste
(down 33% on FY20), and 506 tonnes was
metals, cables, and batteries (up 67%),
mainly due to the replacement of exchange
batteries and associated infrastructure. We
continue to improve our recycling
collections focusing on education within
Spark and working with some of our larger
customers to support them to responsibly
recycle their surplus equipment.
One of our new fleet
electric vehicles.
Mobile phone recycling
Spark is a member of the Telecommunication
Forum’s (TCF) RE:MOBILE product
stewardship scheme. The scheme takes
unused mobile phones, and either
refurbishes and on-sells them in overseas
markets or recycles them. Any profits from the
scheme are donated to the charity
Sustainable Coastlines.
In the past year electrical and electronic
products were designated as Priority Products
under the Waste Minimisation Act 2008.
Designation as a priority product means that
an accredited Product Stewardship scheme
must be implemented to manage waste
streams associated with the product
categories. The RE:MOBILE scheme has been
accredited by the Ministry for the
Environment under the requirements of the
Waste Minimisation Act. The Priority Product
designation has led the broader consumer
electronics industry to engage around the
development of a common consumer
e-waste scheme. We are engaging in this
consultation process through the TCF.
In FY21 Spark recycled 28,715 mobile
devices through the RE:MOBILE scheme, up
from 24,929 in FY20. We are working with our
industry partners and the TCF to boost the
awareness of the scheme and overcome the
barriers consumers experience in recycling
their devices.
In the past year the Spark Foundation also
funded the Recycle A Device (RAD) scheme
to collect and refurbish used laptops for
students and others in need of a device.
See page 44 for more information.
41
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Creating value for
Our communities
We work alongside New Zealand
communities to harness the power of
technology and create a positive digital
future for all. Our products and services
help our communities to stay connected
and enable the provision of community
services. Beyond the direct impacts of our
products we want to play a bigger role in
building healthy, connected, and
equitable communities.
Digital Equity
The role of digital technology in New Zealand’s
recovery and transformation brings the issue
of digital equity into the spotlight. We want to
create a positive digital future where every
Kiwi can prosper. Spark’s commitment to
digital equity is clearly outlined in our
three-year strategy with a bold target to
connect 35,000 households in need by the
end of FY23.
Our digital equity efforts are guided by the
Government’s Digital Inclusion Blueprint,
which identified four elements of digital
inclusion: motivation, access, skills and trust.
Spark Foundation has grounded its strategy
in these insights, focussing on the areas it can
make the biggest difference through its
funding: digital access, digital skills and
pathways, and digital wellbeing.
During FY21, Spark worked on a number of
collaborative initiatives with government,
industry, and the private sector. We continued
our work with the Digital Equity Coalition for
Aotearoa (DECA), signing up to Internet NZ’s
Five Point Inclusion Plan, and signing up to
the Digital Boost Pledge – a collaborative
effort with MBIE and the private sector to
boost the digital skills and capabilities of SMEs.
Social + human capital
42
Spark New Zealand Annual Report 2021
Creating value for Our communities
Spark Foundation
Spark’s community work is led by Spark
Foundation, which has a single-minded focus
on digital equity. The Foundation’s vision is
that no New Zealander is left behind in a
digital world.
Spark Foundation allocates funding for
programmes through a strategic partnership
approach, focusing on working with
organisations whose work is aligned to
improving digital equity for Aotearoa. Some
of the Foundation’s key partnerships include:
Digital Skills and Pathways
• Take2: A programme that aims to break
the cycle of crime through technology.
Take2 teaches incarcerated individuals to
code, enabling meaningful employment
opportunities once they are released.
Hihiko Te Rawa Auahau: Delivered by Toi
Kai Rawa, the Bay of Plenty’s Māori
economic development agency,
innovation hubs will be embedded into
30 Māori communities across the wider
Bay of Plenty over the next the years.
• Digital Natives Academy: A not-for-profit
based in Rotorua that aims to create
career pathways for whānau who don’t
have access to technology, by offering a
supportive and safe environment to learn,
and free courses in areas like digital
wellbeing, game design, and animation.
• Digital Future Aotearoa: Digital Future
delivers a range of programmes
including Code Club (a nationwide
network of over 400 coding clubs for
kids), The Electric Garden (a
programme for years 5–8 students that
teaches kids about digital technologies
through the garden), and Recycle A
Device (see page 44).
Digital Wellbeing
• Te Iwi Matihiko: A values-based
approach to digital wellbeing that
draws from the Te Whare Tapa Whā
model of health but designed for
today’s youth. The programme aims to
introduce tamariki (9-11yrs), rangatahi
(12yrs+) and pakeke (adults) to the key
tools they will need to safely navigate
social media and online gaming. Te Iwi
Matihiko was developed by Digital
Natives Academy.
• The Light Project: This is a pilot project
that aims to help youth, their whānau,
schools and wider communities to
navigate the challenges presented by
online pornography. It addresses one
of the biggest barriers to digital equity
amongst some New Zealand families
– a fear that the internet might cause
harm to tamariki and rangatahi.
Connecting our
communities
Skinny Jump
Spark Foundation supports the delivery of
Skinny Jump by managing the partnerships
that deliver the programme in the community.
Jump is a not-for-profit wireless broadband
service for those who find cost is a barrier to
having an internet connection at home. The
service is entirely prepaid, so there are no
long-term contracts or credit checks needed,
and all it takes to get set up is registering
through a partner and plugging in
the modem.
Skinny Jump is available through a
community partner network, which is
overseen by Digital Inclusion Alliance
Aotearoa (DIAA) and includes 284 local
partners nationwide spanning community
libraries and community hubs amongst
others. Skinny Jump currently has 15,121
1
customers using this service.
Our aspiration for FY21 was to reach 20,000
homes, however this target was not achieved.
We proactively manage the number of
wireless broadband customers we have by
location, to ensure all customers have a good
user experience on our network. During the
year we discovered that some areas of
need are at capacity. To remedy this, we are
prioritising the rollout of our 5G network
in these areas, and upgrading 4G at the
same time, to boost capacity for Skinny Jump
in FY22.
Barriers to digital equity extend well beyond
network capacity and access and can include
challenges such as a lack of digital skills, trust
in technology, and the motivation to get
connected. To better understand our Skinny
Jump customers and further barriers to their
participation, Spark Foundation and DIAA are
currently conducting customer interviews to
understand the key drivers of inactivity.
Previous research identified cost can remain a
barrier, even at a very low investment level
(such as $5 for Jump). As a result, the
Foundation is also trialling providing
customers with 15GB of free data each month
to ensure a level of access regardless of
ability to pay.
1 To be an active connection, data must have been used in the past 30 days.
43
Whakaahu whakamua
Spark New Zealand Annual Report 2021
In FY21 Spark Foundation established two
new partnerships to support the growth of
Skinny Jump in the community.
At the start of the school year, a half-a-million-
dollar fund was launched in partnership with
Spark network supplier, Ciena, to provide
Jump free to eligible students in decile 1 and
2 high schools across New Zealand. The
‘Ciena Jump for Students Fund’ gives eligible
students a free Skinny Jump wireless modem
and broadband connection – including
150GB of free data per month, until the end
of the school year.
In June, Spark Foundation announced the
‘Awhi Matihiko: Red Cross Digital Settlement
Package’ – a collaboration with New Zealand
Red Cross, Internet NZ, and Digital Inclusion
Alliance Aotearoa to empower new refugees
with digital access. The package includes a
Skinny Jump connection with data paid for
12 months (or a fixed line connection if Jump
is not available at their address), a laptop,
and if required, digital skills training.
Ciena Jump for students fund
$500,000
committed to offer free Jump connections
Recycle A Device (RAD)
500
laptops donated to communities in need
Recycle A Device
Recycle A Device (RAD) is a Spark Foundation
funded programme that takes second-hand
laptops donated by businesses and
households; teaches local high school
students to refurbish them; and then gets
them into the hands of those who need them
the most.
The result is an end-to-end process of device
collection, refurbishment, distribution, and
disposal that enhances digital equity at every
level – providing highly sought-after tools,
access, and skills to high school students,
while also offering the added environmental
benefit of diverting e-waste from landfill by
giving these laptops a second life. Once
devices have been refurbished, they are
transferred to students within the school
community itself, or to other community
organisations for distribution to people in
need. As well as Spark Foundation funding,
Telegistics – Spark’s ICT and logistics business
– has partnered with RAD providing all
logistics support, and Spark New Zealand has
committed 500 laptops into the programme
in 2021.
15,121
1
active connections
280
community partners
Skinny Jump
1 To be an active connection, data must have been
used in the past 30 days.
44
Spark New Zealand Annual Report 2021
Creating value for Our communities
Connecting our people to
our communities
Spark Volunteer
Spark employees can take one volunteer day
each year, and Spark Foundation encourages
skills and mission-based volunteering.
Skill-based volunteering means our people
focus on opportunities that take advantage of
their specialised skills and talents to assist
not-for-profits. Mission-based volunteering
means volunteering with organisations whose
work aligns with the purpose of Spark – to
help all of New Zealand win big in a
digital world.
Spark Foundation works with our people to
help them find an appropriate skill or
mission-based volunteering opportunities.
Some of the organisations that our people
volunteered for over the year include Lifeline,
Summer of Tech, Shadow Tech, Hatch
and Take2.
We are currently reassessing our volunteering
programme to align it with our focus on
digital equity as an organisation and to
provide more opportunities for our people to
match their skills with organisations in need.
In FY21 Spark Foundation worked with
Volunteering New Zealand on a series of
workshops to reimagine the future of
volunteering at Spark, which we will explore
further in FY22.
Volunteer leave days used in FY21
Total staff eligible
for Volunteering:
4,358
(2020: 4,383)
Total employee
participation:
440
(2020: 501 days)
% of Employee
participation:
10%
(2020: 11%)
Spark Give
Our payroll giving programme, Spark Give,
enables our people to donate to schools
and charities via their pay. Spark
Foundation matches the amount
employees donate dollar-for-dollar up to
$500 per employee per annual year.
Spark Give results for the year
Employee Donations:$466,022
(FY20: $422k)
Spark’s Matching:$179,486
(FY20: $173k)
Number of employees
participating:
486
(FY20: 488)
Engouraging greater use of Te Reo in
our communities through Kupu
As part of our support for Māori
language week, we continued to
promote our Kupu Māori language app
and encourage greater use of Te Reo by
New Zealanders. To use Kupu, users
simply take a picture on their mobile
phone and Kupu will use image
recognition to identify the object in the
picture and provide a Te Reo Māori
translation for it.
45
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Our Board
1.
3.
5.
4.
6.
7. 8.
2.
1. Justine Smyth, CNZM
Chair
Justine joined the Board of Spark New
Zealand in December 2011 and became
Chair in 2017. She has extensive experience
in governance, mergers and acquisitions,
taxation and financial performance of large
corporate enterprises, as well as actively
investing in small and medium enterprises
(SMEs). Her background is in finance and
business management, having been a Partner
with Deloitte and Group Finance Director at
Lion Nathan. She is currently a director of
Auckland International Airport Limited, and
Chair of The Breast Cancer Foundation New
Zealand. Justine has a Bachelor of Commerce
from the University of Auckland and is a
Fellow of Chartered Accountants of Australia
and New Zealand and a Chartered Fellow of
the Institute of Directors. In 2020 Justine was
appointed a Companion of the New Zealand
Order of Merit for services to governance
and women.
2. Alison Barrass
Non-executive Director
Alison joined the Board in September 2016.
She brings a broad range of skills, including
knowledge and expertise in the fast-moving
consumer goods (FMCG) sector and in
governance, leadership and marketing-led
innovation. Her background includes 30 years
experience at major international FMCG
companies, including PepsiCo, Kimberley-
Clark, Goodman Fielder and Griffins Foods.
She is currently a director with GWA Group,
Heilala Vanilla, Rockit Global, Zespri and is
Chair of Tom & Luke and Babich Wines.
Alison has a Bachelor of Science from the
University of Southampton and a Business
Diploma in Marketing from the University
of Auckland.
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Spark New Zealand Annual Report 2021
Our Board
3. Paul Berriman
Non-executive Director
Paul joined the Board in December 2011,
bringing over 35 years of international
experience in telecommunications, media
and convergence. Until January 2021 he was
Group Chief Technology Officer of the HKT
Trust, where he was responsible for leading
the group’s product and technology roadmap
and strategic development. Prior to this he
was Managing Director of management
consultancy Arthur D. Little in Hong Kong and
he has held roles in Reuters and several major
Hong Kong service providers. In 2009 Paul
was recognised by the IPTV World Forum
with its Special Merit Award for Outstanding
Industry Contribution and in 2008 he was
listed as one of the Global Telecoms Business
Magazine’s top 100 “most influential persons
in telecoms”. He is a Chartered Engineer who
holds a Bachelor of Science in electro-
acoustics from the University of Salford (UK)
and a Masters in Business Administration
from the University of Hong Kong. Paul is a
director of Rain Networks in South Africa, and
a former director of the global Next
Generation Mobile Networks Alliance of
mobile network operators.
4. Warwick Bray
Non-executive Director
Warwick joined the Board in September
2019. He brings over four decades of
experience in the international
telecommunications, technology and media
sectors, most recently in senior executive
roles at Telstra. During his nine years at Telstra
up until 2018, Mr Bray’s executive roles
comprised Chief Financial Officer, Group
Managing Director Product, Executive
Director Mobile and Head of Corporate
Strategy. Earlier in his career, he was a
managing director at JP Morgan (London)
and Dresdner Kleinwort Wasserstein
(London) in telecommunications equity
research. He also worked at McKinsey &
Company in Europe, advising
telecommunications companies on strategy,
regulation and operational improvement, and
as a network systems engineer at Hewlett
Packard. Mr Bray has served on the GSMA
strategy committee, the boards of Hong
Kong mobile business CSL and Australian
pay TV operator Foxtel and as Chairman of
the Australian Mobile Telecommunications
Association. He holds a Bachelor of Science
(Hons) and a Masters in Business
Administration from the University
of Melbourne.
5. Charles Sitch
Non-executive Director
Charles joined the Board in December 2011.
He has more than 20 years’ experience in
driving business strategy, having worked for
McKinsey & Company from 1987, where he
became senior director in 2010, primarily
working with CEOs and boards on strategy
and operations turnarounds, before retiring
in 2010. Since 2006 he has been involved in
various new business ventures. Charles was
previously Chairman of the Board of Trinity
College at the University of Melbourne. He
holds a Masters in Business Administration
from Columbia Business School and a
Bachelor of Laws and a Bachelor of
Commerce from Melbourne University. He is
also a Graduate of the Australian Institute of
Company Directors.
6. Jolie Hodson
Chief Executive and Executive Director
Jolie joined the Board in September 2019.
As Chief Executive Jolie is responsible for
ensuring Spark has a sound strategy and
solid execution, while building a leadership
team around her and a business that is able
to adapt to the fast-changing world of digital
services. Jolie first joined Spark in 2013 as
CFO, and in subsequent years held the roles
of CEO Spark Digital and Customer Director.
Over this time she played a pivotal role in
transforming Spark from a legacy telco to a
growing digital service company, and was
appointed Chief Executive on 1 July 2019.
Prior to joining Spark Jolie worked for 20
years in a range of senior finance roles for the
Lion Group and Deloitte. She has a Bachelor
of Commerce from the University of
Auckland, and is a Fellow of Chartered
Accountants of Australia and New Zealand.
7. Pip Greenwood
Non-executive Director
Pip joined the Board in April 2018, bringing
significant experience in capital markets,
mergers and acquisitions,
telecommunications and governance. She
was formerly interim CEO of Russell McVeagh
and a senior partner at the firm, with over ten
years’ experience on the firm’s Board
including time as its Chair. Over the years Pip
has advised on many high-profile New
Zealand corporate transactions that have
changed the face of industries. She was a
member of the New Zealand Takeovers Panel
from 2007 to 2011 and is a current director of
Fisher & Paykel Healthcare, Westpac New
Zealand (Chair from 1 October 2021), The a2
Milk Company and a trustee of the Auckland
Writers Festival. Pip has a Bachelor of Laws
from the University of Canterbury.
47
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Strategic role of the Board
Spark’s Board plays a critical role in helping to
guide and test company strategy, by
engaging in an ongoing conversation with
the Leadership Squad around key strategic
decisions. These decisions are in relation to
the long-term strategic planning and
direction of the business, including non-
financial performance and our ability to create
value in the medium and long term. This
includes customer experience, environmental,
social and governance measures.
As the body elected by shareholders to
protect and enhance the value of Spark’s
assets, the Board has oversight of Spark’s
financials and the annual and three-year
planning processes. Board members engage
in robust discussions with management
around the strategic direction of the business
to test and ensure investment is going
towards the things that will deliver the best
outcomes for the company and shareholders.
This flows through to Spark’s remuneration
policies where there is Board involvement in
setting targets and hurdles for short-term and
long-term incentives.
Board changes
After six years as a director of Spark, Ido
Leffler stepped down from the Board at our
Annual Meeting of Shareholders in
November 2020. We announced two further
Board changes following the end of FY21.
David Havercroft will become a non-
independent, non-executive director on the
Board from 1 October 2021. We are
delighted to have someone of David’s calibre
joining our Board. His skills and significant
industry knowledge and experience will be
vital as Spark continues to adapt and grow in
today's uncertain context. We also announced
that Pip Greenwood will not be seeking
re-election at our Annual Meeting of
Shareholders in November, after taking on
the role of Chair at Westpac New Zealand
from 1 October 2021. The Spark Board
thanks both Ido and Pip for their valuable
contribution over what has been a very
important period of transformation for Spark.
Future Director
Spark also supports the Future Directors
programme and appointed its second Future
Director Ana Wight effective 1 February 2020
for an initial period of 12 months. This
appointment has been extended until
31 December 2021.
Board succession
Spark’s Board has an appropriate mix of
tenure, skills, diversity and experience. This
allows the Board to be ambitious and to
deliver on those ambitions and to enable
Spark to tackle the challenges and
opportunities of the digital era.
The Board skills matrix on the following page
outlines the qualifications, capabilities,
geographical location, tenure and gender of
each member of the Board.
There is an ongoing Board succession
programme, which is focused on finding new
directors with relevant skills and experience
that complement the diverse perspectives
already represented around the table.
48
Spark New Zealand Annual Report 2021
Our Board
Definitions of categories of capability:
Strategic knowledge for scale telco/
technology businesses: experience as a
senior executive in, or as a strategy
professional advisor to, large telco/
technology businesses.
Financial/commercial: a strong accounting
and finance background, most likely being a
chartered accountant, having held the
position of CFO in a significant publicly listed
company, or leadership position in
professional services/advisory firm.
Risk management/legal/regulatory and/or
sustainability: experience in identifying and
mitigating both financial and non-financial
risks/extensive legal experience/experience
with influencing public and regulatory policy
decisions and outcomes/experience in the
design and application of sustainability
frameworks.
Customer insight/retail/brand: experience as
a senior executive responsible for driving
customer experience including by effectively
using insights, optimising customer journeys
and building brand experience for customers
People leadership and culture: experience as
a CEO of a significant publicly listed company
or large private stand-alone company.
Leadership skills including the ability to set
appropriate organisation culture.
Listed company governance: listed company
Board experience other than Spark,
experience with sophisticated
governance structures.
Capital markets/capital structure: strong
knowledge of debt and equity capital
markets, and experience with mergers and
acquisitions/experience dealing with a range
of funding sources and capital
structuring models.
Digital/data/media/new markets: experience
as a senior executive in, or as a professional
advisor to, digital, data and/or media
business, or businesses in emerging new
markets. Experience in the use of digital
channels and the latest innovative and
digital technologies.
Board skills matrix
Justine
Smyth
Alison
Barrass
Paul
Berriman
Charles
Sitch
Pip
Greenwood
Warwick
Bray
Jolie
Hodson
Qualifications
BCOM, FCA,
CFINSD
BSC, DIP BUS,
MARKETING
MBA, BSC,
CENG
MBA, LLB,
BCOM
LLBBSC, MBABCOM, FCA
Capability
Strategic knowledge for scale telco/technology businesses
Financial / commercial
Risk management / legal / regulatory and/or sustainability
Customer insight / retail / brand
People leadership and culture
Listed company governance
Capital markets / capital structure
Digital / data / media / new markets
Geographical locationNZNZHong KongAustraliaNZAustraliaNZ
Tenure (years)9.74.99.79.73.31.91.9
GenderFFMMFMF
The Board skills matrix identifies the predominant skills of each Director.
The Board has specifically limited high capability and medium capability to both having a maximum of two areas for each Director.
KEY
: High Capability Medium Capability
49
Whakaahu whakamua
Spark New Zealand Annual Report 2021
1.
3.
5.
7.
2.
4.
6.
8.
Our Leadership Squad
1. Melissa Anastasiou
General Counsel
As General Counsel, Melissa leads Spark’s legal
and compliance functions, providing Spark with
strategic legal and commercial guidance,
ensuring the business acts lawfully and with the
utmost integrity. She has also played a pivotal
role in leading out Spark’s diversity and inclusion
programme. Melissa joined Spark in 2009 and
undertook a range of legal roles across the
organisation before being appointed as Group
General Counsel in 2012. Prior to joining Spark
Melissa spent a number of years as a Senior
Legal Counsel for UK mobile provider Telefonica
O2. She also has extensive experience working
for leading corporate law firms in Auckland and
the UK. Melissa has a Bachelor of Laws from
Victoria University of Wellington.
2. Matt Bain
Marketing Director
As Marketing Director Matt brings his
outstanding digital marketing and customer
experience skills to place the customer right at
the centre of Spark’s thinking and actions. Matt
was previously based in Amsterdam as
European Managing Director for agency AKQA
– one of the world’s leading innovation and
brand experience agencies, with responsibility
for 500+ employees across five countries. Over
an 18-year career Matt has built an impeccable
international reputation with some of the
world’s greatest brands – Nike, Heineken, Mini,
Rolls Royce, Siemens, EA Sports, Audi, Phillips,
Tommy Hilfiger and KLM amongst others. He
holds a Master of Commerce from the
University of Auckland.
3. Mark Beder
Technology Director
As Technology Director Mark steers the big
technology choices and deployments that
ensure Spark offers customers the best
data connectivity experience possible. This
means optimising significant investments in
data networks, mobile, and IT infrastructure
to set Spark up for growth and enable
New Zealand’s digital future.
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Spark New Zealand Annual Report 2021
Our Leadership Squad
Mark became Chief Operating Officer in
2016, after joining the business in 2003. Since
2003 he has held several senior technology
roles across the business. He has successfully
driven major initiatives and innovation,
including Spark’s Mobile network evolution
and the ongoing replacements of the PSTN
with a new Converged Communications
Network (CCN).
Before joining Spark Mark worked as a Senior
Manager for Ernst & Young Consulting in
Auckland. He has a Bachelor of Commerce
from the University of Auckland.
4. Leela Gantman
Corporate Relations Director
Leela joined Spark as Corporate Relations
Director in January 2020, bringing with her
close to 20 years’ experience in corporate
and agency roles in New Zealand and
Australia.
Prior to joining Spark Leela was Head of
Communications at Fletcher Building, and
before this External Relations Director at
beverages group Lion in Australia.
As Spark’s Corporate Relations Director Leela
is responsible for reputation management,
internal communications, government,
industry, and community engagement and
the charitable activities of the Spark
Foundation. She also oversees the Company’s
sustainability strategy and serves as a Trustee
on the Spark Foundation Board. Leela holds a
Bachelor of Arts in Communications from the
University of Technology Sydney.
5. Stefan Knight
Finance Director
Stefan was appointed Finance Director in
December 2019. Stefan has been with Spark
since 2003 and has worked across a range of
finance and business performance related
roles. He played a key role over recent years
in important Spark initiatives, including the
Turnaround and Quantum business
improvement programmes and, more
recently, was part of the leadership group that
helped shape the organisation’s move to an
Agile way of working.
Stefan is a Chartered Accountant and began
his career at Deloitte working across both
Audit and Corporate Finance. Stefan has a
Bachelor of Commerce in Accounting and
Finance from the University of Auckland
6. Grant McBeath
Customer Director
As Customer Director at Spark New Zealand,
Grant leads the customer facing teams and is
focused on developing clear insight into what
customers value and helping the teams
deliver it.
Grant joined Spark in 2013 as General
Manager of Sales for the Spark Consumer
and SMB business. The role grew and he
picked up the Consumer and SME Sales,
Service and Operations teams, and he had a
period of six months as acting CEO for Spark
Home, Mobile and Business in 2018 prior to
Spark transitioning to Agile ways of working.
Prior to working for Spark, Grant held a
number of global roles at Nokia throughout
Asia, and other global roles with Chevron
Texaco, Coca-Cola and Cadbury in NZ. Grant
completed a BCom at the University of
Auckland, and also completed his MBA from
the Helsinki School of Economics.
7. Heather Polglase
Human Resources Director
Heather was appointed HR Director in
September 2019. Heather joined Spark in
2013 and has over 20 years international
experience as an HR professional, with a
proven track record for business
transformation, talent management,
leadership development and succession
planning across a range of industries
including FMCG, retail, hospitality,
technology, and telecommunications.
At Spark, Heather has held various senior HR
positions and delivered a number of critical
initiatives, including being a key architect of
Spark’s Leadership and Development
programme to build high-performing teams
and leaders.
Prior to joining Spark, Heather was a senior
HR leader for almost a decade within
Progressive Enterprises then spent two years
in Australia leading HR, People Strategy &
Change Management at Dan Murphy’s. She
has a Bachelor of Business Studies Degree
(Hospitality Management) from Auckland
University of Technology.
8. Tessa Tierney
Product Director
As Product Director Tessa is responsible for
designing and delivering products and
service experiences that customers value.
Tessa is also responsible for shaping Spark’s
investments and maturing capability in digital,
IT, data, and experience design to deliver on
future business needs.
Tessa joined Spark in November 2015 as the
Manager of Brand, Communications and
Events for Spark Digital before moving on to
become Business Manager. In 2017, Tessa
joined the team that was responsible for
successfully transitioning Spark into an Agile
organisation and is regarded as one of
New Zealand’s leading Agile and product
development practitioners.
Tessa brings to the role more than 16 years of
experience in information and
communication technologies, having
previously held a variety of roles at Vodafone
New Zealand. She has a Diploma in
Communications Studies from Manukau
Institute of Technology.
51
Whakaahu whakamua
Spark New Zealand Annual Report 2021
To achieve our purpose, Spark must
successfully execute our business strategy
while maintaining high standards of
operational performance and
corporate governance.
Maintaining high standards
of corporate governance
The Board regularly reviews and assesses
Spark’s governance structures and processes
to ensure that they are consistent with
international best practice, in both form
and substance.
Spark has complied with the
recommendations of the NZX Corporate
Governance Code and substantially complied
with the principles and recommendations of
the ASX Corporate Governance Councils
Principles and Recommendations (4th
Edition) for the FY21 reporting period. You
can read about how we have complied with
these recommendations and principles in
Spark’s Annual Corporate Governance
Statement 2021 at www.sparknz.co.nz/
about/governance/
On 29 March 2021 Spark published its first
Modern Slavery Statement, which sets out
how we are managing and mitigating any
risks of modern slavery in our operations and
supply chain. Our approach to managing
modern slavery risks is supported by our high
standards of operational performance,
corporate governance and risk management.
Our FY21 Modern Slavery Statement can be
found on our website at: www.sparknz.
co.nz/about/governance. Copies of, and
details about, Spark’s corporate governance
policies, practices and processes can be
found on our website at: www.sparknz.
co.nz/about/governance
Our governance and
risk management
Our approach to tax
In the past year Spark published its Group Tax
Strategy to provide clarity and transparency on
our approach to tax. The digital economy is an
important and growing sector in New Zealand,
and the taxes we pay are an important source
of government revenue. Spark’s tax strategy
follows the spirit of the law in addition to the
pure interpretation of the law. We believe that
it is important that those in the sector pay their
fair share of taxes to support the ongoing
investment required for New Zealand’s
long-term success. This includes the provision
of infrastructure, education, social and
environmental services we rely on as a
New Zealand-based company.
In FY21 Spark’s effective tax rate was 30.6%,
which is higher than the New Zealand
domestic tax rate of 28%. This is primarily
because Spark's share of underlying earnings
of Southern Cross are taxable under New
Zealand's international tax rules, while in FY21
no non-taxable dividends were received from
Southern Cross (see note 6.1 of the financial
statements for a breakdown of income tax
expense). As a large business, Spark makes a
0
20
40
60
80
100
120
140
160
180
200
$ MILLION
OVERSEAS
TAX PAYMENTS
TOTAL INCOME
TAX PAID
NZ INCOME TAX
CONTRIBUTED
TAX CREDITS
(INC. FITC)
PROVISIONAL
TAX PAID
$188m
($5m)
$183m
($47m)
($136m)
ESG performance and
reporting
Spark is committed to the continuous
improvement of our environmental, social,
and governance (ESG) performance. We seek
to present a clear and transparent assessment
of our ESG performance by considering the
GRI Standards and Integrated Reporting
International <IR> Framework in our
annual reporting.
In the past year we established a cross
functional group accountable for
environmental and ESG performance,
reporting and risk management.
We established an Environmental Policy, and
integrated this into governance, and
completed a review of ESG reporting
benchmarks. This informed a decision to
prioritise participation in the Corporate
Sustainability Assessment (CSA). The CSA is a
comprehensive benchmark of our ESG
maturity against our peers, with good
coverage against our material sustainability
issues. The CSA is now a part of S&P Global
and is the assessment framework behind
inclusion in the Dow Jones Sustainability
Index (DJSI) global series. We will also
continue our participation in the Carbon
Disclosure Project (CDP), which is aligned to
the CSA.
Breakdown of income tax payments FY21
52
Spark New Zealand Annual Report 2021
Our governance and risk management
significant contribution to New Zealand’s tax
base. Spark contributed $183 million of
New Zealand income taxes during FY21
(before any tax credits were applied).
In addition to income tax paid by Spark, the
Spark Group has payment and collection
obligations across a wide range of tax types
resulting in an excess of $599m of taxes
under management during FY21.
Spark has a limited number of international
investments and does not incorporate any
inappropriate use of tax haven countries.
These investments are subject to all
applicable New Zealand and/or international
tax rules that specifically include transfer
pricing where required. This includes one
wholly owned subsidiary – Teleco Insurance
Limited, Spark’s group insurance company -
that is registered in Bermuda, but a tax
resident in New Zealand. Spark also has
non-controlling shareholdings in the
Southern Cross Cables group of companies
that utilises companies registered in Bermuda
the defined governance structure that
supports its application across Spark. More
information on the roles and responsibilities
are included in the table on page 118.
Strategy and objective setting
This domain focuses on integrating risk
management into strategy setting and
business planning. Examples include the
consideration of risks and opportunities to
business objectives when making strategy
decisions and checking in with every function
using a systematic method as part of the
Quarterly Business Review Process. Each
quarter the Leadership Squad communicate
the top priorities for the business to the
Wider Leadership Group, and support
execution with strategic guidance and access
to extra resources as needed.
Performance
This domain involves maintaining a portfolio
view of risks under active management.
Examples include maintaining a principal risk
profile that is used by the Leadership Squad
and the ARMC to understand relevant risks
and how they are being managed. It also
focuses on the quality of the embedded risk
management practices that are used within
functions across the business. These two
views enable in-depth analysis of relevant
business risks and how they are being
managed from a top-down and bottom-
up perspective.
Review and revision
This domain involves identifying and
implementing opportunities to continuously
improve risk management practices.
Examples include regular assessments of the
policy and framework.
Taxes under managementand the United States. See our listings on
page 79.
The full tax strategy is available online:
www.sparknz.co.nz/about/governance/
Managing risk
Our risk policy and framework helps people
to manage uncertainty and adapt to
challenges as they pursue Spark’s strategy.
Oversight by the Audit and Risk Management
Committee (ARMC) and the diligent
application of the defined roles and
responsibilities across the business ensures
Spark’s risk management system
remains effective.
The policy and framework are benchmarked
to COSO ERM 2017 (COSO), a leading
practice risk management standard. Spark
has used this as its primary standard to
benchmark against since July 2018. Spark
also uses other leading risk management
standards like ISO31000: 2018 and specific
standards and guidance, where available, to
benchmark and inform it risk
management practices.
Spark’s framework is structured into five risk
management domains that all work together
to enable a robust system for risk
management. Below is a description of each
domain and some examples of activities by
domain to help understand the framework in
more depth.
Governance and culture
This domain reinforces the importance of risk
management and influences how people
apply the framework. Managing risk is
embedded in Spark’s organisational
structure, its functional activities, and is
supported by specialist resources from the
Risk Team. Examples include the policy and
FOREIGN INCOME TAX
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M
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Whakaahu whakamua
Spark New Zealand Annual Report 2021
Information, reporting and communication
This domain focuses on guiding Spark on
how to use the policy and framework.
Examples include information pages, access
to support channels, and education sessions.
The policy and framework are assessed
annually, and externally every three years to
ensure they remain effective. All assessment
results and agreed actions are shared with
the ARMC to ensure they remain informed
about the status of the policy and framework.
Spark’s principal business risks
Principal risk profiles are updated twice
yearly. The last update was finalised in August
2021. The principal risk themes identified
were:
Estimating impacts and responding with
balanced judgement to COVID-19
Estimating the impacts that Covid-19 will
have on the New Zealand economy and
Spark continues to be challenging. Risk
factors include over or under-estimating the
revenue impacts, not taking advantage of
opportunities, and preserving the health and
safety of our people. With the vaccine rollout
progressing and strict border controls
continuing, New Zealand should remain
protected. However, international
developments and recent lockdowns in
Australia are a stark reminder how quickly it
can turn. To mitigate this risk, Spark has
identified probable scenarios and response
plans, and tuned its performance monitoring
to track measures that indicate if anticipated
impacts are arriving so that we can respond
quickly. Investment into robust procedures for
government alert level changes and the
ability for people to work remotely enable
Spark to put our people’s safety at the centre
of decision making.
to maintain appropriate operational controls
for Privacy. External reviews have helped to
ensure that critical elements for our security
risk management remain healthy. These
reviews also included security maturity
validations and security device configuration
audits to ensure our processes meet
expected standards.
Cost optimisation while maintaining
operational standards
While executing net cost reduction is a
strength for Spark, it needs to be done
sustainably so that operational delivery
standards for customers are maintained.
Inherent risks include unintended
consequences from initiatives, brand
reputation damage, and accelerated
regulatory intervention. To mitigate this risk,
the Leadership Squad has established a
formal delivery structure. This structure
includes strong governance and all initiatives
using road-tested execution methodologies.
Trajectory toward targets is measured, which
in turn enables intervention and course
corrections when required.
Delivering Spark’s strategy with skill
shortages in New Zealand
An emerging risk for Spark is access to the
people and skills it needs to execute on its
business strategy. Competition for skilled
people is high and finding new talent to join
Spark is becoming more difficult with low
unemployment. Mitigation strategies to
ensure we have access to specialist skill sets
include partnering to attract and retain
people, continued focus on engaging
employee experiences and benefits,
investment in development and identifying
where team members can be upskilled from
existing roles into new areas of opportunity.
Management is very aware of this risk and is
actively managing it across specifically
impacted business teams.
Executing simplification projects
Spark plans to continue simplifying its
portfolio of products and migrate customers
to new plans. This objective introduces
revenue and customer experience risks
because execution requires cooperation by a
complex set of stakeholders (e.g. customers,
regulatory bodies, suppliers, and internal
teams) and retiring legacy products is
challenging. In FY21, Spark made good
progress maturing its approach and
capability in planning and executing
simplification projects, such as retiring legacy
plans. Close monitoring by Management
enables risk and issues to be worked through
effectively, particularly when trade off
decisions are required.
Delivering technology and
network leadership
The use of already established and proven
delivery methods for large-scale network and
technology projects (such as our 5G roll-out)
will help us to manage potential risks created
by delivery of new technologies and will also
sustain our existing technology. With a high
share of operational cost, Spark’s technology
units will also have to continue executing
net-cost reduction while maintaining
operational standards. In addition to cost
optimisation mitigations, technology units
have strengthened operational risk
management to ensure visibility and
coordinate risk response actions.
Maintaining customer trust in our
information security and privacy controls
Evolving external threats, internal changes,
changing legislation, and high expectations
from customers and stakeholders may create
delivery challenges. Security and Privacy
roadmaps jointly created with Agile units and
strong governance involving the Leadership
Squad help to ensure that significant risks are
managed. The Security Tribe is responsible
for critical operational controls to ensure
standards and compliance are upheld. Our
Digital Trust team sets privacy frameworks
and standards that Agile units need to apply
54
Spark New Zealand Annual Report 2021
Our governance and risk management
Business continuity and crisis management
The Business Continuity and Crisis
Management Policy protects customers from
the impact of disruptive events and ensures
value generating activities are resilient and
comply with relevant external standards, for
example Civil Defence and 111 obligations.
Spark’s framework is benchmarked to
ISO22301 and ISO 22313, which are
acknowledged as leading practice standards
for business continuity. It is overseen by the
ARMC in a similar way to the Managing Risk
Policy and Framework. Regular reviews of the
framework are performed by the Risk and
Internal Audit Teams. External reviews and
testing of key elements of the framework
such as the Level One Criss Management
Plan and Team are also done to ensure that
the framework remains effective.
Spark’s business continuity framework
performed well when called upon during the
Covid-19 pandemic. Spark continues to
navigate the pandemic’s impacts such as
unexpected lock-downs, supply chain issues,
access to off-shore talent and resources.
Our continued investment in network
resiliency, as outlined on page 30, also
demonstrates application of the framework
in practice.
Climate-related risk
Climate change poses a risk to our business
due to potential disruption to our operations
and our customers. The Financial Sector
(Climate-related Disclosures and Other
Matters) Amendment Bill proposes a
requirement for all equity and debt issuers on
the NZX to report based on requirements
aligned to the Task Force on Climate-related
Financial Disclosures (TCFD) framework.
We integrated elements of TCFD disclosure
in our FY20 report. This year we completed a
climate risk analysis against two scenarios,
aligned to TCFD guidance. Our Leadership
Squad and Board were engaged on the
design of the risk process and reviewed
the findings.
We will continue to incorporate TCFD
reporting into our Integrated Report,
providing an annual process for the review of
our climate-related financial risks
and disclosures.
Our initial scenario analysis did not identify
any immediate or extreme risks. We do not
intend to complete a full climate scenario
analysis on an annual basis. However, we
have identified a number of areas for future
analysis, including evaluating climate risk in
our supply chain, and reviewing physical
adaptation risk alongside the development of
the national Climate Change Adaptation Act.
Our scenario-based risk
assessment
Our climate risk assessment considered two
scenarios matching those used by the
National Climate Change Risk Assessment
produced by Ministry for the Environment
and aligned to TCFD recommendations:
Scenario 1 – RCP 4.5: A future where early,
ambitious mitigation has limited temperature
change. This identifies risks to Spark from
rapid de-carbonisation, for example from
regulatory intervention, a high carbon price.
Scenario 2 – RCP 8.5: A future where
insufficient early mitigation has led to
significant risk requiring adaptation to rising
temperatures. This identifies risks to Spark
from extreme weather events, sea-level rise,
and knock-on impacts on our operating
environment.
This analysis was undertaken through a series
of interviews with key teams across Spark,
with oversight of the Environment and ESG
Squads. This was supported by a process to
map our infrastructure against publicly
available climate scenario modelling data, to
understand the number and location of sites
that may be of greater risk.
55
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Our scenario-based risk assessment
Impact rating
Our climate scenario risk analysis considered the likelihood, impact,
and urgency of risks using 3, 10 and 30 year time horizons. Using the
same impact and likelihood categories as our standard enterprise risk
management system we identified no risks that met our highest
’Extreme’ risk category, and seven that fell into lower risk
rating categories:
Physical adaption risk Includes impacts on network resilience and future investment, increased weather events, sea level rise,
planning and Resource Management Act (RMA) requirements, and insurance costs.
Rated as high likelihood with
low impact in the 3 year horizon,
growing in impact over the
10 and 30 year time horizons.
We mapped key infrastructure against publicly available climate scenario models. This showed many of the most
extreme climatic changes expected to 2050 are in lightly-populated areas, for example on the West Coast of the South
Island. Most of the population, and therefore much of our network, is in coastal areas. Analysing site proximity to coastal
inundation risk zones, and factoring site elevation, shows only a small number of sites at greater than moderate risk in
2050 under the RCP 8.5 scenario.
In the next two years the RMA will be repealed and replaced with three new acts: the Natural and Built Environments
Act; the Strategic Planning Act; and the Climate Change Adaptation Act (CAA). We expect the introduction of the CCA
will establish a coordinated, national approach to managing climate adaptation risk and tools for businesses to
integrate climate adaptation risk into planning application processes. We will actively monitor RMA reform to inform
our long-term adaptation work.
Supply chain risk Includes increased supply lead times, increased air freight cost, increased supply cost, supply chain
disruption, and increased inventory and working capital.
Rated as high likelihood with
low impact in the 3 year horizon,
growing in impact over the
10 and 30 year time horizons.
The increasing number of extreme weather events across the globe increases the risk of disruption to our supply chain.
Growing competition for resources from emerging climate mitigation technologies such as EVs may also increase cost
and disruption. This is likely to drive increased cost and lead-times on purchasing and require larger local inventory and
working capital to manage risk. This may impact our ability to provide devices to our customers and maintain and grow
our infrastructure.
We have identified a need for further analysis of climate risk in our supply chain, which will be actioned alongside
broader continual improvement processes to reduce risk and deliver our sustainability objectives.
Provision of climate
related services
Includes provision of monitoring and control devices over Spark’s IoT network plus other potential
climate related services.
Rated as medium likelihood
with low business impact in the
3 year horizon, growing to
moderate impact in 3-10 years.
Digital technology has the opportunity to enable significant emissions reductions. We provide services that support
digitisation towards a low-carbon economy, but it is difficult to isolate business-as-usual digital transformation from
specific sustainability enablers.
To assess this opportunity we analysed our IoT revenues that are related to climate or sustainability services such as
environmental monitoring services, energy efficiency, metering, or fleet management. This analysis found that
around half of our IoT revenue is associated with these services, and that this share is likely to grow alongside growth
in our IoT business.
In FY22 we will undertake further work to quantify current and potential Spark customer emissions reduction
opportunities and inform future climate and sustainability related services.
SBTi science-based
emissions reduction target
Includes the risk we will not meet
our SBTi target.
Moderate risk.Risk we will not achieve our Scope 1 and 2 reduction target or risk we will be unable to influence 70% of suppliers by
spend to adopt own SBTi-aligned targets.
This risk rating reflects the ambition of our target, which will require significant effort over the next decade. Our
planned actions reduce this risk rating to a ‘low’ rating. See page 39 for information on our SBTi target and plan.
Social disruption
Medium likelihood, low impact
over the 30 year horizon
Low direct risk to Spark, however highlights the national risk of increased inequality as climate-intensive roles are
disestablished and the importance of digital equity in a just transition. See page 42 for our work in digital equity.
Risk to NZ economic activity
Medium likelihood, low impact
over the 30 year horizon
We referenced the Climate Change Commission’s projected cost of action to achieve New Zealand’s 2050 target,
which was approximately 1% of projected annual GDP by 2050.
Climate litigation
Low likelihood, low impact,
across all time horizons
Considered low-risk as Spark is not linked to infrastructure or investments with heavy emissions.
MEDIUM RISK
LOW RISK
HIGH RISK
56
Spark New Zealand Annual Report 2021
Our governance and risk management
Our business relies on over 2,300 local and
global suppliers. Each year we spend around
$2 billion to support our business and meet
our customers’ needs. Our supply chain is
complex, as our direct suppliers often have
suppliers of their own. We work hard to
ensure integrity in our supply chain, using
our Supplier Code of Conduct and regular
business reviews with key suppliers.
We also recognise the importance of doing
the right thing by our suppliers, particularly
our smaller, local suppliers. That includes
paying suppliers in a timely fashion. Our
standard payment terms are the 20th of the
month following the month of the
invoice date.
We manage supplier relationships based on
the strategic importance to Spark and our
customers. This is split across two
management frameworks – Strategic
Partnership Management and Strategic
Supplier Management. Our Strategic
Partnership Management framework is how
we partner with suppliers that directly impact
our customers. The primary goal is to
maintain, grow, and seek out partnerships
that enable beneficial growth in new and
existing markets and provide value-added
services to customers.
Our Strategic Supplier Management
framework allows us to focus on key
relationships by building and maintaining
world-class services with cost leadership and
resilience as a significant focus.
Spark’s Supplier Code of
Conduct
Spark is committed to sourcing our products
and services from suppliers that provide safe
working conditions, treat workers with respect
and dignity and conduct business in an
environmentally and socially responsible
manner. Our Supplier Code of Conduct sets
out the minimum standards we expect from
all our suppliers across labour and human
rights, health and safety, environmental
sustainability, and ethical business practices.
See: www.sparknz.co.nz/suppliers/
All new suppliers are requested to sign up to
the Code as part of their onboarding process.
As part of the evaluation process, the only
suppliers who did not sign up to Spark’s
Code were either global suppliers that had
their own code of conduct, which Spark
deemed acceptable, or suppliers deemed
low-risk based on the services provided and
the nature of the supplier.
If a supplier is unable to meet the
requirements of the Code, we work with them
to implement our process of remediation
plans and timeframes. We have ongoing
conversations with suppliers that are
managed within our framework.
The Supplier Code of Conduct was
introduced in FY18. To embed the Code we
worked with our top 100 suppliers by
contract value to ensure they were signed up
to the Code or could demonstrate they were
adhering to an existing equivalent code of
practice. We also used the Code as a basis for
four comprehensive audits of large, offshore-
based suppliers. These were significant
suppliers operating in high-risk locations,
according to FTSE4Good criteria.
In FY19 we had committed to four further
‘deep dive’ audits in FY20, which were not
completed at the time due to a shift in our
focus to incorporating environmental, social,
and ethical considerations into our supplier
selection processes and Covid-19 restrictions,
which prevented travel and on-site visits.
However, these four supplier audits were
underway in FY21 and completed at the start
of FY22. From FY20 we began including a
scored section in our Request for Proposal
(RFP) process where we seek information
from suppliers on their non-financial
performance and credentials.
In addition to the Code, in Q3 of FY21 we
published our inaugural Modern Slavery
Statement, covering the 12 months to 30
June 2020, which reaffirmed our commitment
to upholding human rights – both within our
own operations and throughout our supply
chain. This means the fair and respectful
treatment of all our people, and a focus on
providing fulfilling and rewarding
employment. It means complying fully with
the law, but also going above and beyond
compliance – acting professionally, ethically,
and responsibly as we deliver customer
outcomes, contribute to the community, and
create shareholder value. We have published
our second Modern Slavery Statement, for
the 12 months to 30 June 2021, alongside
this report – and will continue to align our
reporting on modern slavery with our Annual
Report from this year onwards.
We are committed to taking meaningful
action to identify, mitigate and manage any
modern slavery risks and to continuously
improving our approach.
See: www.sparknz.co.nz/about/
governance
Spark also updated our policies due to the
changes in the NZ Privacy Act, which was
effective from 1st December 2020. These
changes meant Spark would have to
proactively inform its customers of any
breaches in its data. This extended to all NZ
companies, but Spark is working to assess
and update its contractual position with all
suppliers including global companies to
ensure this is addressed.
Our suppliers
57
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Spark New Zealand Annual Report 2021
Spark seeks to remunerate our people with
competitive salaries, paying in line with the
market so we can recruit and retain the best
talent. In keeping with our focus on customer
experience, we incorporate customer
satisfaction measures into our
performance incentives.
As a result of Covid-19 there were no annual
salary review increases for all Spark people,
including the Leadership Squad and fees for
the Board of Directors, for FY21. In February
2021, the Board approved a salary review for
FY22 (salaries from 1 July 2021) which was
based on our Contribution Models with
additional allocations for strategic actions
including lifting our minimum full-time salary
to $47,500 – above the Living Wage.
Leadership Squad
remuneration
Remuneration mix
The table below shows the standard FY21
remuneration mix for the Leadership Squad
expressed as a percentage of fixed
remuneration. The Short-Term Incentive (STI)
scheme is expressed at target, and the
maximum payment possible through the
scheme is double the target value. The
Long-Term Incentive scheme (LTI) values
represent the maximum LTI value.
Leadership Squad remuneration
Long-Term Incentive40% of base
Short-Term Incentive50% of base
SalaryBase
Fixed remuneration
All Spark employee packages – including the
Leadership Squad – include a fixed
remuneration component that is set based on
contribution, experience, and market
relativities. Fixed remuneration supports the
attraction, motivation, and retention of highly
skilled executives.
Fixed remuneration generally consists of base
salary. KiwiSaver sits outside fixed
remuneration and as such, employees with
KiwiSaver receive employer contributions on
top of base salary and cash incentives. A
number of Spark-funded benefits, including
medical and life insurances, are also available
to eligible employees on top of
fixed remuneration.
Short-term Incentive Schemes
Spark operates a small number of short-term
incentive schemes, from monthly and
quarterly commission and sales incentive
plans to annual cash-based short-term
incentives. Some employees in specific sales
positions may have a component of their
remuneration subject to individual or
divisional sales performance targets, such
that their total remuneration potential is
directly linked to the acquisition and retention
of profitable business for Spark.
For senior leaders, including the Leadership
Squad, a component of their remuneration
package is at risk in the form of a
discretionary annual cash-based Short-Term
Incentive (STI). Spark’s STI scheme rewards
senior leaders for the achievement of annual
performance objectives, with payments
awarded from a fixed cash pool that is set
based on overall Spark performance against
financial and/or non-financial annual
performance objectives. The actual payment
to individuals is at the sole discretion of Spark
and takes into account contributing factors
such as performance, and the performance of
individual parts of the business.
Eligibility to participate in the STI scheme on
an annual basis is at the discretion of the
company and is targeted at individuals in
senior roles who play a significant role in
driving the overall performance of Spark.
The STI scheme rules contain a clawback
provision that allows Spark to clawback any
payments made under the STI scheme, for a
period of 12 months following the payment.
This clawback provision was used for the
FY20 STI due to revisions in the iNPS score.
During FY21 we changed our iNPS platform
from an external provider to an in-house
solution, which identified additional surveys
that should be included to ensure a more
accurate representation of customer
experience. As a result, the rebased figure is
+22, instead of the +33 reported using a
different methodology in FY20.
Leadership & Board remuneration
58
Spark New Zealand Annual Report 2021
Leadership & Board remuneration
FY21 Short-term incentive scheme outcomes
For FY21 substantively all STI participants
shared the same Spark Group targets
comprising of EBITDAI, customer experience
measures, as well as additional measures
based on our three-year strategy.
The FY21 Group performance outcome, as
approved by the Board, is summarised
as follows:
Performance
metric%OutcomeResult
Group EBITDAI50%72.8%Above target
Customer
Experience
25%14.6%Threshold
met
3-year strategy –
Wireless
Broadband
19%0%Threshold
not met
3-year strategy –
Plan simplification
6%12%Stretch
maximum
Total100%99.4%
Based on the above result, the total FY21
Group performance outcome was
$5.4 million and the available funding pool
for all eligible STI participants across Spark for
FY21 was $5.0 million due to application of
FY20 clawback. Total payments cannot
exceed $5.0 million.
FY22 Short-term incentive scheme target
The mechanics of the FY22 STI will be similar
to FY21. Group results will be the main
determinate of the STI pool, with substantially
all participants sharing the same Group
measures. The FY22 group measures will be a
combination of EBITDAI, customer
experience and our three-year strategy.
Long-term incentive schemes
Spark believes that some senior leaders
should have part of their remuneration linked
to the long-term performance of the
Company, so for the Leadership Squad and a
select group of senior leaders, a long-term
incentive forms part of their remuneration
package. In FY21, Spark operated one main
scheme: the Spark New Zealand Long Term
Incentive Scheme.
FY21 / FY22 Long-term Incentive Scheme
For FY21, members of the Leadership Squad
(including the CEO) and selected senior
leaders were granted options under the
Spark Long-Term Incentive Scheme (LTI).
Under the scheme, participants were granted
options at the start of the three-year vesting
period. The number of options granted
equalled the gross LTI value divided by the
volume weighted average price of Spark New
Zealand shares for the 20 days prior to the
grant date. Subject to satisfaction of the
performance hurdle and continued
employment, at vesting each option converts
to a Spark share based on a zero exercise
price. If the target is not met, or the
participant leaves, then the options
simply lapse.
For FY22, members of the Leadership Squad,
including the CEO, and selected senior
leaders will be granted options under the
same scheme as FY21.
FY21 and FY22 Long-term Incentive Scheme
performance measure
Vesting of the FY21 LTI grant (September
2020) is contingent on participants’ continued
employment with Spark through to
September 2023 and the company achieving
a Total Shareholder Return (TSR) performance
hurdle. TSR is a measure of share price
appreciation and dividends paid over the
three-year period of the grant. The target for
this hurdle is Spark’s cost of equity plus 1%
compounding annually.
For FY22, the Long-term Incentive Scheme
performance measure remains unchanged
from FY21.
Performance evaluation
The CEO annually reviews the performance
of her direct reports. The evaluation is
undertaken using criteria set by the CEO,
including the performance of the business,
the accomplishment of strategic and
operational objectives, and other non-
quantitative objectives agreed with the HRCC
at the beginning of each financial year. The
last Leadership Squad evaluations were
undertaken during June 2021. Spark
undertakes appropriate checks before
appointing someone onto the
Leadership Squad.
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Spark New Zealand Annual Report 2021
CEO remuneration
Remuneration policy, strategy,
and governance
CEO Jolie Hodson’s remuneration package
reflects the scope and complexity of her role
and is set by the Board with reference to the
remuneration of CEOs of similarly sized
organisations.
CEO Remuneration FY21
For FY21 the CEO’s remuneration package
comprised of a fixed cash component, an
at-risk short-term incentive, and an at-risk
long-term incentive, to be awarded under the
Spark Long-term Incentive Scheme. The
construct of the CEO’s remuneration package
is such that 60% of her remuneration package
is at risk. The table below shows the target
remuneration mix:
Long-Term Incentive75% of base
Short-Term Incentive75% of base
SalaryBase
The CEO is also expected to maintain a
holding of Spark shares as set out on page
111 of this report.
Remuneration components
Short-term Incentive Scheme
The CEO is eligible for an annual cash-based
short-term incentive, subject to the
achievement of specific performance
objectives set by the Board based on Spark’s
strategy and business plan for the respective
financial year. These objectives will be a
combination of financial and non-financial
measures. This is covered in more detail in the
earlier STI scheme section. The Board will
assess the CEO’s performance at the end of the
financial year to determine the actual payment
value of her short-term incentive, which will be
in the range of 0% to 200% of her target value.
Long-term Incentive Scheme
For FY21 the CEO’s annual LTI was granted as
share options under the Spark Long Term
Incentive Scheme. This is covered in more
detail in the earlier LTI scheme section. The
LTI component of the CEO’s remuneration
package is designed to link part of her
remuneration to the long-term performance
of Spark, and align her interests with those of
shareholders, through the grant of options
with a post-allocation performance hurdle.
Performance hurdle
A performance hurdle applies to long-term
incentives made to the CEO. This hurdle is
agreed by the Board and sets a minimum
level of performance that is required to be
achieved over the period of each grant, for
the LTI to be eligible to vest. For FY21, a
performance hurdle of Spark’s TSR applies.
The target for this hurdle was Spark’s cost of
equity plus 1% compounding annually.
Spark’s TSR must meet or exceed this target
over the period of the grant (from the date
the options are granted to the date three
years after that date) for the options to vest. If
Spark’s TSR does not meet this target, all of
the options will lapse. Testing to determine
whether the TSR performance hurdle has
been met will occur at the end of the vesting
period of the grant. The Board will receive
independent advice to the effect that the
performance hurdle has been met, or not
met, in determining whether the CEO can
exercise the options or whether the options
will lapse.
CEO termination
Spark may terminate the CEO’s employment
with three months’ notice. A payment of nine
months base remuneration will be made, plus
entitlements for annual performance
incentives and long-term incentives subject to
the rules relating to these incentives, in the
case of termination by Spark, other than for
termination for cause.
If there is a change of control that results in
the CEO no longer being the CEO of a
publicly listed company, then she will be able
to terminate her employment with three
months’ notice and receive payment as if
Spark had terminated her employment.
Spark may also terminate the CEO’s
employment without notice for defined
causes, in which case she will receive no
further entitlement to any remuneration.
Board remuneration
Remuneration and strategy
The remuneration of Directors is reviewed
annually by the Human Resources and
Compensation Committee (HRCC) – taking
account of the company’s size and complexity
and the responsibilities, skills, performance
and experience of the Directors – with
recommendations made to the Board for
approval. Specialist independent consultants
may be engaged from time to time to provide
advice and ensure that the remuneration of
Spark’s Directors is appropriate and
comparable to that of similar companies in
New Zealand and, as relevant, Australia.
Apart from the CEO, no Director of Spark
receives compensation in the form of share
options or restricted shares, nor do they
participate in any bonus or profit-sharing
plan. Non-executive Directors are, however,
expected to maintain a holding of Spark
shares as set out on page 116 of this report.
As is the case for employees, Directors are
required to comply with the Insider Trading
Policy when buying or selling Spark shares
and any such transactions are disclosed to
the market.
Remuneration components
No superannuation or retirement allowance
was paid to any Spark Director during FY21.
Spark does not have service contracts with
any Director, apart from the CEO, that provide
for any benefits or remuneration in the event
that a Director’s service with Spark is
terminated. New Zealand-based non-
executive Directors are eligible for Spark-
funded medical insurance, and all non-
executive Directors are also eligible for
Spark-funded life insurance.
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Spark New Zealand Annual Report 2021
Leadership & Board remuneration
Financial statements
Financial statements
62
Notes to the financial statements
66
Section 1 - General information
1.1About this report66
1.2Key estimates and assumptions66
1.3Significant transactions and events in the financial year67
Section 2 - Financial performance information
2 .1Segment information68
2.2Operating revenues and other gains69
2.3Operating expenses72
2.4Finance income, finance expense, depreciation,
amortisation, and net investment income
73
2.5Non-GAAP measures74
Section 3 - Assets
3 .1Receivables and prepayments75
3.2Inventories78
3.3Long-term investments79
3.4Right-of-use assets80
3.5Leased customer equipment assets81
3.6Property, plant and equipment82
3.7Intangible assets84
3.8Net tangible assets85
Section 4 - Liabilities and equity
4 .1Payables, accruals and provisions86
4.2Lease liabilities87
4.3Debt89
4.4Capital risk management90
4.5Equity and dividends91
Section 5 - Financial instruments
5 .1Derivatives and hedge accounting93
5.2Financial risk management97
Section 6 - Other information
6 .1Income tax100
6.2Employee share schemes101
6.3Related party transactions102
6.4Subsidiaries103
6.5Reconciliation of net earnings to net cash flows from
operating activities
104
6.6Commitments and contingencies104
Independent auditor’s report
105
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Spark New Zealand Annual Report 2021
Statement of profit or loss and other comprehensive income
YEAR ENDED 30 JUNE
2021
RESTATED
1
2020
NOTES$M$M
Operating revenues and other gains2.2 3,593 3,623
Operating expenses2.3 (2,469) (2,510)
Earnings before finance income and expense, income tax, depreciation, amortisation and net
investment income (EBITDAI)2.5 1,124 1,113
Finance income2.4 34 36
Finance expense2.4 (81) (94)
Depreciation and amortisation2.4 (523) (488)
Net investment income/(loss)2.4 (1) 1
Net earnings before income tax 553 568
Income tax expense6.1 (169) (148)
Net earnings 384 420
Other comprehensive income
Items that will not be reclassified to profit or loss:
Revaluation of long-term investments designated at fair value through other comprehensive
income3.3 (87) 91
Items that may be reclassified to profit or loss:
Change in hedge reserves net of tax5.1 57 (35)
Other comprehensive income (30) 56
Total comprehensive income 354 476
Earnings per share
Basic and diluted earnings per share (cents) 20.7 22.9
Weighted average ordinary shares (millions) 1,852 1,837
Weighted average ordinary shares and options (millions) 1,854 1,838
See accompanying notes to the financial statements.
1 Restated due to reassessment of useful lives of reacquired rights, see note 1.3.
Financial statements
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Spark New Zealand Annual Report 2021
Financial statements
Statement of financial position
AS AT
30 JUNE 2021
RESTATED
1
AS AT
30 JUNE 2020
NOTES$M$M
Current assets
Cash 72 53
Short-term receivables and prepayments3.1 768 807
Short-term derivative assets5.1 12 1
Inventories3.2 64 96
Taxation recoverable - 1
Total current assets 916 958
Non-current assets
Long-term receivables and prepayments3.1 271 284
Long-term derivative assets5.1 24 60
Long-term investments3.3 227 308
Right-of-use assets3.4 647 698
Leased customer equipment assets3.5 77 86
Property, plant and equipment3.6 1,080 1,121
Intangible assets3.7 871 843
Total non-current assets 3,197 3,400
Total assets 4,113 4,358
Current liabilities
Short-term payables, accruals and provisions4.1 479 493
Taxation payable 23 44
Short-term derivative liabilities5.1 4 5
Short-term lease liabilities4.2 60 41
Debt due within one year4.3 373 228
Total current liabilities 939 811
Non-current liabilities
Long-term payables, accruals and provisions4.1 60 81
Long-term derivative liabilities5.1 91 156
Long-term lease liabilities4.2 406 531
Long-term debt4.3 1,030 1,244
Deferred tax liabilities6.1 84 61
Total non-current liabilities 1,671 2,073
Total liabilities 2,610 2,884
Equity
Share capital 1,084 949
Reserves (371) (353)
Retained earnings790 878
Total equity 1,503 1,474
Total liabilities and equity 4,113 4,358
See accompanying notes to the financial statements.
1 Restated due to reclassifications of work in progress and amounts payable to customers and reassessment of useful lives of reacquired rights, see note 1.3.
On behalf of the Board
Justine Smyth, CNZM Jolie Hodson
Chair Chief Executive
Authorised for issue on 18 August 2021
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Spark New Zealand Annual Report 2021
Statement of changes in equity
SHARE
CAPITAL
RETAINED
EARNINGS
HEDGE
RESERVES
SHARE-BASED
COMPEN-
SATION
RESERVE
REVALUATION
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVETOTAL
YEAR ENDED 30 JUNE 2021NOTE$M$M$M$M$M$M$M
Balance at 1 July 2020 949 878 (120) 2 (212) (23) 1,474
Net earnings – 384 – – – – 384
Other comprehensive income/(loss) – – 57 – (87) – (30)
Transfer to retained earnings on disposal of
historical long-term investments – (11) – – 11 – –
Total comprehensive income/(loss) – 373 57 – (76) – 354
Contributions by, and distributions to, owners:
Dividends4.5 – (461) – – – – (461)
Supplementary dividends – (47) – – – – (47)
Tax credit on supplementary dividends – 47 – – – – 47
Dividend reinvestment plan4.5 131 – – – – – 131
Issuance of shares under share schemes 4 – – 1 – – 5
Total transactions with owners 135 (461) – 1 – – (325)
Balance at 30 June 2021 1,084 790 (63) 3 (288) (23) 1,503
SHARE
CAPITAL
RETAINED
EARNINGS
HEDGE
RESERVES
SHARE-BASED
COMPEN-
SATION
RESERVE
REVALUATION
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVETOTAL
YEAR ENDED 30 JUNE 2020 – RESTATED
1
NOTE$M$M$M$M$M$M$M
Balance at 1 July 2019 945 917 (85) 2 (303) (23) 1,453
Net earnings – 420 – – – – 420
Other comprehensive income/(loss) – – (35) – 91 – 56
Total comprehensive income/(loss) – 420 (35) – 91 – 476
Contributions by, and distributions to, owners:
Dividends4.5 – (459) – – – – (459)
Supplementary dividends – (39) – – – – (39)
Tax credit on supplementary dividends – 39 – – – – 39
Issuance of shares under share schemes 4 – – – – – 4
Total transactions with owners 4 (459) – – – – (455)
Balance at 30 June 2020 949 878 (120) 2 (212) (23) 1,474
See accompanying notes to the financial statements.
1 Restated due to reassessment of useful lives of reacquired rights, see note 1.3.
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Spark New Zealand Annual Report 2021
Financial statements
Statement of cash flows
YEAR ENDED 30 JUNE
20212020
NOTES$M$M
Cash flows from operating activities
Receipts from customers 3,547 3,594
Receipts from interest 32 34
Receipts from dividends – –
Payments to suppliers and employees (2,453) (2,497)
Payments for income tax (188) (140)
Payments for interest on debt (46) (52)
Payments for interest on leases (26) (30)
Payments for interest on leased customer equipment assets (8) (6)
Net cash flows from operating activities6.5 858 903
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 6 13
Proceeds from sale of business 30 23
Proceeds from long-term investments 6 –
Payments for purchase of business (25) (11)
Payments for, and advances to, long-term investments (13) (35)
Payments for purchase of property, plant and equipment, intangibles (excluding spectrum),
and capacity (335) (393)
Payments for purchase of spectrum intangible assets (51) –
Payments for capitalised interest (6) (8)
Net cash flows from investing activities (388) (411)
Cash flows from financing activities
Net proceeds from/(repayments of) debt4.4 (38) 30
Receipts from finance leases 6 6
Receipts from loans receivable 1 –
Payments for dividends (330) (459)
Payments for leases (56) (42)
Payments for leased customer equipment assets (34) (28)
Net cash flows from financing activities (451) (493)
Net cash flows 19 (1)
Opening cash position 53 54
Closing cash position 72 53
See accompanying notes to the financial statements.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: General informationNotes to the financial statements: General information
Section 1 General information
1.1 About this report
Reporting entity
These financial statements are for Spark New Zealand Limited (the
Company) and its subsidiaries (together ‘Spark’ or ‘the Group’).
Spark is a major supplier of telecommunications and digital
services in New Zealand. Spark provides a full range of
telecommunications, information technology, media and other
digital products and services, including: mobile services; voice
services; broadband services; internet sports streaming services;
cloud, security and service management services; procurement and
partner services and managed data, networks and services.
The Company is incorporated and domiciled in New Zealand,
registered under the Companies Act 1993 and is an FMC reporting
entity under the Financial Markets Conduct Act 2013. The Company
is listed on the New Zealand Main Board equity security market and
the Australian Securities Exchange and the address of its registered
office is Spark City, 167 Victoria Street West, Auckland 1010,
New Zealand.
Basis of preparation
The financial statements have been prepared in accordance with
Generally Accepted Accounting Practice in New Zealand (‘NZ
GAAP’). They comply with New Zealand equivalents to International
Financial Reporting Standards (‘NZ IFRS’) and other applicable
Financial Reporting Standards, as appropriate for profit-oriented
entities. The financial statements also comply with International
Financial Reporting Standards (‘IFRS’).
The measurement basis adopted in the preparation of these
financial statements is historical cost, modified by the revaluation of
certain investments and financial instruments, as identified in the
accompanying notes. These financial statements are expressed in
New Zealand dollars, which is Spark’s functional and presentation
currency. All financial information has been rounded to the nearest
million, unless otherwise stated. Certain comparative information
has been updated to conform with the current year’s presentation.
The principal accounting policies applied in the preparation of
these financial statements are set out in the accompanying notes
where an accounting policy choice is provided by NZ IFRS. A policy
is also included when it is new, has changed, is specific to Spark’s
operations, is significant or is material. Where NZ IFRS does not
provide an accounting policy choice, Spark has applied the
requirements of NZ IFRS but a detailed accounting policy is not
included.
New and amended standards
No new or amended accounting standards have been adopted by
Spark in the current year. Amendments have been issued for NZ
IFRS 9 Financial Instruments and NZ IFRS 16 Leases, effective FY22,
that address issues arising from the reform of benchmark interest
rates; these have not yet been adopted by Spark. However, Spark
does not anticipate that this will result in a material impact on the
Group’s financial statements.
Consideration of the IFRS Interpretations Committee
(‘IFRIC’) agenda decision
In April 2021, IFRIC issued an agenda decision clarifying its
interpretation on how current accounting standards apply to
configuration and customisation costs incurred in implementing
Software-as-a-Service (‘SaaS’) cloud computing arrangements.
The IFRIC decision has clarified that because SaaS arrangements
are service contracts that provide Spark with the right to access the
cloud provider’s application software over the contract period,
costs to configure or customise this software should be recognised
as operating expenses when the services are received. Spark’s
current accounting policy is to record these configuration and
customisation costs as part of the cost of an intangible asset and
amortise these costs over the useful life of the software assets.
Spark has commenced a review process to quantify the impact of
this agenda decision on the financial statements of the Group;
however, given the short timeframe and the complexity involved,
this has not been finalised as at the date of this report. It is
anticipated that this exercise will be completed in Q2 FY22. In the
last three years Spark has capitalised approximately $50 million in
relation to cloud computing arrangements of which a subset may
relate to customisation and configuration of cloud solutions and
may need to be reclassified to operating expense. Once the impact
has been fully quantified Spark will update the market.
1.2 Key estimates and assumptions
The preparation of these financial statements requires management
to make estimates and assumptions. These affect the amounts of
reported revenues and expenses and the measurement of assets
and liabilities as at 30 June. Actual results could differ from these
estimates.
The principal areas of judgement and estimation for Spark in
preparing these financial statements are found in the following
notes:
• Note 2.2 Operating revenues and other gains;
• Note 3.1 Receivables and prepayments;
• Note 3.4 Right-of-use assets;
• Note 3.6 Property, plant and equipment;
• Note 3.7 Intangible assets; and
• Note 4.2 Lease liabilities.
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Spark New Zealand Annual Report 2021
Notes to the financial statements
1
1.3 Significant transactions and events in the
financial year
The following significant transactions and events affected the
financial performance and financial position of Spark for the year
ended 30 June 2021:
Debt programme
• On 30 November 2020 Spark renewed its $200 million
committed revolving facility with Westpac New Zealand, to
mature on 30 November 2023.
• On 16 April 2021 Spark extended the term of its NZ$200 million
committed standby revolving credit facility with Citisecurities by
one year, to mature on 30 April 2024.
Wire maintenance customer refunds
• Wire maintenance is a Spark service designed to cover the cost
of repairing certain faults with a customer’s internal wiring. Spark
has now withdrawn this product for fibre customers and in the
current period has provided credits to customers who purchased
this product while on a fibre connection, of approximately
$16 million. This is included within voice revenues (see note 2.1).
Long-term investments (see note 3.3)
• The fair value of Spark’s investment in Hutchinson
Telecommunications Australia Limited decreased by $87 million
during the year due to a decrease in its observable bid share
price from A$0.170 to A$0.110. The change in fair value is
recognised within other comprehensive income.
Spectrum Renewal (see note 3.7)
• In January 2021 Spark paid $50 million for the renewal of its
management rights to 1800MHz and 2100MHz spectrum for 20
years. This is included within Spark’s additions of $51 million to
spectrum intangible assets.
Capital expenditure (see notes 2.5, 3.4, 3.6 and 3.7)
• Spark’s additions to property, plant and equipment, intangible
assets (excluding spectrum) and capacity right-of-use assets were
$354 million, details of which are provided in notes 3.4, 3.6 and
3.7 and on page 19 of this annual report.
Dividends (see note 4.5)
• Dividends paid during the year ended 30 June 2021 in relation
to the H2 FY20 second-half dividend (ordinary dividend of 12.5
cents per share) and H1 FY21 first-half dividend (ordinary
dividend of 12.5 cents per share) totalled $461 million or 25.0
cents per share, of this $131 million was settled through the
dividend reinvestment plan.
Southern Cross NEXT Cable (‘SX NEXT’) (see note 3.3)
• Spark contributed $4 million of equity to its Southern Cross
investment to fund the SX NEXT undersea cable build during
FY21. Subsequent to balance date Spark contributed $31 million
of equity.
• No dividends were received from Southern Cross during FY21.
Dividends have been suspended for the duration of the SX NEXT
build phase and are not expected to resume until at least FY23.
Covid-19
• The effects of Covid-19 continue to have a negative impact on
the financial performance of Spark’s business, predominantly
due to lost roaming revenues. In FY21 these negative impacts
were partially offset by lower bad debt expenses as the predicted
adverse economic impacts were less than expected.
Changes in segments (see note 2.1)
• Spark has reclassified the comparative segment results to reflect
changes in the classification of Computer Concepts Limited
(‘CCL’) solutions and cloud-based telephony products and also a
reclassification of some voice revenues to managed data,
networks and services.
Reclassifications and reassessments
Reclassification of work in progress (see notes 3.6 and 3.7)
• Spark has recently implemented a process to more accurately
split capital work in progress between property, plant and
equipment and intangible assets in line with the nature of the
underlying assets. As a result the comparative intangible assets
work in progress has reduced by $106 million (2019: $121
million), with a corresponding increase in property, plant and
equipment work in progress.
Reclassification of amounts payable to customers (see notes
3.1 and 4.1)
• Spark has identified some amounts payable to customers that
had previously been set off within trade receivables. Therefore,
the comparative financials have been reclassified to gross up
trade receivables and trade accounts payable, by $30 million.
These reclassifications have no impact on Spark’s net assets for the
current or restated periods and no impact on the statement of
profit or loss and other comprehensive income or statement of
cash flows.
Reassessment of useful lives of required rights (see note 3.7)
• As at 30 June 2020 Spark had $19 million of reacquired rights
included within other intangible assets that were considered to
have indefinite lives. Spark has reviewed this treatment and
identified that the underlying contracts that relate to these assets
had a contractual term. As a result Spark has restated its
comparative period to record additional amortisation of
$9 million, reduction in tax expense of $2 million, and a reduction
in opening retained earnings of $12 million. This adjustment has
no impact on the statement of cash flows or on the financial
performance for the year ended 30 June 2021.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Financial performance information
Section 2 Financial performance information
2.1 Segment information
The segment results disclosed are based on those reported to the Chief Executive and are how Spark reviews its performance.
Spark’s segments are measured based on product margin, which includes product operating revenues and direct product costs. The
segment result excludes other gains, labour, operating expenses, depreciation and amortisation, net investment income, finance income
and expense and income tax expense, as these are assessed at an overall Group level by the Chief Executive.
Comparative segment results
Spark has reclassified the comparative segment results to reflect changes in the classification of CCL solutions and cloud-based telephony
products and also a reclassification of some voice revenues to managed data, networks and services. Therefore, managed data, network
and services revenues have increased by $29 million due to a reclassification from cloud, security and services management of $23 million,
voice of $5 million, and procurement and partners of $1 million. There is no change to the overall Spark reported result because of these
changes.
20212020
OPERATING
REVENUESPRODUCT COSTS
PRODUCT
MARGIN
OPERATING
REVENUESPRODUCT COSTS
PRODUCT
MARGIN
YEAR ENDED 30 JUNE$M$M$M$M$M$M
Mobile 1,311 (474) 837 1,288 (459) 829
Voice 308 (128) 180 386 (144) 242
Broadband 670 (331) 339 680 (339) 341
Cloud, security and service management 443 (85) 358 420 (72) 348
Procurement and partners 414 (371) 43 407 (362) 45
Managed data, networks and services 282 (137) 145 277 (139) 138
Other operating revenues
1
137 (67) 70 130 (82) 48
Segment result 3,565 (1,593) 1,972 3,588 (1,597) 1,991
1 Other operating revenues include revenue from Qrious, Internet of Things, Spark Sport and exchange building sharing arrangements.
Reconciliation from segment product margin to consolidated net earnings before income tax
2021
RESTATED
2020
YEAR ENDED 30 JUNE$M$M
Segment product margin1,9721,991
Other gains2835
Labour(491)(511)
Other operating expenses (note 2.3)(385)(402)
Earnings before finance income and expense, income tax, depreciation, amortisation and net investment
income (EBITDAI)1,1241,113
Finance income3436
Finance expense(81)(94)
Depreciation and amortisation(523)(488)
Net investment income/(loss)(1)1
Net earnings before income tax553568
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Spark New Zealand Annual Report 2021
Notes to the financial statements
2
2.2 Operating revenues and other gains
The accounting policies specific to Spark’s operating revenues are outlined below:
Contracts with customers
Spark records revenue from contracts with customers in accordance with the five steps in NZ IFRS 15:
1. Identify the contract with a customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price, which is the total consideration provided by the customer;
4. Allocate the transaction price amount to the performance obligations in the contract based on their relative stand-alone selling prices;
and
5. Recognise revenue when or as the performance obligation is satisfied.
Spark often provides products and services in bundled arrangements (for example, a broadband modem together with a broadband
service). Where multiple products or services are sold in a single arrangement, revenue is recognised in relation to each distinct good or
service. A product or service is distinct where, amongst other criteria, a customer can benefit from it on its own or together with other
resources that are readily available. Revenue is allocated to each distinct product or service in proportion to its stand-alone selling price
and recognised when, or as, control is transferred to the customer.
Generally, control for products is transferred and revenue recognised at the point in time it is delivered to the customer and for services,
control is transferred, and revenue recognised, over time as the service is provided. Revenue for performance obligations satisfied over
time is recognised using the resources consumed by customers method or the time-elapsed method, as these best depict the transfer of
goods or services to customers.
Performance obligations, where Spark acts as an agent, includes some third-party media services and certain cloud, security and service
management contracts. Contracts with significant payment terms include those that have goods that were purchased on interest-free
payment terms of greater than 12 months.
The nature of the various performance obligations in our contracts with customers and when revenue is recognised is outlined below:
PERFORMANCE OBLIGATIONS
FROM CONTRACTS WITH CUSTOMERS
TIMING OF SATISFACTION
OF THE PERFORMANCE OBLIGATION AND PAYMENT
Mobile services, broadband services, voice services, media services,
cloud, security and service management services, managed data
services and rental of equipment
As the service is provided (usually monthly). Generally billed and
paid on a monthly basis.
Usage, other optional or non-subscription services, and
pay-per-use services
As the service is provided. Generally billed and paid on a
monthly basis.
Fixed modems, mobile handsets and other distinct goodsWhen control is passed to the customer, generally when the
customer takes possession of the goods. For goods sold in
packages or on interest-free terms, customers usually pay in equal
instalments over 6 to 36 months.
Installation or set-up services (where distinct)As the service is provided. Generally billed and paid following the
provision of the service.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Financial performance information
2.2 Operating revenues and other gains (continued)
20212020
YEAR ENDED 30 JUNE$M$M
Operating revenues
Mobile 1,311 1,288
Voice 308 386
Broadband 670 680
Cloud, security and service management 443 420
Procurement and partners 414 407
Managed data, networks and services 282 277
Other operating revenues 137 130
3,565 3,588
Other gains
Net gain on sale of long-term investments/businesses 1 5
Gain on sale and exchange of property, plant and equipment and intangibles 9 28
Gain on lease modifications and terminations 18 2
28 35
Total operating revenues and other gains 3,593 3,623
Other gains
In the year ended 30 June 2021 other gains comprises a $9 million gain from the sale of property, plant and equipment (primarily in
relation to mobile network equipment), $1 million gain from the sale of Spark’s long-term investment, NOW New Zealand Limited, and
gains from lease modifications and terminations of $18 million.
In the year ended 30 June 2020 other gains included a net $5 million gain from the sale of the operational parts of the network services
division of Computer Concepts Limited (CCL) Spark’s wholly owned subsidiary and the sale of Spark’s entertainment streaming business
Lightbox, $16 million from the sale of property, plant and equipment (primarily in relation to mobile network equipment), $12 million gain
on exchange of intangible assets (primarily spectrum assets) and gains from lease modifications and terminations of $2 million.
70
Spark New Zealand Annual Report 2021
Notes to the financial statements
2
Key estimates and assumptions
Determining the transaction price
Determining the transaction price of Spark’s contracts requires judgement in estimating the amount of revenue we expect to be
entitled to for delivering the performance obligations within a contract. The transaction price is the amount of consideration that
is enforceable and to which we expect to be entitled in exchange for the goods and services we have promised to our customer.
We determine the transaction price by considering the terms of the contract and business practices that are customary within that
product, as well as adjusting the transaction price for estimated variable consideration and for any effects of the time value of
money. The expected value or most likely amount methods are used to determine variable consideration and any amount where
it is determined that it is highly probable a revenue reversal will not subsequently occur is included in the transaction price. In
making this determination consideration is given to the likelihood and potential magnitude of the revenue reversal, as well as
factors outside of Spark’s influence, the time when the uncertainty is expected to be resolved and Spark’s experience with similar
types of contracts. Judgement is required to determine the discount rate underlying any time value of money calculations, as well
as whether the financing component in a contract is significant. Discounts, rebates, refunds, credits, price concessions, incentives,
penalties and other similar items are reflected in the transaction price at contract inception.
Determining the stand-alone selling price and the allocation of the transaction price
Determining the stand-alone selling price of performance obligations and the allocation of the transaction price between
performance obligations involves judgement. The transaction price is allocated to performance obligations based on the relative
stand-alone selling prices of the distinct goods or services in the contract. The best evidence of a stand-alone selling price is the
observable price of a good or service when the entity sells that good or service separately in similar circumstances and to similar
customers. If a stand-alone selling price is not directly observable, we estimate the stand-alone selling price taking into account
reasonably available information relating to the market conditions, entity-specific factors and the class of customer. In
determining the stand-alone selling price, we allocate revenue between performance obligations based on expected minimum
enforceable amounts to which Spark is entitled. Any amounts above the minimum enforceable amounts are recognised as
revenue as they are earned.
Distinct goods and services
We make judgements in determining whether a promise to deliver goods or services is considered distinct. We account for
individual products and services separately if they are distinct (i.e. if a product or service is separately identifiable from other
items in the bundled package and if the customer can benefit from it). The consideration is allocated between separate products
and services in a bundle based on their stand-alone selling prices.
Timing of satisfaction of performance obligations
We make judgements in determining whether performance obligations are satisfied over time or at a point in time, as well as the
methods used for measuring progress towards completed satisfaction of performance obligations. Refer to page 69 for Spark’s
accounting policy on timing of satisfaction of performance obligations.
2.2 Operating revenues and other gains (continued)
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Financial performance information
2.3 Operating expenses
20212020
YEAR ENDED 30 JUNE$M$M
Product costs 1,593 1,597
Labour 491 511
Other operating expenses
Network support costs 83 65
Computer costs 101 98
Accommodation costs 67 63
Advertising, promotions and communication 72 78
Bad debts (7) 17
Impairment expense 2 2
Other 67 79
Total other operating expenses 385 402
Total operating expenses 2,469 2,510
Cost of inventories recognised as an expense
The cost of inventories recognised as an expense in relation to broadband modems, mobile devices and other accessories was
$381 million (30 June 2020: $353 million).
Lease expenses
Expenses relating to short-term leases and leases of low-value assets were $5 million (30 June 2020: $8 million). In the year ended 30 June
2021 rent concessions of less than $1 million were received as a result of Covid-19 and treated as a reduction of expenses (30 June 2020:
$2 million).
Donations
Donations for the year ended 30 June 2021 were $1,722,000 and comprised Spark’s donation to Spark Foundation of $1,692,000 and
other donations of $30,000 (30 June 2020: $2,306,000, comprised of Spark’s donation to the Spark Foundation of $2,249,000 and other
donations of $57,000). Spark made no donations to political parties in the years ended 30 June 2021 or 30 June 2020.
Auditor’s remuneration
20212020
YEAR ENDED 30 JUNE$’000$’000
Audit of financial statements
Audit and review of financial statements
1
1,000 1,096
Other services
Regulatory audit work
2
50 65
Other non-assurance services
3
94 10
Total fees paid to auditor 1,144 1,171
1 The audit fee includes fees for both the annual audit of the financial statements and the review of the interim financial statements.
2 Regulatory audit work consists of the audit of telecommunications-related regulatory disclosures and reporting on trust deed requirements and solvency returns.
3 Other non-assurance services relate to taxation advisory and compliance services, Holiday Act 2003 compliance and administrative and other advisory services for the
Corporate Taxpayer Group of which Spark, alongside a number of organisations, is a member.
72
Spark New Zealand Annual Report 2021
Notes to the financial statements
2
2.4 Finance income, finance expense, depreciation, amortisation and net investment income
2021
RESTATED
2020
YEAR ENDED 30 JUNENOTES$M$M
Finance income
Finance lease interest income 13 13
Other interest income 21 23
34 36
Finance expense
Finance expense on long-term debt
1
(43) (53)
Lease interest expense4.2 (26) (31)
Leased customer equipment interest expense (8) (6)
Other interest and finance expenses (10) (12)
(87) (102)
Plus: interest capitalised
2
6 8
(81) (94)
Depreciation and amortisation expense
Depreciation - property, plant and equipment3.6 (242) (233)
Depreciation - right-of-use assets3.4 (77) (64)
Depreciation - leased customer equipment assets3.5 (36) (27)
Amortisation - intangible assets3.7 (168) (164)
(523) (488)
Net investment income/(loss)
Share of associates’ and joint ventures’ net profits/(losses)3.3 (1) 1
(1) 1
1 Includes $14 million transferred from the cash flow hedge reserve for the year ended 30 June 2021 (30 June 2020: $8 million).
2 Interest was capitalised on property, plant and equipment and intangible assets under development for the year ended 30 June 2021 at an annualised rate of 3.8%
(30 June 2020: 4.4%).
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Financial performance information
2.5 Non-GAAP measures
Spark uses non-GAAP financial measures that are not prepared in accordance with New Zealand Equivalents to International Financial
Reporting Standards (‘NZ IFRS’). Spark believes that these non-GAAP financial measures provide useful information to readers to assist in
the understanding of the financial performance, financial position or returns of Spark. These measures are also used internally to evaluate
performance of products, to analyse trends in cash-based expenses, to establish operational goals and allocate resources. However, they
should not be viewed in isolation, nor considered as a substitute for measures reported in accordance with NZ IFRS, as they are not
uniformly defined or utilised by all companies in New Zealand or the telecommunications industry.
Spark’s policy is to present ‘adjusted EBITDAI’ and ‘adjusted net earnings’ when a financial year includes significant items (such as gains,
expenses and impairments) individually greater than $25 million. There are no adjusting items for the years ended 30 June 2021 or
30 June 2020.
Earnings before finance income and expense, income tax, depreciation, amortisation and net investment
income (EBITDAI)
Spark calculates EBITDAI by adding back depreciation and amortisation, finance expense and income tax expense and subtracting finance
income and net investment income (which includes dividend income and Spark’s share of net profits or losses from associates and joint
ventures) to net earnings. A reconciliation of Spark’s EBITDAI is provided below and based on amounts taken from, and consistent with,
those presented in these financial statements.
2021
RESTATED
2020
YEAR ENDED 30 JUNE$M$M
Net earnings reported under NZ IFRS 384 420
Less: finance income (34) (36)
Add back: finance expense 81 94
Add back: depreciation and amortisation 523 488
Less: net investment income 1 (1)
Add back: income tax expense 169 148
EBITDAI 1,124 1,113
Capital expenditure
Capital expenditure is the additions to property, plant and equipment and intangible assets (excluding goodwill, acquisitions and other
non-cash additions that may be required by NZ IFRS, such as decommissioning costs) and additions to capacity right-of-use assets where
such additions are paid up front.
2021
RESTATED
2020
YEAR ENDED 30 JUNENOTES$M$M
Additions to property, plant and equipment3.6 203 227
Additions to intangible assets3.7 192 149
Additions to capacity right-of-use assets3.4 13 11
Capital expenditure including spectrum and transfers from finance lease receivables 408 387
Less spectrum additions3.7 (51) (13)
Less property, plant and equipment transfers from finance lease receivables (3)–
Capital expenditure excluding spectrum and transfers from finance lease receivables 354 374
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Spark New Zealand Annual Report 2021
Notes to the financial statements
3
Section 3 Assets
3.1 Receivables and prepayments
2021
RESTATED
2020
AS AT 30 JUNE$M$M
Short-term receivables and prepayments
Trade receivables 314 319
Prepayments 137 140
Short-term unbilled revenue 235 231
Short-term contract assets 5 11
Short-term contract costs 43 47
Short-term finance lease receivables 4 16
Other short-term receivables 30 43
768 807
Long-term receivables and prepayments
Long-term unbilled revenue 79 52
Long-term contract costs 64 66
Long-term finance lease receivables 108 144
Other long-term receivables 20 22
271 284
Amounts are stated at their net carrying value, including expected credit loss allowance provisions. The fair value of finance lease
receivables is estimated to be $213 million (30 June 2020: $163 million) and the carrying amount of all other receivables, measured at
amortised cost, are approximately equivalent to their fair value because of the short term to maturity.
Contract assets
Contract assets primarily relate to Spark’s rights to consideration for performance obligations delivered but not billed at the reporting date.
Contract assets are transferred to receivables when the rights become unconditional. The following summarises significant changes in
those balances:
20212020
YEAR ENDED 30 JUNE$M$M
Opening balance as at 1 July 11 15
Additions from new contracts with customers, net of terminations and renewals 8 17
Transfer of contract assets to trade receivables (14) (21)
Closing balance as at 30 June 5 11
Assets
Notes to the financial statements: Assets
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Spark New Zealand Annual Report 2021
3.1 Receivables and prepayments (continued)
Contract costs
Contract costs include costs to obtain a contract (such as commission costs) and costs to fulfil a contract. These costs are expected to be
recovered and are therefore initially deferred and then recognised within operating expenses on a systematic basis that is consistent with
the transfer to the customer of the goods or services to which the asset relates. The following summarises significant changes in those
balances:
20212020
COSTS TO
OBTAIN A
CONTRACT
COSTS TO
FULFIL A
CONTRACTTOTAL
COSTS TO
OBTAIN A
CONTRACT
COSTS TO
FULFIL A
CONTRACTTOTAL
YEAR ENDED 30 JUNE$M$M$M$M$M$M
Opening balance as at 1 July 28 85 113 37 91 128
Additions 8 36 44 12 25 37
Amortisation recognised in operating expenses (17) (33) (50) (21) (31) (52)
Closing balance as at 30 June 19 88 107 28 85 113
Short-term contract costs 11 32 43 15 32 47
Long-term contract costs 8 56 64 13 53 66
Key estimates and assumptions
Determining the costs we incur to obtain or fulfil a contract that meets the deferral criteria within NZ IFRS 15 requires us to make
significant judgements. Further, where such costs can be deferred, determining the appropriate amortisation period to recognise
the costs within operating expenses requires management judgement, including assessing the expected average customer
tenure for consumer customers and the expected contract term for enterprise customers.
Expected credit loss allowance provision
Movements in the loss allowance provision are as follows:
20212020
YEAR ENDED 30 JUNE$M$M
Opening balance as at 1 July 31 30
Charged to costs and expenses (4) 24
Bad debts recovered (3) (4)
Utilised(7)(19)
Closing balance as at 30 June
1
17 31
1 The total expected loss provision reduced $14 million in FY21, of which $8 million reflected the release of additional provisions taken in FY20 primarily as a result of
Covid-19.
Notes to the financial statements: Assets
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Spark New Zealand Annual Report 2021
Notes to the financial statements
3
Spark has applied the simplified approach to providing for expected credit losses, which requires the recognition of a lifetime expected
loss provision for trade receivables, unbilled revenue, contract assets, contract costs, finance lease receivables and other receivables. The
calculation of the allowance provision incorporates forward-looking information, such as forecasted economic conditions.
The expected credit loss allowance provision has been determined as follows:
CURRENT≤ 1 MONTH> 1 MONTHTOTAL
AS AT 30 JUNE 2021$M$M$M$M
Expected loss rate1.4%2.5%9.5%1.8%
Gross carrying amount 837 40 42 919
Expected credit loss allowance provision 12 1 4 17
Short-term loss allowance provision 9 1 4 14
Long-term loss allowance provision 3 – – 3
AS AT 30 JUNE 2020 – RESTATED$M$M$M$M
Expected loss rate2.8%2.6%13.5%3.2%
Gross carrying amount 906 39 37 982
Expected credit loss allowance provision 25 1 5 31
Short-term loss allowance provision 20 1 5 26
Long-term loss allowance provision 5 – – 5
The composition of the expected credit loss allowance provision between receivable types is as follows:
20212020
AS AT 30 JUNE$M$M
Trade receivables 7 13
Unbilled revenue 7 13
Contract assets and contract costs 2 3
Finance lease receivables 1 2
Expected credit loss allowance provision 17 31
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of
recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be
subject to enforcement activities to comply with the Group’s procedures for recovery of amounts due.
Key estimates and assumptions
The expected credit loss allowance provision is determined based on assumptions about the risk of default and expected loss
rates of customers and other counterparties. Spark uses judgement in making these assumptions and selecting the inputs to the
impairment calculation based on Spark’s past collection history, existing market conditions, as well as forward-looking estimates
at the end of the reporting period. Forward-looking estimates include assessment of forecasted changes to interest rates,
unemployment rates and gross domestic product in New Zealand.
3.1 Receivables and prepayments (continued)
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Assets
Finance lease receivables
Spark has a number of leases for space in exchange buildings, including as a lessor for space in Spark exchanges and a lessee for space in
Chorus exchanges. These leases include a legal right of offset, as Spark and Chorus settle the payments on a net basis and are therefore
shown as a net finance lease receivable on the statement of financial position.
In addition, Spark sub-leases a number of office building floors. Where sub-leases are for the whole of the remaining non-cancellable term
of the head lease, these are classified as a finance lease.
The profile of lease net receipts is set out below:
20212020
UNDISCOUNTEDDISCOUNTEDUNDISCOUNTEDDISCOUNTED
AS AT 30 JUNE$M$M$M$M
Less than one year
1
13 3 17 16
Between one and five years 41 (7) 66 52
More than five years 266 115 309 92
Net finance lease receivables 320 111 392 160
Plus short-term portion of finance lease receivables in liability position– 1 ––
Total finance lease receivables 320 112 392 160
Less unearned finance income (208)– (232)–
Present value of finance lease receivables 112 112 160 160
Short-term finance lease receivables 4 16
Long-term finance lease receivables 108 144
1 Included within the discounted balance for 30 June 2021 is a $1 million liability relating to the Chorus finance lease receivable.
The lease with Chorus, where Spark is the lessor, has multiple rights of renewals and the full lease term has been used in the calculation of
the financial lease receivable at lease inception, as it was likely that because of the specialised nature of the buildings, the lease would be
renewed to the maximum term.
3.2 Inventories
20212020
AS AT 30 JUNE$M$M
Goods held for resale 56 86
Content rights inventory 7 8
Maintenance materials and consumables 1 2
Total inventories 64 96
Content rights inventory
Spark enters into contracts for the right to stream digital content for sport and previously to subscribers of Lightbox. Content rights are
stated at the lower of cost and net realisable value, less accumulated amortisation and includes prepaid content that is not yet available for
broadcast.
The amortisation of content rights is recognised within operating expenses on a straight-line basis over their licence periods or, for live
sports content, over its broadcast period. The content rights amortisation charge for the year ended 30 June 2021 was $28 million (30 June
2020: $40 million).
3.1 Receivables and prepayments (continued)
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Spark New Zealand Annual Report 2021
Notes to the financial statements
3
3.3 Long-term investments
20212020
AS AT 30 JUNEMEASUREMENT BASIS$M$M
Shares in HutchisonFair value through other comprehensive income 160 247
Investment in associates and joint venturesEquity method 59 54
Other long-term investmentsCost 8 7
227 308
Spark holds a 10% interest in Hutchison Telecommunications Australia Limited (Hutchison) which is quoted on the Australian Securities
Exchange (ASX) and its fair value is measured using the observable bid share price as quoted on the ASX, classified as being within Level 1
of the fair value hierarchy. As at 30 June 2021 the quoted price of Hutchison’s shares on the ASX was AUD$0.110 (30 June 2020:
AUD$0.170). The decrease in fair value of $87 million is recognised in other comprehensive income (30 June 2020: $91 million increase).
Investment in associates and joint ventures
Spark’s investment in associates and joint ventures at 30 June 2021 consists of the following:
NAMETYPECOUNTRYOWNERSHIPPRINCIPAL ACTIVITY
Connect 8 LimitedJoint VentureNew Zealand50%Fibre network construction
Flok LimitedAssociate New Zealand38%Hardware and software development
Pacific Carriage Holdings LimitedAssociateBermuda38%A holding company
Pacific Carriage Holdings Limited IncAssociateUnited States38%A holding company
PropertyNZ Limited (homes.co.nz)AssociateNew Zealand23%Property data website
Rural Connectivity Group LimitedJoint VentureNew Zealand33%Rural broadband
Southern Cross Cables Holdings LimitedAssociateBermuda38%A holding company
TNAS LimitedJoint VentureNew Zealand50%Telecommunications development
All investments in associates and joint ventures are measured using the equity method and none are considered to be individually
material. Changes in the aggregate carrying amount of Spark’s investment in associates and joint ventures were as follows:
20212020
ASSOCIATESJOINT VENTURESTOTALASSOCIATESJOINT VENTURESTOTAL
YEAR ENDED 30 JUNE$M$M$M$M$M$M
Opening balance as at 1 July 31 23 54 9 12 21
Additional investment during the year 5 8 13 22 10 32
Impairment (1) – (1) – – –
Disposals (5) – (5) – – –
Share of net profits/(losses) – (1) (1) – 1 1
Deferred gains – (1) (1) – – –
Closing balance as at 30 June 30 29 59 31 23 54
Spark has suspended equity accounting for Pacific Carriage Holdings Limited and Southern Cross Cables Holdings Limited (together
‘Southern Cross’) as their carrying values were reduced to nil. Spark has no obligation to fund Southern Cross’ deficits or repay dividends.
For the year ended 30 June 2021 Spark’s share of Southern Cross profits was not recognised because of the existence of historic
cumulative Southern Cross deficits. In the current year Southern Cross’ profit was $39 million (30 June 2020: $51 million).
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Assets
3.4 Right-of-use assets
Spark is a lessee for a large number of leases, including:
• Property – Spark leases a number of office buildings and retail stores. These leases generally have rights of renewal that are reasonably
certain to be exercised and therefore may have long effective lease terms;
• Capacity arrangements – Spark enters into a number of indefeasible right-of-use capacity arrangements for cable capacity;
• Mobile sites – Spark has entered into a number of agreements to allow the operation of mobile network infrastructure throughout
New Zealand;
• Motor vehicles – Spark leases motor vehicles for use in sales, field operations and maintenance of infrastructure equipment; and
• Other – Spark leases equipment that is held at Spark premises and used to provide services to customers.
Movements in right-of-use assets are summarised below:
PROPERTYCAPACITY
MOBILE
SITES
MOTOR
VEHICLESOTHERTOTAL
YEAR ENDED 30 JUNE 2021$M$M$M$M$M$M
Opening net book value333 233 102 2 28 698
Additions74 13 27 4 11 129
Disposals(2)– (3)– (9)(14)
Remeasurements
1
(90)– 1 – – (89)
Depreciation charge(34)(22)(10)(2)(9)(77)
Closing net book value281 224 117 4 21 647
PROPERTYCAPACITY
MOBILE
SITES
MOTOR
VEHICLESOTHERTOTAL
YEAR ENDED 30 JUNE 2020$M$M$M$M$M
Opening net book value287 243 94 1 – 625
Additions79 11 13 2 33 138
Disposals(8)– – – – (8)
Remeasurements2 – 5 – – 7
Depreciation charge(27)(21)(10)(1)(5)(64)
Closing net book value333 233 102 2 28 698
1 Remeasurements to property primarily relate to modifications and changes of assumptions for leases, including market rent reviews and reductions in lease terms for
corporate property leases. The reduction in property right-of-use assets is substantially offset by a reduction in property lease liabilities (see note 4.2).
All capacity additions for the year ended 30 June 2021 were fully paid on control being obtained and therefore deemed capital
expenditure as reconciled in note 2.5 (30 June 2020: all fully paid and deemed capital expenditure).
Income from sub-leasing right-of-use assets for the year ended 30 June 2021 was $1 million (30 June 2020: $1 million).
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Spark New Zealand Annual Report 2021
Notes to the financial statements
3
3.4 Right-of-use assets (continued)
Key estimates and assumptions
At inception of a contract Spark assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an identified asset, Spark assesses whether:
• The contract involves the use of an identified asset;
• Spark has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• Spark has the right to direct the use of the asset.
At inception or on reassessment of a contract that contains a lease component, Spark allocates the consideration in the contract
to each lease component on the basis of their relative stand-alone prices. Spark recognises a right-of-use asset at the lease
commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any
lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are
determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically assessed for
impairment losses and adjusted for certain remeasurements of the lease liability.
3.5 Leased customer equipment assets
Spark acts as the intermediate party (as a lessee and a lessor) in a number of lease arrangements for customer premises equipment. Such
arrangements may also include an initial sale and leaseback transaction. A sale and leaseback transaction contains a genuine sale if control
of an asset is transferred under NZ IFRS 15. For Spark’s back-to-back lease arrangements we have assessed that a sale does not occur as
control over the equipment remains with Spark instead of passing to the buyer-lessor.
Spark as the seller-lessee continues to recognise the leased customer equipment asset, which is initially measured at cost. The asset is
subsequently depreciated using the straight-line method based on the expected lease term. Movements in leased customer equipment
assets are summarised below:
20212020
YEAR ENDED 30 JUNE$M$M
Opening net book value86 55
Additions28 61
Disposals (1)(3)
Depreciation charge(36)(27)
Closing net book value77 86
20212020
AS AT 30 JUNE$M$M
Cost182 158
Accumulated depreciation and impairment losses(105)(72)
Closing net book value77 86
Leased customer equipment assets are on-leased to customers under operating leases. Amounts recovered from customers for the year
ended 30 June 2021 were $43 million (30 June 2020: $31 million).
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Notes to the financial statements: Assets
3.6 Property, plant and equipment
TELECOMMUNI-
CATIONS
EQUIPMENT
AND PLANTFREEHOLD LANDBUILDINGSOTHER ASSETS
WORK IN
PROGRESSTOTAL
YEAR ENDED 30 JUNE 2021$M$M$M$M$M$M
Opening net book value641 60 198 114 108 1,121
Additions– – 40 – 163 203
Transfers167 1 –18 (186)–
Disposals– – – (2)– (2)
Depreciation charge(160)– (31)(51)– (242)
Closing net book value648 61 207 79 85 1,080
AS AT 30 JUNE 2021
Cost4,006 61 550 553 85 5,255
Accumulated depreciation and impairment losses(3,358)– (343)(474)– (4,175)
Closing net book value648 61 207 79 85 1,080
TELECOMMUNI-
CATIONS
EQUIPMENT
AND PLANTFREEHOLD LANDBUILDINGSOTHER ASSETS
WORK IN
PROGRESSTOTAL
YEAR ENDED 30 JUNE 2020 - RESTATED$M$M$M$M$M$M
Opening net book value 623 60 199 125 126 1,133
Additions – – 29 – 198 227
Transfers 166 – 1 49 (216) –
Disposals – – – (6) – (6)
Depreciation charge (148) – (31) (54) – (233)
Closing net book value 641 60 198 114 108 1,121
AS AT 30 JUNE 2020 - RESTATED
Cost 3,818 60 562 569 108 5,117
Accumulated depreciation and impairment losses (3,177) – (364) (455) – (3,996)
Closing net book value 641 60 198 114 108 1,121
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Spark New Zealand Annual Report 2021
Notes to the financial statements
3
3.6 Property, plant and equipment (continued)
Joint arrangement
Spark has entered into a joint arrangement in relation to the construction and operation of the Tasman Global Access fibre-optic submarine
cable between Australia and New Zealand. As at 30 June 2021 the carrying value of Spark’s share of property, plant and equipment and
intangible assets in the joint operation was $30 million (30 June 2020: $31 million).
Key estimates and assumptions
Spark’s property, plant and equipment is measured at cost and depreciation is charged on a straight-line basis over the assets’
estimated useful lives. Determining the appropriate useful life of property, plant and equipment requires management
judgement, including the expected period of service potential, the likelihood technological advances will make the asset
obsolete, the likelihood of Spark ceasing to use it and the effect of government regulation.
The estimated useful lives of Spark’s property, plant and equipment is as follows:
Telecommunications equipment
Links and cables 10 – 50 years
Network transport 3 – 15 years
Mobile radio access network 5 – 18 years
Customer premises equipment 3 – 5 years
International cable and satellite 10 – 15 years
Buildings
Buildings 15 – 53 years
Furniture and fittings 3 – 15 years
Air conditioning 8 – 20 years
Power systems 3 – 25 years
Batteries 5 – 15 years
Other
Motor vehicles 3 – 10 years
Computer equipment 2 – 8 years
Internal IT system assets 3 – 15 years
The assessment of assets for impairment is based on a large number of factors, such as changes in current competitive
conditions, expectations of growth in the telecommunications industry, the discontinuance of services, the expected future cash
flows an asset is expected to generate and other changes in circumstances that indicate an impairment exists. Key judgements
include rates of expected revenue growth or decline, expected future margins and the selection of an appropriate discount rate
for valuing future cash flows.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Assets
3.7 Intangible assets
SOFTWARE
SPECTRUM
LICENCES
OTHER
INTANGIBLESGOODWILL
WORK IN
PROGRESSTOTAL
YEAR ENDED 30 JUNE 2021$M$M$M$M$M$M
Opening net book value 351 158 59 222 53 843
Additions
1
– 51 – – 141 192
Transfers 102 – – – (102) –
Acquisitions – – 4 – – 4
Amortisation charge (138) (16) (14) – – (168)
Closing net book value 315 193 49 222 92 871
AS AT 30 JUNE 2021
Cost 2,075 336 146 270 92 2,919
Accumulated amortisation and impairment losses (1,760) (143) (97) (48) – (2,048)
Closing net book value 315 193 49 222 92 871
1 Total software capitalised in the year ended 30 June 2021 includes $36 million of internally generated assets. Other software capitalised in the year includes software
licences and externally supplied labour.
SOFTWARE
SPECTRUM
LICENCES
OTHER
INTANGIBLESGOODWILL
WORK IN
PROGRESSTOTAL
YEAR ENDED 30 JUNE 2020 - RESTATED$M$M$M$M$M$M
Opening net book value 312 163 68 213 100 856
Additions
1
– 13 – – 136 149
Transfers 173 – 10 – (183) –
Acquisitions – – 1 9 – 10
Disposals (5) (1) – – – (6)
Impairments (2) – – – – (2)
Amortisation charge (127) (17) (20) – – (164)
Closing net book value 351 158 59 222 53 843
AS AT 30 JUNE 2020 – RESTATED
Cost 1,985 282 141 270 53 2,731
Accumulated amortisation and impairment losses (1,634) (124) (82) (48) – (1,888)
Closing net book value 351 158 59 222 53 843
1 Total software capitalised in the year ended 30 June 2020 includes $42 million of internally generated assets. Other software capitalised in the year includes software
licences and externally supplied labour.
Key estimates and assumptions
Intangible assets are amortised over their useful lives on a straight-line basis, except goodwill, which is tested for impairment annually.
Determining the appropriate useful life of an intangible asset requires management judgement, including assessing the expected
period of service potential, the likelihood technological advances will make it obsolete and the likelihood of Spark ceasing to use it.
The estimated useful lives of Spark intangible assets is as follows:
Spectrum licences 2 – 21 years
Software 2 – 12 years
Customer contracts and brands 5 – 10 years
Other intangible assets 2 – 100 years
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Spark New Zealand Annual Report 2021
Notes to the financial statements
3
3.7 Intangible assets (continued)
Goodwill
Goodwill by cash-generating unit (CGU) is presented below:
20212020
AS AT 30 JUNE$M$M
Mobile 28 28
Cloud, security and service management 167 167
Qrious 14 14
Digital Island 13 13
222 222
During the years ended 30 June 2021 and 30 June 2020 no impairment arose as a result of the assessment of the carrying value of
goodwill. Headroom currently exists in each CGU and, based on sensitivity analysis performed, no reasonably possible changes in the
assumptions would cause the carrying amount of the CGUs to exceed their recoverable amounts.
Key estimates and assumptions
Goodwill is assessed annually for impairment using a value-in-use model, which estimates the future cash flows, based on the
FY22 Board-approved business plan, applied to the next three years, with key assumptions being forecast earnings and capital
expenditure for each CGU. The forecast financial information is based on both past experience and future expectations of CGU
performance. The major inputs and assumptions used in performing an impairment assessment that require judgement include
revenue forecasts, operating cost projections, customer numbers and customer churn, discount rates, growth rates and future
technology paths.
Nil terminal growth was applied to all CGUs and a pre-tax discount rate of 10.0% was utilised for the year ended 30 June 2021
(30 June 2020: 8.8%).
3.8 Net tangible assets
The calculation of Spark’s net tangible assets per share and its reconciliation to the statement of financial position is presented below:
2021
RESTATED
2020
AS AT 30 JUNE$M$M
Total assets 4,113 4,358
Less intangible assets (871) (843)
Less total liabilities (2,610) (2,884)
Net tangible assets 632 631
Number of shares outstanding (in millions) 1,867 1,837
Net tangible assets per share$0.34$0.34
Net tangible assets per share is a non-GAAP financial measure that is not defined in NZ IFRS. Total assets includes right-of-use assets and
total liabilities includes lease liabilities.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Liabilities and equity
Section 4 Liabilities and equity
4.1 Payables, accruals and provisions
2021
RESTATED
2020
AS AT 30 JUNE$M$M
Short-term payables, accruals and provisions
Trade accounts payable 270 267
Revenue billed in advance 80 74
Accrued personnel costs 37 38
Accrued interest 2 2
GST payable 34 37
Short-term sale and leaseback liabilities 34 31
Short-term provisions 3 6
Other short-term payables and accruals 19 38
479 493
Long-term payables, accruals and provisions
Long-term sale and leaseback liabilities 47 58
Long-term provisions 10 5
Other long-term payables & accruals 3 18
60 81
Trade accounts payable and sale and leaseback liabilities are financial instruments held at amortised cost.
Provisions
Total provisions as at 30 June 2021 were $13 million (30 June 2020: $11 million). New provisions of $10 million were made during the year
(30 June 2020: $7 million) and provisions of $8 million were utilised or released (30 June 2020: $3 million).
The largest portion of the provisions relate to make-good provisions of $12 million (30 June 2020: $7 million).
Notes to the financial statements: Liabilities and equity
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Spark New Zealand Annual Report 2021
Notes to the financial statements
4
4.2 Lease liabilities
PROPERTYCAPACITY
MOBILE
SITES
MOTOR
VEHICLESOTHERTOTAL
YEAR ENDED 30 JUNE 2021$M$M$M$M$M$M
Opening lease liability balance 443 2 99 2 26 572
Leases entered into during the year19 – 27 4 12 62
Disposals(2)– (4)– (9)(15)
Interest expense19 – 6 – 1 26
Principal repayments(49)– (15)(2)(9)(75)
Remeasurements
1
(105)– – – – (105)
Balance at the end of the year325 2 113 4 21 465
Short-term portion of finance lease receivable1 – – – – 1
Total lease liability balance326 2 113 4 21 466
Short-term lease liabilities38 – 12 2 8 60
Long-term lease liabilities288 2 101 2 13 406
Lease liabilities – non-cancellable commitments
2
170 2 53 4 20 249
PROPERTYCAPACITY
MOBILE
SITES
MOTOR
VEHICLESOTHERTOTAL
YEAR ENDED 30 JUNE 2020$M$M$M$M$M$M
Opening lease liability balance 394 2 93 1 – 490
Leases entered into during the year77 – 9 2 31 119
Disposals(9)– – – – (9)
Interest expense24 – 6 – 1 31
Principal repayments(46)– (14)(1)(6)(67)
Remeasurements3 – 5 – – 8
Closing lease liability balance 443 2 99 2 26 572
Short-term lease liabilities25 – 8 1 7 41
Long-term lease liabilities418 2 91 1 19 531
Lease liabilities – non-cancellable commitments
2
198 2 13 2 26 241
1 Remeasurements to property primarily relate to modifications and changes of assumptions for leases, including market rent reviews and reductions in lease terms for
corporate property leases. The reduction in lease liabilities is substantially offset by a reduction in property right-of-use assets (see note 3.4).
2 Relates to the discounted lease liability for future minimum rental commitments for non-cancellable periods of leases, excluding rights of renewal, which are at Spark’s
option.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Liabilities and equity
4.2 Lease liabilities (continued)
Key estimates and assumptions
Spark recognises a lease liability at the lease commencement date. The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, Spark’s incremental borrowing rate. Generally, Spark uses its incremental borrowing rate as
the discount rate, with adjustments for the type and term of the lease.
Lease payments included in the measurement of the lease liability comprise:
• Fixed payments, including in-substance fixed payments;
• Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement
date;
• Amounts expected to be payable under a residual value guarantee;
• The exercise price under a purchase option that Spark is reasonably certain to exercise; and
• Lease payments in an optional renewal period if Spark is reasonably certain to exercise an extension option.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in
future lease payments arising from a change in an index or rate, if there is a change in Spark’s estimate of the amount expected to
be payable under a residual value guarantee or if Spark changes its assessment of whether it will exercise a purchase or
extension option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Spark has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have lease terms of 12
months or less and leases of low-value assets. Spark recognises the lease payments associated with these leases within operating
expenses on a straight-line basis over their lease terms.
88
Spark New Zealand Annual Report 2021
Notes to the financial statements
4
4.3 Debt
Debt is recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, debt is classified and measured
at amortised cost plus, for hedged liabilities that are in a fair value hedging relationship, adjustments for fair value changes attributable to
the risk being hedged. Any difference between cost and redemption value (including fair value changes) is recognised in the statement of
profit or loss over the period of the borrowings, using the effective interest rate method.
20212020
AS AT 30 JUNE$M$M
FACE VALUEFACILITYCOUPON RATEMATURITY
Short-term debt
Short-term borrowingsVariable< 1 month 3 –
Commercial paperVariable< 3 months 155 228
158 228
Supplier financing arrangements
1
Amounts due within one yearVariable< 3 years14 –
Amounts due in more than a yearVariable< 3 years 18 –
32 –
Bank funding
The Hongkong and Shanghai Banking Corporation Limited100 million NZDVariable30/11/2021 100 50
Mitsubishi UFJ Financial Group Bank Limited125 million NZDVariable30/11/2022 60 100
160 150
Domestic notes
100 million NZD4.50%25/03/2022 101 103
100 million NZD4.51%10/03/2023 104 108
125 million NZD3.37%07/03/2024 130 135
125 million NZD3.94%07/09/2026 131 140
466 486
Foreign currency Medium Term Notes
Australian Medium Term Notes - 100 million AUD1.90%05/06/2026 106 107
Australian Medium Term Notes - 150 million AUD4.00%20/10/2027 177 185
Australian Medium Term Notes - 125 million AUD2.60%18/03/2030 132 139
Norwegian Medium Term Notes - 1 billion NOK
2
3.07%19/03/2029 172 177
587 608
1,403 1,472
Debt due within one year 373 228
Long-term debt 1,030 1,244
1 Supplier financing arrangements relate to amounts payable to suppliers on extended payment terms and are therefore considered as debt. Amounts paid under these
arrangements are presented in the statement of cash flows within financing activities.
2 Norwegian krone.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Liabilities and equity
4.3 Debt (continued)
None of Spark’s debt is secured and all debt ranks equally with other liabilities. There are no financial covenants over Spark’s debt,
however, there are certain triggers in the event of default, as defined in the various debt agreements. There have been no events of default
over Spark’s debt in the years ended 30 June 2021 and 30 June 2020.
The fair value of long-term debt, including long-term debt due within one year, based on market observable prices, was $1,270 million
compared to a carrying value of $1,245 million as at 30 June 2021 (30 June 2020: fair value of $1,254 million compared to a carrying value
of $1,244 million).
20212020
AS AT 30 JUNE$M$M
Total debt 1,403 1,472
Less short-term debt (158) (228)
Total long-term debt (including long-term debt due within one year) 1,245 1,244
4.4 Capital risk management
Spark manages its capital considering shareholders’ interests, the value of Spark’s assets and the Company’s credit rating. The Board
continues to be committed to the Company maintaining a single ‘A Band’ credit rating and its capital management policies are designed
to ensure this objective is met. As part of this commitment Spark manages its debt levels to ensure that the ratio of net debt at hedged
rates (being inclusive of associated derivatives) to EBITDAI does not materially exceed 1.4 times on a long-run basis, which, for credit rating
agency purposes, Spark estimates equates approximately to adjusted debt to EBITDA of 1.7 times. The difference between these two
ratios is primarily due to the credit rating agency making adjustments for leases and captive finance operations.
As at 30 June 2021 the Company’s Standard & Poor’s credit ratings for long-term and short-term debt were A- and A-2 respectively,
with outlook stable (30 June 2020: same).
Net debt
Net debt at hedged rates, the primary net debt measure Spark monitors, includes long-term debt at the value of hedged cash flows due to
arise on maturity, plus short-term debt, less any cash. Net debt at carrying value includes the non-cash impact of fair value hedge
adjustments and any unamortised discount.
Net debt at hedged rates is a non-GAAP measure and is not defined in accordance with NZ IFRS but is a measure used by management. A
reconciliation of net debt at hedged rates and net debt at carrying value is provided below:
20212020
AS AT 30 JUNE$M$M
Cash (72) (53)
Short-term debt at face value 158 228
Long-term debt at face value 1,212 1,162
Net debt at face value 1,298 1,337
To retranslate debt balances at swap rates where hedged by currency swaps 5 12
Net debt at hedged rates
1
1,303 1,349
Non-cash adjustments
Impact of fair value hedge adjustments
2
1213
Unamortised discount (2) –
Net debt at carrying value 1,313 1,362
1 Net debt at hedged rates is the value of hedged cash flows due to arise on maturity and includes an adjustment to state the principal of foreign currency medium term
notes at the hedged currency rate.
2 Fair value hedge adjustments arise on domestic notes in fair value hedges and foreign currency medium term notes in dual fair value and cash flow hedges. These have
no impact on the cash flows to arise on maturity.
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Spark New Zealand Annual Report 2021
Notes to the financial statements
4
4.4 Capital risk management (continued)
A reconciliation of movements in net debt is provided below:
CASH FLOWSNON-CASH MOVEMENTS
YEAR ENDED 30 JUNE 2021
AS AT 1 JULY
2020
$M
PROCEEDS
$M
PAYMENTS
$M
INTEREST
AMORTISATION
$M
FAIR VALUE
CHANGES
$M
FOREIGN
EXCHANGE
MOVEMENT
$M
OTHER
$M
AS AT 30 JUNE
2021
$M
Cash(53)(8,996)8,977––––(72)
Short-term debt2282,044(2,115)1–––158
Long-term debt1,2443,323(3,290)(1)(48)7101,245
Derivatives(57)–––46(7)–(18)
Net debt 1,362 (3,629) 3,572 – (2) – 10 1,313
CASH FLOWSNON-CASH MOVEMENTS
YEAR ENDED 30 JUNE 2020
AS AT 1 JULY
2019
$M
PROCEEDS
$M
PAYMENTS
$M
INTEREST
AMORTISATION
$M
FAIR VALUE
CHANGES
$M
FOREIGN
EXCHANGE
MOVEMENT
$M
OTHER
$M
AS AT 30 JUNE
2020
$M
Cash(54)(6,945)6,946––––(53)
Short-term debt1501,150(1,075)3–––228
Long-term debt1,2451,847(1,882)–44(9)(1)1,244
Derivatives(15)278(288)–(41)9–(57)
Net debt 1,326 (3,670) 3,701 3 3 – (1) 1,362
4.5 Equity and dividends
Share capital
Movements in the Company’s issued ordinary shares were as follows:
20212020
YEAR ENDED 30 JUNENUMBERNUMBER
Shares at the beginning of the year 1,837,044,943 1,836,191,581
Dividend reinvestment plan 29,190,684–
Issuance of shares under share schemes and other transfers889,466 853,362
Shares at the end of the year 1,867,125,093 1,837,044,943
All issued shares are fully paid and have no par value. Shareholders of ordinary shares have the right to vote at any general meeting of the Company.
Dividends
20212020
YEAR ENDED 30 JUNE
CENTS PER
SHARE$M
CENTS PER
SHARE$M
Previous year second half-year dividend 12.5 230 12.5 230
First half-year dividend 12.5 231 12.5 229
Total dividends in the year 25.0 461 25.0 459
Second half-year dividend declared subsequent to balance date not provided for 12.5 233 12.5 230
Events after balance date
On 18 August 2021 the Board approved the payment of a second-half ordinary dividend of 12.5 cents per share or approximately
$233 million. This ordinary dividend will be 100% imputed. In addition, supplementary dividends totalling approximately
$23 million will be payable to shareholders who are not resident in New Zealand. In accordance with the Income Tax Act 2007,
Spark will receive a tax credit from Inland Revenue equivalent to the amount of supplementary dividends paid.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Liabilities and equity
4.5 Equity and dividends (continued)
H1 FY21 H2 FY21
ORDINARY DIVIDENDS ORDINARY DIVIDENDS
Dividends declared
Ordinary shares 12.5 cents 12.5 cents
American Depositary Shares
1
43.79 US cents 44.01 US cents
Imputation
Percentage imputed100%100%
Imputation credits per share 4.8611 cents 4.8611 cents
Supplementary dividend per share
2
2.2059 cents 2.2059 cents
‘Ex’ dividend dates
New Zealand Stock Exchange18/03/2116/09/21
Australian Securities Exchange18/03/2116/09/21
American Depositary Shares 18/03/2116/09/21
Record dates
New Zealand Stock Exchange19/03/2117/09/21
Australian Securities Exchange19/03/2117/09/21
American Depositary Shares 19/03/2117/09/21
Payment dates
New Zealand and Australia 9/04/211/10/21
American Depositary Shares 19/04/2115/10/21
1 Spark’s American Depositary Shares, each representing five ordinary Spark shares and evidenced by American Depositary Receipts (ADRs), are traded over-the-counter
in the United States. This is a Level 1 ADR programme that is sponsored by Bank of New York Mellon. For H2 FY21 these are based on the exchange rate at 12 August
2021 of NZ$1 to US$0.7042 and a ratio of five ordinary shares per one American Depositary Share. The actual exchange rate used for conversion is determined in the
week prior to payment when the Bank of New York Mellon performs the physical currency conversion.
2 Supplementary dividends are paid to non-resident shareholders.
Dividend Reinvestment Plan
The Company has a dividend reinvestment plan under which shareholders can elect to receive dividends in additional shares.
For the year ended 30 June 2021 shares with a total value of $131 million (2020: nil) were issued in lieu of dividends. Shares
issued in lieu of dividends are excluded from dividends paid in the statement of cash flows.
The dividend reinvestment plan has been retained for the H2 FY21 dividend. Shares issued under the dividend reinvestment
plan will be issued at the prevailing market price around the time of issue. The last date for shareholders to elect to participate
in the dividend reinvestment plan for the H2 FY21 dividend is 20 September 2021.
Spark’s Dividend Reinvestment Plan Offer Document and Participation Notice can be found on Spark’s Investor Centre Website
investors.sparknz.co.nz
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Spark New Zealand Annual Report 2021
Notes to the financial statements
5
Section 5 Financial instruments
5.1 Derivatives and hedge accounting
20212020
DERIVATIVE
ASSETS
DERIVATIVE
LIABILITIES
DERIVATIVE
ASSETS
DERIVATIVE
LIABILITIES
AS AT 30 JUNE$M$M$M$M
Designated in a cash flow hedge10 (83)1 (155)
Designated in a fair value hedge16 – 35 –
Designated in a dual fair value and cash flow hedge9 (7)22 –
Other1 (5)3 (6)
36 (95)61 (161)
Short-term derivatives12 (4)1 (5)
Long-term derivatives24 (91)60 (156)
Spark’s derivatives are held at fair value, calculated using discounted cash flow models and observable market rates of interest, foreign
exchange and electricity prices. This represents a level two measurement under the fair value measurement hierarchy, being inputs other
than quoted prices included within level one that are observable for the asset or liability. As at 30 June 2021 and 30 June 2020 no
derivative financial assets or derivative financial liabilities have been offset in the statement of financial position. The potential for offsetting
of any derivative financial instruments is $20 million (30 June 2020: $39 million).
Hedge accounting
Derivatives are hedge accounted when they are designated into an effective hedge relationship as a hedging instrument. The nature and
the effectiveness of the hedge accounting relationship will determine where the gains and losses on remeasurement are recognised.
Derivatives are designated:
• Fair value hedges, where the derivative is used to manage interest rate risk in relation to debt;
• Cash flow hedges, where the derivative is used to manage the variability in cash flows of highly probable forecast transactions; and
• Dual fair value and cash flow hedges, where the derivative is used to hedge the interest rate risk on foreign debt and the variability in
cash flows due to movements in foreign exchange rates.
At inception, each hedge relationship is formalised in hedge documentation. Hedge accounting is discontinued when the hedge
instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. Spark determines the existence of an
economic relationship between the hedging instrument and the hedged item based on the currency, amount and timing of respective
cash flows, reference interest rates, tenors (time to maturity), repricing dates, maturities and notional amounts. Spark assesses whether the
derivative designated in each hedging relationship is expected to be, and has been, effective in offsetting the changes in cash flows of the
hedged item using the hypothetical derivative method.
Derivatives in hedge relationships are designated based on a hedge ratio of 1:1. In these hedge relationships the main source of
ineffectiveness is the effect of the counterparty and Spark’s own credit risk on the fair value of the derivatives, which is not reflected in the
change in the fair value of the hedged item attributable to changes in foreign exchange and interest rates.
Cash flow hedges
Cross-currency interest rate swaps and interest rate swaps are jointly designated in cash flow hedges to manage interest and foreign
exchange rate risk on debt. The hedged cash flows will affect Spark’s statement of profit or loss and other comprehensive income as
interest and principal amounts are repaid over the remaining term of the debt.
Interest rate swaps are designated in cash flow hedges to manage the interest rate exposure of highly probable forecast variable rate debt
and aggregate variable interest rate exposures created by swapping local or foreign currency fixed-rate debt into variable rate debt.
Electricity hedge contracts are designated in cash flow hedges to reduce electricity price risk from price fluctuations. These hedge
contracts establish the price at which future specified quantities of electricity are purchased and settled. Any resulting differential to be
paid or received is recognised as a component of electricity costs through the term of the contracts.
Spark also enters into forward exchange contracts to hedge forecast foreign currency purchases, the majority expected to be made within
12 months. The related cash flows are recognised in the statement of profit or loss and other comprehensive income over this period.
Notes to the financial statements: Financial instruments
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Financial instruments
5.1 Derivatives and hedge accounting (continued)
A reconciliation of movements in the hedge reserves, net of tax, is outlined below:
20212020
YEAR ENDED 30 JUNE$M$M
Opening balance as at 1 July (120) (85)
Gain/(loss) recognised in other comprehensive income57 (49)
Amount reclassified to finance expense 14 8
Amount reclassified to property, plant and equipment/intangible assets and inventory (9) 6
Amount reclassified to other operating expenses(5) –
Total movements to other comprehensive income/(loss) 57 (35)
Closing balance as at 30 June (63) (120)
Other amounts deferred in equity will be transferred to the statement of profit or loss over the next four years (30 June 2020: five years).
Included within the closing balance at 30 June 2021 is $3 million relating to the cost of hedging reserve (30 June 2020: $2 million). The
movement in the hedge reserves includes $68 million in the change in fair value of interest rate swaps less $19 million associated deferred
tax, $6 million in relation to electricity derivatives and $2 million for forward foreign exchange contracts (30 June 2020: $49 million in the
change in fair value of interest rate swaps less $14 million associated deferred tax).
Fair value hedges
Interest rate swaps are designated in a fair value hedge to manage interest rate risk in relation to debt. The gain or loss from remeasuring
the interest rate swaps and debt at fair value is recognised in the statement of profit or loss and other comprehensive income. During the
year ended 30 June 2021 there has been no material ineffectiveness on fair value hedging relationships (30 June 2020: no material
ineffectiveness).
Dual fair value and cash flow hedges
Spark has Australian dollar (AUD) and Norwegian Krone (NOK) denominated debt. As part of Spark’s risk management policy, cross-
currency interest rate swaps (CCIRSs) are entered into to convert all of the proceeds of the debt issuances to New Zealand dollars and
convert the foreign currency fixed rate of the debt issuance to a New Zealand dollar floating rate. To mitigate profit or loss volatility, the
CCIRSs were designated into a dual fair value and cash flow hedge relationship. The foreign currency basis element of the CCIRSs are
excluded from the designation and are separately recognised in other comprehensive income in a cost of hedging reserve.
For fair value hedges the gain or loss from remeasuring the CCIRSs and debt at fair value is recognised in the statement of profit or loss
and other comprehensive income. For cash flow hedges gains or losses deferred in the cash flow hedge reserve will be reclassified to
Spark’s statement of profit or loss and other comprehensive income as interest and principal amounts are repaid over the remaining term
of the debt.
The change in fair value of the hedging instruments relating to the foreign currency basis component of the CCIRS is recognised in other
comprehensive income and accumulated in a cost of hedging equity reserve. Subsequently, the cumulative amount is transferred to profit
or loss at the same time as the hedged item impacts profit or loss.
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Spark New Zealand Annual Report 2021
Notes to the financial statements
5
5.1 Derivatives and hedge accounting (continued)
The details of the hedging instruments are as follows:
NOTIONAL
AMOUNT OF
HEDGING
INSTRUMENT
STATEMENT OF
FINANCIAL
POSITION LINE
ITEM
CARRYING AMOUNT OF
THE HEDGING INSTRUMENT
LIFE TO DATE
CHANGE-IN-
VALUE USED FOR
CALCULATING
HEDGE
INEFFECTIVE-
NESSASSETSLIABILITIES
AS AT 30 JUNE 2021$M$M$M
Cash flow hedges
Interest rate swapsNZD 780m Derivatives – (80) (80)
Forward foreign exchange contractsNZD 200m Derivatives 3 (3) –
Electricity derivatives66.24 GWh Derivatives 7 – 7
Fair value hedges
Interest rate swapsNZD 390m Derivatives 16 – 16
Forward foreign exchange contractsNZD 8m Derivatives – – –
Fair value and cash flow hedges
Cross-currency swapsAUD 150m Derivatives 9 – 9
Cross-currency swapNOK 1b Derivatives – (2) (2)
Cross-currency swapsAUD 125m Derivatives – (3) (3)
Cross-currency swapsAUD 100m Derivatives – (2) (2)
35 (90) (55)
AS AT 30 JUNE 2020
Cash flow hedges
Interest rate swapsNZD 860m Derivatives – (148) (148)
Forward foreign exchange contractsNZD 207m Derivatives 1 (4) (3)
Electricity derivatives329 GWh Derivatives – (2) (2)
Fair value hedges
Interest rate swapsNZD 390m Derivatives 35 – 35
Fair value and cash flow hedges
Cross-currency swapsAUD 150m Derivatives 16 – 16
Cross-currency swapNOK 1b Derivatives 3 – 3
Cross-currency swapsAUD 125m Derivatives 3 – 3
Cross-currency swapsAUD 100m Derivatives – – –
58 (154) (96)
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Financial instruments
5.1 Derivatives and hedge accounting (continued)
The details of hedged items are as follows:
STATEMENT OF
FINANCIAL POSITION
LINE ITEM
CARRYING AMOUNT OF
THE HEDGED ITEM
ACCUMULATED AMOUNT OF
FAIR VALUE HEDGE ADJUSTMENTS
ON THE HEDGED ITEM INCLUDED
IN THE CARRYING AMOUNT
OF THE HEDGED ITEM
LIFE TO DATE
CHANGE-IN-
VALUE USED FOR
CALCULATING
HEDGE
INEFFECTIVE-
NESSASSETSLIABILITIESASSETSLIABILITIES
AS AT 30 JUNE 2021$M$M$M$M$M$M
Cash flow hedges
Aggregated variable interest rate exposure – – – – – 80
Highly probable forecast purchases of electricity – – – – – (7)
Fair value hedges
Domestic Notes Long-term debt – (407) – (17) (16)
Fair value and cash flow hedges
Australian Medium Term Note (AUD 150m) Long-term debt – (177) – (17) (9)
Norwegian Medium Term Note (NOK 1b) Long-term debt – (172) – (6) 2
Australian Medium Term Note (AUD 125m) Long-term debt – (132) – 2 3
Australian Medium Term Note (AUD 100m) Long-term debt – (106) – 2 2
– (994) – (36) 55
AS AT 30 JUNE 2020
Cash flow hedges
Aggregated variable interest rate exposure – – – – – 138
Highly probable forecast variable rate debt – – – – – 10
Committed foreign exchange transactions – – – – – 3
Highly probable forecast purchases of electricity – – – – – 2
Fair value hedges
Domestic Notes Long-term debt – (426) – (36) (35)
Fair value and cash flow hedges
Australian Medium Term Note (AUD 150m) Long-term debt – (185) – (26) (16)
Norwegian Medium Term Note (NOK 1b) Long-term debt – (178) – (17) (3)
Australian Medium Term Note (AUD 125m) Long-term debt – (139) – (6) (3)
Australian Medium Term Note (AUD 100m) Long-term debt – (107) – – –
– (1,035) – (85) 96
96
Spark New Zealand Annual Report 2021
Notes to the financial statements
5
5.2 Financial risk management
a) Market risk
Spark is exposed to market risk primarily from changes in foreign
currency exchange rates, interest rates and electricity prices. Spark
employs risk management strategies, including the use of
derivative financial instruments, to manage these exposures
through a Board-approved treasury policy, which provides the
framework within which treasury-related activities are conducted.
Spark manages the concentration of exposures using well-defined
market and credit risk limits and through timely reporting to senior
management. All contracts have been entered into with high-credit
quality financial institutions, except electricity hedge contracts,
which are generally settled monthly. The risk associated with these
transactions is that the fair value or cash flows of financial
instruments will change due to movements in market rates or, in the
case of default by a counterparty, through the cost of replacement
at the current market rates.
Currency risk
Nature of the risk
Currency risk is the risk that eventual New Zealand dollar net cash
flows from transactions undertaken by Spark will be adversely
affected by changes in foreign currency exchange rates.
Exposure and risk management
Spark’s total net exposure (from non-derivative financial
instruments) to foreign currency as at 30 June 2021 is $598 million
(30 June 2021: $605 million). This includes $167 million long-term
debt principal denominated in NOK (30 June 2020: $161 million)
and $403 million long-term debt principal denominated in AUD (30
June 2020: $400 million). The remaining exposure is primarily trade
payables and other receivables denominated in United States
dollars (USD).
Spark manages currency risk arising from foreign currency debt
through hedging. Spark’s long-term debt issued in NOK and AUD
is fully hedged using cross-currency interest rate swaps to convert
foreign currency cashflows into floating-rate New Zealand dollar
exposures.
Currency risk from capital and operational expenditure in foreign
currencies (and related trade payables) has been substantially
hedged by entering into forward exchange contracts.
Sensitivity to foreign currency movements
As at 30 June 2021 a movement of 10% in the New Zealand dollar
would (after hedging) impact the statement of profit or loss by less
than $3 million (30 June 2020: less than $3 million) and the
statement of changes in equity by less than $19 million (30 June
2020: less than $19 million). This analysis assumes a movement in
the New Zealand dollar across all currencies and only includes the
effect of foreign exchange movements on monetary financial
instruments.
Interest rate risk
Nature of the risk
Interest rate risk is the risk that fluctuations in interest rates impact
Spark’s cash flows, financial performance or the fair value of its
holdings of financial instruments.
Exposure and risk management
Spark is exposed to interest rate risk from its financing activities,
which primarily include loans and debt issuance either at fixed or
floating rates. For floating-rate exposures Spark employs the use of
derivative financial instruments to reduce its exposure to
fluctuations in interest rates, with the objective to minimise the cost
of net borrowings and to minimise the impact of interest rate
movements on interest expense and net earnings.
Cross-currency interest rate swaps are used to convert foreign
currency debt into floating-rate New Zealand dollar exposures.
Interest rate swaps are used to convert floating-rate exposures into
fixed-rate exposures and vice versa. As a result Spark’s interest rate
exposure is limited to New Zealand only.
Sensitivity to interest rate movements
As at 30 June 2021 a movement in interest rates of 25 basis points
would (after hedging) impact the statement of profit or loss by less
than $1 million (30 June 2020: less than $1 million) and statement
of changes in equity by less than $2 million (30 June 2020: less
than $3 million).
Electricity price risk
Nature of the risk
Electricity price risk is the risk that fluctuations in spot electricity
prices will impact Spark’s financial performance.
Exposure and risk management
Spark is a large consumer of electricity, which exposes the Group to
fluctuations in the market spot price. To reduce its exposure to
electricity price risk, Spark has entered into electricity hedge
contracts. These contracts establish a fixed price for Spark, with the
counterparty topping up or retaining the difference between the
spot price and the fixed price over the term of the contract.
Sensitivity to electricity price movements
As at 30 June 2021 a movement of 10% in forward electricity prices
would impact the statement of profit or loss and statement of
changes in equity (after hedging) by less than $2 million (30 June
2020: less than $3 million).
97
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Financial instruments
b) Credit risk
Nature of the risk
Credit risk arises in the normal course of Spark’s business on cash,
receivables and derivative financial instruments if a counterparty
fails to meet its contractual obligations.
Exposure and risk management
Spark is exposed to credit risk if customers and counterparties fail
to make payments in respect of:
• Payment of trade and other receivables as they fall due; and
• Contractual cash flows of derivative assets held at fair value.
Spark’s assets subject to credit risk as at 30 June 2021 were $1,010
million (30 June 2020: $1,035 million).
Spark considers the probability of default upon initial recognition
of cash, receivables and derivative assets and whether there has
been a significant and ongoing increase in credit risk at the end of
each reporting period. To assess this Spark compares the risk of
default occurring on these assets at the reporting date, with the risk
of default at the date of initial recognition. Available, reasonable
and supportive forward-looking information is considered,
especially the following indicators:
• External credit rating (as far as available);
• Actual or expected significant adverse changes in business,
financial or economic conditions that are expected to cause a
significant change to the customer or counterparty’s ability to
meet their obligations; and
• Significant changes in the value of the collateral supporting the
obligation or in the quality of third-party guarantees or credit
enhancements.
Spark manages its exposure using a credit policy that includes
limits on exposures with significant counterparties that have been
set and approved by the Board and are monitored on a regular
basis. Spark places its cash and derivative financial instruments with
high-credit quality financial institutions and does not have
significant concentration of risk with any single party. Concentration
of credit risk for trade and other receivables is limited because of
Spark’s large customer base.
Spark has certain derivative and debt arrangements that are subject
to bilateral credit support agreements that require Spark or its
counterparties to post collateral funds to support the value of
certain derivatives subject to certain agreed threshold amounts. As
at 30 June 2021 no collateral was posted (30 June 2020: nil).
Letters of credit and guarantees may also be held over some
receivable amounts. The carrying amounts of financial assets
represent the maximum credit exposure.
c) Liquidity risk
Nature of the risk
Liquidity risk represents Spark’s ability to meet its contractual
obligations as they fall due.
Exposure and risk management
Spark uses cash and derivative financial instruments to manage
liquidity and evaluates its liquidity requirements on an ongoing
basis. In general, Spark generates sufficient cash flows from its
operating activities to meet its financial liabilities. As at 30 June
2021 Spark had current assets of $916 million and current liabilities
of $939 million (30 June 2020: current assets of $958 million and
current liabilities of $811 million). Positive operating cash flows
enable working capital to be managed to meet short-term liabilities
as they fall due.
In the event of any shortfalls Spark has the following financing
programmes:
• An undrawn committed standby facility of $200 million with a
number of creditworthy banks (30 June 2020: $200 million);
• Committed bank facilities of $575 million with $160 million
drawn as at 30 June 2021 (30 June 2020: $575 million facility
with $150 million drawn); and
• Committed bank overdraft facilities of $15 million with
New Zealand banks (30 June 2020: $15 million).
There are no compensating balance requirements associated with
these facilities.
Spark will refinance $100 million of an existing bank facility
maturing on 30 November 2021. This was approved at the Spark
February 2021 Board Meeting.
Spark’s FY21 liquidity policy is to maintain committed facilities of at
least 110% of the next 12 months’ forecast peak net funding
requirements. Spark’s funding policy requires that the maximum
amount of long-term debt, excluding short-term debt such as
commercial paper, maturing in any 12-month period is not to
exceed $300 million, which has been met.
5.2 Financial risk management (continued)
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Spark New Zealand Annual Report 2021
Notes to the financial statements
5
Maturity analysis
The following table provides an analysis of Spark’s remaining contractual cash flows relating to financial liabilities. Contractual cash flows
include contractual undiscounted principal and interest payments.
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS0–6 MONTHS6–12 MONTHS1–2 YEARS2–5 YEARS5+ YEARS
AS AT 30 JUNE 2021$M$M$M$M$M$M$M
Non-derivative financial liabilities
Trade payables 270 270 270 – – – –
Sale and leaseback liabilities 81 91 22 25 31 13 –
Lease liabilities 466 616 40 36 70 147 323
Short and long-term debt 1,403 1,509 330 120 130 301 628
Derivative financial liabilities
Interest rate swaps (net settled) 85 69 7 6 13 31 12
Cross-currency interest rate swaps
(gross settled)
Inflows – (125) (6) (11) (17) (52) (39)
Outflows 7 132 6 6 15 58 47
Forward exchange contracts (gross settled)
Inflows – (89) (85) (4) – – –
Outflows 3 92 87 5 – – –
2,315 2,565 671 183 242 498 971
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS0–6 MONTHS6–12 MONTHS1–2 YEARS2–5 YEARS5+ YEARS
AS AT 30 JUNE 2020 $M$M$M$M$M$M$M
Non-derivative financial liabilities
Trade payables 267 267 267 – – – –
Sale and leaseback liabilities 89 103 20 21 37 25 –
Lease liabilities 572 786 36 35 69 169 477
Short and long-term debt 1,472 1,598 243 20 185 401 749
Derivative financial liabilities –
Interest rate swaps (net settled) 155 160 14 14 27 66 39
Electricity derivatives (net settled) 2 2 – 1 1 – –
Cross-currency interest rate swaps
(gross settled) –
Inflows – (119) (1) (1) (2) (6) (109)
Outflows – 119 1 1 2 6 109
Forward exchange contracts (gross settled) –
Inflows – (124) (98) (24) (2) – –
Outflows 4 128 102 24 2 – –
2,561 2,920 584 91 319 661 1,265
5.2 Financial risk management (continued)
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Other information
Section 6 Other information
6.1 Income tax
Income tax expense
The income tax expense is determined as follows:
2021
RESTATED
2020
YEAR ENDED 30 JUNE$M$M
Statement of profit or loss
Current income tax
Current year income tax expense (172) (175)
Adjustments in respect of prior periods 4 13
Deferred income tax
Depreciation, provisions, accruals, tax losses and other 4 11
Reintroduction of tax depreciation on buildings– 10
Adjustments in respect of prior periods (5) (7)
Income tax expense recognised in the statement of profit or loss (169) (148)
Reconciliation of income tax expense
2021
RESTATED
2020
YEAR ENDED 30 JUNE$M$M
Net earnings before income tax 553 568
Tax at current rate of 28% (155) (159)
Adjustments to taxation
Non-assessable gains on sale 1 7
Other non-assessable items (2) 1
Tax effects of non-New Zealand profits (6) (9)
Taxes paid in foreign jurisdictions (6) (4)
Reintroduction of tax depreciation on buildings– 10
Adjustments in respect of prior periods (1) 6
Total income tax expense (169) (148)
Notes to the financial statements: Other information
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Spark New Zealand Annual Report 2021
Notes to the financial statements
6
6.1 Income tax (continued)
Deferred tax assets and liabilities
Deferred tax assets and liabilities are offset in the statement of financial position and presented as a net deferred tax liability. The
movement in the deferred tax assets and liabilities is provided below:
FIXED ASSETSLEASES
PROVISIONS &
ACCRUALSOTHERTOTAL
ASSETS/(LIABILITIES)$M$M$M$M$M
Opening balance as at 1 July 2020 (127) 27 – 39 (61)
Amounts recognised in statement of profit or loss
Relating to the current period 20 (17) (1) 2 4
Adjustments in respect of prior periods (1) – (4) – (5)
Amounts recognised in equity relating to the current year – – – (22) (22)
Reclassifications 29 (29) – – –
Closing balance as at 30 June 2021 (79) (19) (5) 19 (84)
Opening balance as at 1 July 2019 – RESTATED (135) 26 (3) 24 (88)
Amounts recognised in statement of profit or loss
Relating to the current period4 1 4 2 11
Reintroduction of tax depreciation on buildings 10 – – – 10
Adjustments in respect of prior periods (6) – (1) – (7)
Amounts recognised in equity relating to the current year – – – 13 13
Closing balance as at 30 June 2020 (127) 27 – 39 (61)
Spark has not recognised the tax effect of accumulated unrestricted losses and temporary differences amounting to AUD$461 million at 30
June 2021 based on the relevant corporation tax rate of Australia (30 June 2020: AUD$461 million). These losses and temporary
differences may be available to be carried forward to offset against future taxable income. However, utilisation is contingent on the
production of taxable profits over a significant period of time and is subject to compliance with the relevant taxation authority
requirements.
Spark has a negative $18 million imputation credit account balance as at 30 June 2021 due to the timing of dividend and tax payments
(30 June 2020: nil). The imputation credit account had a positive balance as at 31 March 2021 and 31 March 2020.
6.2 Employee share schemes
Spark operates share-based compensation plans that are equity settled as outlined below.
Restricted share schemes (RSS)
A restricted share scheme was initially introduced for selected employees in September 2001. For new allocations after August 2015 these
were replaced by two new restricted share schemes:
• Spark New Zealand Long-Term Incentive Scheme; and
• Spark New Zealand Managing Director Long-Term Incentive Scheme.
The Spark New Zealand Long-Term Incentive Scheme is for the Leadership Squad and senior leaders and delivers one scheme with the
same set of rules under one long-term incentive, with a performance hurdle in place. The Spark New Zealand Managing Director Long-
Term Incentive Scheme related to the previous Managing Director, Simon Moutter.
Under these restricted share schemes ordinary shares in the Company are issued to Spark Trustee Limited. Participants purchase shares
from Spark Trustee Limited with funds lent to them by the Company and which are held on their behalf by Spark Trustee Limited. If the
individual is still employed by Spark at the end of the vesting period (generally three years) and applicable performance hurdles are met,
the employee is provided a cash bonus, which must be used to repay the loan and the shares are then transferred to the individual. The
target for this hurdle is the Company’s cost of equity plus 1% compounding annually. The last year when RSS shares were granted was
FY19 therefore FY22 will be the last year where RSS shares vest.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Other information
6.2 Employee share schemes (continued)
Share option scheme
From September 2019 members of the Leadership Squad (including the CEO) and selected senior leaders have been granted options
under the new Spark Long-Term Incentive (LTI) scheme. Under the scheme participants are granted options at the start of the three-year
vesting period. The number of options granted equals the gross LTI value divided by the volume weighted average price of Spark New
Zealand shares for the 20 days prior to the grant date. Subject to satisfaction of the performance hurdle and continued employment, at
vesting each option converts to a Spark share based on a zero exercise price. If the target is not met (or the participant leaves Spark
employment) then the options simply lapse, with exceptions for redundancy, death and disablement. Spark enables participants to meet
tax obligations through PAYE by authorising the sale of a sufficient number of shares on their behalf.
Vesting of the LTI grants are contingent on: participants’ continued employment with Spark for three years from grant date (subject to
exceptions); and the Company achieving a Total Shareholder Return (TSR) performance hurdle. TSR is a measure of share price
appreciation and dividends paid over the three-year period of the grant. The target for this hurdle is set annually and for grants issued in
2019 and 2020 this was the Company’s cost of equity plus 1% compounding annually. Options with an intrinsic value of $9 million (30 June
2020: $5 million) remain outstanding at 30 June 2021 and have a weighted average remaining life of 1.7 years (30 June 2020: 2.2 years).
Information regarding shares and options awarded under these schemes is as follows:
20212020
OPTIONSRSSOPTIONSRSS
NUMBER OF
OPTIONS
NUMBER OF
SHARES
NUMBER OF
OPTIONS
NUMBER OF
SHARES
Opening balance as at 1 July 998,125 1,086,461 – 1,755,862
Granted 939,898 – 1,088,715 –
Vested – (512,447) – (541,860)
Lapsed (92,479) (7,973) (90,590) (127,541)
Closing balance as at 30 June 1,845,544 566,041 998,125 1,086,461
Percentage of total ordinary shares0.10%0.03%0.05%0.06%
The fair value of the employee services received in exchange for the grant of equity instruments is recognised as an expense, with a
corresponding entry in equity. The total charge recognised for these schemes for the year ended 30 June 2021 was $1.8 million (30 June
2020: $1.8 million) and the expense relating to the restricted shares schemes was $1.2 million (30 June 2020: $1.4 million). As at 30 June
2021, $1.6 million of share scheme awards remain unvested and not expensed (30 June 2020: $2.1 million). This expense, measured at its
fair value based on a valuation model, will be recognised over the remaining vesting period of the awards.
6.3 Related party transactions
Related parties of Spark include the associates and joint venture companies listed in note 3.3 and key management personnel
detailed below.
Interest of directors in certain transactions
A number of the Company’s directors are also directors of other companies and any transactions undertaken with these entities have been
entered into on an arm’s length commercial basis.
Transactions with associate and joint venture companies
Spark’s transactions with associates and joint ventures include the following:
• Spark provides network operations and management services to Southern Cross in respect of its operations in New Zealand;
• Spark makes payments to Southern Cross in connection with capacity it has purchased on Southern Cross’ network;
• Spark made payments to Southern Cross for operational expenditure relating to cable maintenance;
• Spark made payments to Connect 8 Limited for fibre and telecommunications construction services;
• Spark sold mobile network equipment to Connect 8 Limited;
• Spark made payments to Rural Connectivity Group for network services; and
• Spark received revenue from Connect 8 Limited and Rural Connectivity Group for the sale of mobile network equipment and mobile
backhaul equipment.
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Spark New Zealand Annual Report 2021
Notes to the financial statements
6
6.3 Related party transactions (continued)
Balances and amounts in respect of these transactions with associate and joint venture companies are set out in the table below:
20212020
AS AT AND FOR THE YEAR ENDED 30 JUNE$M$M
Operating revenues 12 11
Operating expenses 14 9
Capacity acquired and other capital expenditure
1
23 59
Receivables 18 15
Payables (1) (2)
1 As at 30 June 2021 Spark has committed to purchases of $50 million for cable capacity from Southern Cross (30 June 2020: $62 million).
Key management personnel compensation
20212020
YEAR ENDED 30 JUNE$’000$’000
Directors’ remuneration
1
1,292 1,349
Salary and other short-term benefits
2
7,577 7,686
Long-term incentives and share-based compensation
3
831 901
9,700 9,936
1 Excludes Chief Executive remmuneration.
2 Includes short-term benefits paid on termination.
3 Includes $831,000 share-based compensation (30 June 2020: $776,000 share-based compensation and $125,000 other long-term incentives).
The table above includes remuneration of the Chief Executive and the other members of the Leadership Squad, including amounts paid to
members of the Leadership Squad who left during the year ended 30 June or were in acting Leadership Squad positions. Like other Spark
employees members of the Leadership Squad also receive product and service concessions. In addition, where members of the
Leadership Squad are KiwiSaver members, they receive contributions towards their KiwiSaver schemes.
6.4 Subsidiaries
Subsidiaries are all entities over which Spark has control. The significant subsidiary companies of Spark and their activities are as follows:
NAMECOUNTRYOWNERSHIPPRINCIPAL ACTIVITY
Computer Concepts LimitedNew Zealand100%IT infrastructure and business cloud services
Digital Island LimitedNew Zealand100%Business telecommunications provider
Gen-i Australia Pty Limited Australia100%Provides outsourced telecommunications services
Mattr LimitedNew Zealand 94%Software company focused on decentralised identity and verifiable data
Qrious LimitedNew Zealand100%Big data analytics business
Revera LimitedNew Zealand100%IT infrastructure and data centre provider
Spark Finance LimitedNew Zealand100%A Group finance company
Spark New Zealand Trading LimitedNew Zealand100%Provides local, national and international telephone and data services
Spark Retail Holdings LimitedNew Zealand100%Retailer of telecommunications products and services
TCNZ (Bermuda) LimitedNew Zealand100%A holding company
Teleco Insurance LimitedBermuda100%A Group insurance company
Telecom New Zealand USA LimitedUnited States100%Provides international wholesale telecommunications services
Telecom Southern Cross LimitedNew Zealand100%A holding company
Telegistics LimitedNew Zealand100%Mobile phone repair and equipment distribution
The financial year end of all significant subsidiaries is 30 June.
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Spark New Zealand Annual Report 2021
Notes to the financial statements: Other information
6.5 Reconciliation of net earnings to net cash flows from operating activities
2021
RESTATED
2020
YEAR ENDED 30 JUNE$M$M
Net earnings for the year 384 420
Adjustments to reconcile net earnings to net cash flows from operating activities
Depreciation and amortisation 523 488
Bad and doubtful accounts (4) 21
Deferred income tax2 (13)
Share of associates’ and joint ventures’ net losses 1 (1)
Impairments 2 2
Other gains (28) (35)
Other (5) 18
Changes in assets and liabilities net of effects of non-cash and investing and financing activities
Movement in receivables and related items (1) 26
Movement in inventories 31 (10)
Movement in current taxation (20) 21
Movement in payables and related items (27) (34)
Net cash flows from operating activities 858 903
6.6 Commitments and contingencies
Capital and other commitments
As at 30 June 2021 capital expenditure contracted for, but not yet incurred, was $173 million (30 June 2020: $246 million) with
$119 million due in the year ending 30 June 2022. Commitments principally relate to telecommunications network equipment and cable
capacity.
As at 30 June 2021 Spark had other supplier commitments of $633 million (30 June 2020: $760 million), with $469 million due in the year
ending 30 June 2022. Commitments include mobile handsets, modems, licences and content rights.
Contingencies
No ongoing claims, investigations and inquiries are expected to have a significant effect on Spark’s financial position or profitability.
104
Spark New Zealand Annual Report 2021
Notes to the financial statements
Independent auditor’s report
To the Shareholders of Spark New Zealand Limited
OpinionWe have audited the consolidated financial statements of Spark New Zealand Limited and its subsidiaries (the
‘Group’), which comprise the consolidated statement of financial position as at 30 June 2021, and the
consolidated statement of profit and loss and other comprehensive income, statement of changes in equity
and statement of cash flows for the year then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements, on pages 62 to 104, present fairly, in all
material respects, the consolidated financial position of the Group as at 30 June 2021, and its consolidated
financial performance and cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’).
Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and International
Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
We are independent of the Company in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand)
issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards
Board for Accountants’ International Code of Ethics for Professional Accountants (including International
Independence Standards), and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
Our firm carries out other assignments for Spark New Zealand Limited in relation to regulatory audit, other
assurance related services (such as trustee reporting), Holiday Act 2003 compliance, taxation compliance and
advisory services and non-assurance services provided to the Corporate Taxpayers Group. These services have
not impaired our independence as auditor of the Group. In addition to this, the Chief Executive has both a
sister and brother-in-law that are partners at Deloitte. These Deloitte partners are not involved in the provision
of any services to the Group and its subsidiaries and this matter has not impacted our independence. Also,
partners and employees of our firm deal with the Group on normal terms within the ordinary course of trading
activities of the business of the Group. The firm has no other relationship with, or interest in the Group.
Audit materialityWe consider materiality primarily in terms of the magnitude of misstatement in the financial statements of the
Group that in our judgment would make it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced (the ‘quantitative’ materiality). In addition, we also
assess whether other matters that come to our attention during the audit would in our judgment change or
influence the decisions of such a person (the ‘qualitative’ materiality). We use materiality both in planning the
scope of our audit work and in evaluating the results of our work.
We determined materiality for the Group financial statements as a whole to be $26 million.
Key audit mattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Independent Auditor’s Report
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Spark New Zealand Annual Report 2021
Key audit matterHow our audit addressed the key audit matter
Revenue recognition
The Group’s reported operating revenue of $3,565m (2020:
$3,588m) includes:
• Mobile $1,311m (2020: $1,288m)
• Broadband $670m (2020: $680m)
• Voice $308m (2020: $386m)
• Cloud, security and service management $443m
(2020: $420m)
• Procurement and partners $414m (2020: $407m)
• Managed data, networks and services $282m (2020: $277m)
• Other revenues $137m (2020: $130m)
Revenue recognition is considered to be a key audit matter.
For Mobile, Voice and Broadband revenue, and to a lesser
extent other revenue streams, there is an inherent risk around
the accuracy and timing of revenue recognition given the
complexity of systems and the large volume of data processed;
moreover, judgment is required for multiple element
arrangements. This risk is most pronounced for new or changing
product plans and prices.
Cloud, security and service management revenue requires
significant management judgments and estimates, particularly
for larger contracts, which are bespoke and cover several
accounting periods.
The judgments and estimates that significantly impact the
accuracy of revenue recognition for these contracts include:
• identifying the separate performance obligations;
• assessing whether the performance obligations are satisfied at
a point in time or over time; and
• determining the amount and appropriate method of
measuring the costs of fulfilling the performance obligations
or, where appropriate, the completeness and valuation of
provisions against contracts that are expected to be loss-
making.
Contract costs incurred to fulfil a contract arising from these
contracts require significant estimation in determining their
recoverability, and the appropriate period of amortisation.
Disclosures relating to revenue recognition and the revenue
stream breakdown can be found in Note 2.2. Operating
revenues and other gains. Refer also to Note 3.1 Contract costs
for further information on costs to fulfil a contract.
Our audit approach included both controls testing and substantive
procedures. For our procedures on the design and operating
effectiveness of controls over significant IT systems, we involved our
IT specialists.
Our audit procedures included:
Across Mobile, Voice and Broadband, and Cloud, security and
service management revenue streams:
• assessing the appropriateness of the revenue recognition policies
for the products and services offered by the Group, which included
but were not limited to:
– challenging the Group’s assessment for each performance
obligation about whether the customer can benefit from the
product or service on its own or together with readily available
resources;
– assessing the allocation of the transaction price to the
performance obligations by comparing the stand-alone selling
price assigned to observed market prices or estimated prices;
and
– examining the stages at which revenue for each performance
obligation is recognised.
• testing of manual journal entries recorded in the general ledger
relating to revenue recognition.
Mobile, Voice and Broadband:
• testing of the design and implementation, and the operating
effectiveness of automated controls over the capture of data at the
network switches and interfaces between relevant IT applications,
measurement and billing of revenue, and the recording of entries
in the general ledger. We also tested the access controls and change
management controls over the relevant billing systems;
• testing of the design and implementation, and the operating
effectiveness of manual controls over the initiation, authorisation,
recording and processing of revenue transactions. This included
evaluating process controls over authorising new price plans and
rate changes and the adjustments to the relevant billing systems;
and
• testing a sample of revenue transactions recorded during the year
relating to new or changing product plans.
Cloud, security and service management:
• testing of cloud, security and service management contracts for
appropriate revenue recognition and provisioning for contracts
that were expected to be loss-making. We considered the future
forecast profitability and the contractual terms to assess the
recoverability of the contract-specific assets and to determine if
any contracts required loss provisions; and
• testing a sample of revenue transactions recorded during the year
by agreeing to supporting evidence, which included cash receipts,
customer contracts, and invoices.
106
Spark New Zealand Annual Report 2021
Independent auditor’s report
Key audit matterHow our audit addressed the key audit matter
Carrying value of property, plant & equipment
and intangible assets
The Group has property, plant & equipment and intangible assets
of $1,951m (2020: $1,964m) with additions during the year of
$395m (2020: $376m).
There are a number of areas where judgments significantly impact
the carrying value of property, plant & equipment and intangible
assets and their respective depreciation and amortisation profiles.
These areas are as follows:
• the impact of planned or unexpected replacement technology
which will impact the way in which an asset is used or is
expected to be used;
• the decision to capitalise or expense costs;
• the useful economic life of the asset; and
• the timely transfer and commencement of depreciation of
assets transferred from work in progress.
Changes in these judgments may have a significant impact on the
results of the Group. Due to the significance of these judgments
and the materiality of these assets to the Consolidated Statement
of Financial Position, this is considered a key audit matter.
Refer to notes 3.6 and 3.7.
Our audit procedures included the following:
• testing of the design and implementation, and the operating
effectiveness of controls over the acquisition and disposal of
assets;
• assessing the appropriateness of capitalisation of costs incurred on
capital projects, by examining a sample of additions to identify if
the expenditure meets the definition of an asset in accordance
with the applicable accounting standards;
• assessing the appropriateness of the date from which assets
commenced being depreciated; and
• assessing the allocated useful economic lives, by comparing to
industry benchmarks and our knowledge of the business and its
operations.
We assessed the application of the Group’s annual asset life review.
This included assessing judgments made by the Group on:
• the appropriateness of asset lives applied in the calculation of
depreciation and amortisation;
• the nature and impact of changes on the business from Spark’s
strategy, including which specific assets are impacted; and
• the extent of the impact of these changes on the carrying value of
identified property, plant and equipment and software intangible
assets.
Other information The directors are responsible on behalf of the Group for the other information. The other information
comprises the information in the Annual Report that accompanies the consolidated financial statements and
the audit report.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
Our responsibility is to read the other information and consider whether it is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If so, we are required to report that fact. We have nothing to report in this regard.
Other matterThe consolidated financial statements for the year ended 30 June 2020 were audited by another auditor who
expressed an unmodified opinion on those financial statements on 26 August 2020.
Directors’
responsibilities for the
consolidated financial
statements
The directors are responsible on behalf of the Group for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
directors determine is necessary to enable the preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible on behalf of the Group for
assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
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Spark New Zealand Annual Report 2021
Auditor’s responsibilities
for the audit of the
consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs and ISAs (NZ) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is located on
the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1
This description forms part of our auditor’s report.
Restriction on useThis report is made solely to the Company’s shareholders, as a body. Our audit has been undertaken so that
we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company’s shareholders as a body, for our audit work, for this report,
or for the opinions we have formed.
Jason Stachurski, Partner for Deloitte Limited
Auckland, New Zealand
18 August 2021
108
Spark New Zealand Annual Report 2021
Independent auditor’s report
Corporate governance disclosures
Stock exchange listings
Spark’s ordinary shares are listed on the NZX and ASX. Spark is admitted to the Official List of ASX as a foreign exempt issuer. As an NZX listed
issuer and ASX foreign exempt issuer, Spark complies with NZX Listing Rules and applicable ASX Listing Rules.
Spark’s American Depositary Shares, each representing five ordinary Spark shares and evidenced by American Depositary Receipts (ADRs), are
traded over-the-counter in the United States. This is a Level 1 ADR programme that is sponsored by Bank of New York Mellon.
Spark Finance Limited, a wholly owned subsidiary of Spark New Zealand Limited, has debt securities listed on the NZX. Details of debt securities
issued by Spark Finance Limited can be found in Spark Finance Limited’s reports at: investors.sparknz.co.nz/Investor-Centre
Director remuneration
The total remuneration available to non-executive directors is fixed by shareholders. The current annual remuneration limit is $1,630,000
approved at the annual meeting held in November 2017.
The fees payable to non-executive directors during FY21 were:
BOARD/COMMITTEECHAIR
1
MEMBER
2
Board of Directors$368,700$145,200
Audit and Risk Management Committee (ARMC)$39,100$19,000
Human Resources and Compensation Committee (HRCC)$33,500$16,800
Nominations and Corporate Governance Committee (NOMs)––
1. Committee chair and member fees were not payable to the Chair of the Board. Committee member fees were not payable to committee Chairs.
2. Member fees were payable for each committee.
From 1 July 2021 the non-executive directors’ fees increased by 1.5% (rounded to the nearest $100), to be paid out of the current shareholder-
approved annual remuneration limit of $1,630,000.
This increase approximates the average annual CPI increase seen over the last four quarters and is expected to broadly maintain the market
positioning outlined in the independent Ernst & Young benchmarking report that was distributed alongside the 2017 Notice of Annual Meeting.
Committee membership as at 30 June 2021 was as follows:
HUMAN RESOURCES AND
COMPENSATION COMMITTEE
AUDIT AND RISK
MANAGEMENT COMMITTEE
NOMINATIONS AND
CORPORATE GOVERNANCE COMMITTEE
Alison Barrass (Chair)
Pip Greenwood
Justine Smyth
Charles Sitch (Chair)
Paul Berriman
Warwick Bray
Pip Greenwood
Justine Smyth (ex officio)
Justine Smyth (Chair)
Alison Barrass
Paul Berriman
Warwick Bray
Pip Greenwood
Jolie Hodson
Charles Sitch
109
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Spark New Zealand Annual Report 2021
The total remuneration received by non-executive directors of Spark during FY21 was as follows:
1
NAME OF DIRECTORBOARD FEES
AUDIT & RISK
MANAGEMENT
COMMITTEE FEES
NOMINATIONS &
CORPORATE
GOVERNANCE
COMMITTEE FEES
HUMAN
RESOURCES AND
COMPENSATION
COMMITTEE FEES
TOTAL
REMUNERATION
2
Justine Smyth$368,700–––$368,700
Alison Barrass$145,200––$33,500$178,700
Paul Berriman$145,200$19,000––$164,200
Warwick Bray$145,200$19,000$164,200
Pip Greenwood$145,200$19,000–$10,956
3
$175,156
Ido Leffler
4
$50,899––$5,889$56,788
Charles Sitch$145,200$39,100––$184,300
Total$1,145,599$96,100$50,345$1,292,044
1. The figures shown are gross amounts and exclude GST (where applicable) and are rounded to the nearest dollar.
2. This table excludes contributions towards medical and life insurance of a total of $9,898. Spark meets costs incurred by directors that are incidental to the performance of their duties.
This includes providing New Zealand-based directors with mobile phones and $120 per month home phone account credits and overseas-based directors with $400 per month
phone allowances. Spark also meets the costs of directors’ Spark-related travel. As these costs are incurred by Spark to enable directors to perform their duties, no value is attributable
to them as benefits to directors for the purposes of the above table.
3. Ms Greenwood was appointed as a member of the HRCC from 6 November 2020.
4. Mr Leffler resigned as a director from 6 November 2020.
The following former Managing Director long-term incentives vested in FY21:
GRANT YEARSECURITIES
PERFORMANCE
PERIOD
PERFORMANCE
MEASURE
VESTING
OUTCOME
SHARES
TRANSFERRED
VALUE
TRANSFERRED
1
FY18Restricted Shares September 2017
– September 2020
Absolute TSR,
hurdle – Spark’s
annual cost of
equity +1%
compounding
100% – 3 year TSR
result was 53.21%
compared with a
36.33% target
172,481NZ$798,587
TotalNZ$798,587
1. Represents the NZX listed price of Spark shares on the exercise/transfer date multiplied by the number of shares transferred.
Additionally, Mr Moutter’s FY19 Equity Incentive (essentially a deferred STI) vested on 21 September 2020, as the service condition was
satisfied. Accordingly, 99,058 redeemable ordinary shares converted to ordinary shares.
CEO remuneration
The total remuneration earned or paid in FY21, and anticipated target remuneration expected to be earned or paid in FY22, by and to the CEO,
Jolie Hodson is as follows:
PERIODBASE SALARY
1
SHORT-TERM INCENTIVE
2
LONG-TERM INCENTIVE
3
FY21 actual remunerationNZ$1,200,000NZ$894,450NZ$900,000 in the form of share options
FY22 anticipated target remunerationNZ$1,230,000NZ$922,500NZ$922,500 in the form of share options
1. Base salary excludes employer contributions towards KiwiSaver and is not at risk.
2. FY21 actual short-term incentive was earned in FY21 and will be paid in FY22. The amount that will be paid for the FY21 actual short-term incentive will be reduced by $78,750 when it
is paid in FY22 as a result of clawback for the FY20 short term incentive (see page 58). The gross amount earned in FY20 and paid in FY21 was $747,000. FY22 anticipated short-term
incentive will be earned in FY22 and paid in FY23.
3. FY21 long-term incentive was granted in FY21 and, subject to performance hurdles, will vest in September 2023.
110
Spark New Zealand Annual Report 2021
Corporate governance disclosures
The following CEO long-term incentives vested in FY21:
GRANT YEARSECURITIES
PERFORMANCE
PERIOD
PERFORMANCE
MEASURE
VESTING
OUTCOME
SHARES
TRANSFERRED
VALUE
TRANSFERRED
1
FY18Restricted SharesSeptember 2017
– September 2020
Absolute TSR,
hurdle – Spark’s
annual cost of
equity + 1%
compounding
100% – 3 year TSR
result was 53.21%
compared with a
36.33% target
44,845NZ$207,632
TotalNZ$207,632
1. Represents the NZX listed price of Spark shares on the exercise/transfer date multiplied by the number of shares transferred.
The CEO is expected to acquire and hold shares that are at least equivalent in value to 25% of the CEO’s base salary but ideally would increase
this shareholding to 100% of base salary subject to the vesting of shares under any long-term incentive schemes. To fulfil this expectation shares
are to be acquired within a four-year period from 1 July 2019. As at 30 June 2021 the CEO holds 142,214 ordinary shares which fulfils this
expectation to hold shares that are at least equivalent in value to 25% of the CEO’s base salary, which based on the share price as at 30 June
2021 equates to approximately 57% of the CEO’s base salary as at 30 June 2021.
Other directors’ fees
Mr Richard Quince received a directors fee of NZ$10,000 (excluding GST) for acting as a director of Teleco Insurance (NZ) Limited. Ocorian
Services (Bermuda) Limited received directors fees of US$2,900 in relation to Ms Carol Feathers acting as a director of Teleco Insurance Limited.
Board and committee meeting attendance for FY21
The Board held nine formal meetings during FY21. The table below shows director attendance at these Board meetings and committee
member attendance at committee meetings. Sub-committees of the Board also met regularly throughout the year to consider matters of
special importance.
BOARDARMCHRCCNOMS
Total number of meetings held9875
Alison Barrass
1
9475
Paul Berriman98–5
Warwick Bray98–5
Pip Greenwood
2
9835
Jolie Hodson
3
9875
Ido Leffler
4
3–41
Charles Sitch98–5
Justine Smyth
5
9875
1. Ms Barrass attended a number of ARMC meetings but is not a member of the committee.
2. Ms Greenwood was appointed a member of the HRCC on 6 November 2020.
3. Ms Hodson attended ARMC and HRCC meetings as Executive Director.
4. Mr Leffler resigned as a director on 6 November 2020.
5. Ms Smyth attended ARMC meetings in an ex officio capacity.
111
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Spark New Zealand Annual Report 2021
Director independence
The Board has determined, based on information provided by directors regarding their interests, that at 30 June 2021 Ms Barrass, Mr Berriman,
Mr Bray, Ms Greenwood, Mr Sitch and Ms Smyth were independent. The Board determined that Ms Hodson was not independent due to her
position as CEO.
The criteria for determining director independence and conflict of interest may be found in the Board Charter at: www.sparknz.co.nz/about/
governance
Director interests
Directors made the following entries in the interests register for FY21:
• Directors disclosed, pursuant to section 140 of the Companies Act 1993, interests in the following entities during FY21:
DIRECTORENTITYRELATIONSHIP
Alison BarrassLewis Road Creamery Limited
Babich Wines Limited
Zespri Group Limited
Heilala Vanilla Limited
Rockit Orchards Limited
Ceased to be a director
Chair
Director
Will cease to be a director
1
Director
Paul BerrimanHKT Trust
NGMN e.v
IX Acquistion Corp
Ceased to be Group Chief Technology Officer
Ceased to be a board member
Advisor
Pip GreenwoodWestpac New Zealand LimitedAppointed Chair
2
Ido Leffler
3
Beach House Group
Lux Group Limited
Southern Cross Austereo
Ceased to be a director
Director
Board member
Charles SitchTrinity College Melbourne UniversityCeased to be Chair
1. Will cease to be a director effective 30 September 2021.
2. Appointment effective 1 October 2021.
3. Mr Leffler resigned as a director on 6 November 2020.
• Directors disclosed, pursuant to section 148 of the Companies Act 1993, the following acquisitions and disposals of relevant interests in
Spark shares during FY21:
NAMEDATE NATURE OF TRANSACTIONCONSIDERATION NUMBER OF SHARES
Paul Berriman17 September 2020Purchase of ordinary sharesAUD$100,46823,000
Warwick Bray30 March 2021Purchase of ordinary sharesAUD$130,99731,230
Jolie Hodson21 September 2020Issue of optionsServices to Spark187,430
24 September 2020
Unrestricting of restricted
ordinary sharesServices to Spark44,845
Justine Smyth1 October 2020Purchase of ordinary shares$116,84125,000
26 March 2021Purchase of ordinary shares$133,27330,000
• Directors disclosed, for the purposes of section 162 of the Companies Act 1993, that insurance was renewed for Spark’s directors and
senior managers for the 12-month period from 1 June 2021 and deeds of indemnity provided to all directors and specified senior
managers of Spark.
112
Spark New Zealand Annual Report 2021
Corporate governance disclosures
Employee benefits
The following table sets out benefits provided to employees during FY21 by employee group
1
:
FULL-TIME PERMANENT
EMPLOYEES
PART-TIME PERMANENT
EMPLOYEES
FIXED-TERM / CASUAL
EMPLOYEES
Parental LeaveYe sYe sYe s
2
Insurance cover:
• Medical
• Life & Terminal Illness
• Income Protection
• Trauma
Ye sYe s
3
No
Spark Account Credit
4
Ye sYe sNo
Ability to participate in Spark
Share
5
Ye sYe sNo
Volunteer Day
6
Ye sYe sNo
Spark Give
7
Ye sYe sNo
8
Eligibility to join Marram
9
Ye sYe sNo
Eligible for Purchased Leave
10
Ye sYe sNo
1. Excludes benefits offered to some subsidiaries, which differ from Spark’s overall benefits suite.
2. Eligibility for Parental Leave is in accordance with Government legislation.
3. Employees must work at least 15 hours a week to be eligible.
4. Employees with Spark accounts will receive monthly credits of $120, which can be used towards Spark products or services.
5. Spark’s employee share purchase scheme.
6. The opportunity for Spark employees to take a day of paid volunteer leave.
7. If an employee donates to a charity or to a school directly from their pay then Spark will match the amount dollar-for-dollar, up to a $500 annual matching cap.
8. Only casual employees are ineligible.
9. Marram Trust offers access to accommodation across New Zealand for discounted rates, as well as providing a basic level of healthcare cover.
10. The ability to purchase additional annual leave via a deduction of base salary.
113
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Spark New Zealand Annual Report 2021
Employee remuneration
The table below shows the number of employees and former employees, not being directors of Spark, who, in their capacity as employees,
received remuneration and other benefits during FY21 totalling NZ$100,000 or more
1
.
RANGECURRENTFORMERTOTALRANGECURRENTFORMERTOTAL
$100,000 - $110,00031737354$320,001 - $330,000415
$110,001 - $120,00032742369$330,001 - $340,000101
$120,001 - $130,00027929308$340,001 - $350,000202
$130,001 - $140,00021324237$350,001 - $360,000415
$140,001 - $150,00020412216$360,001 - $370,000101
$150,001 - $160,00011016126$370,001 - $380,000415
$160,001 - $170,0009316109$390,001 - $400,000101
$170,001 - $180,00072678$400,001 - $410,000213
$180,001 - $190,00047451$410,001 - $420,000314
$190,001 - $200,00035742$450,001 - $460,000202
$200,001 - $210,00027330$460,001 - $470,000101
$210,001 - $220,00022325$470,001 - $480,000101
$220,001 - $230,00022325$540,001 - $550,000101
$230,001 - $240,00013417$560,001 - $570,000213
$240,001 - $250,00019221$610,001 - $620,000101
$250,001 - $260,0007310$700,001 - $710,000101
$260,001 - $270,000819$710,001 - $720,000011
$270,001 - $280,0008210$770,001 - $780,000101
$280,001 - $290,000314$820,001 - $830,000101
$290,001 - $300,000606$900,001 - $910,000101
$300,001 - $310,000404$1,020,001 - $1,030,000101
$310,001 - $320,000224
Total1,873 224 2,097
1. The table includes base salaries, short-term incentives and vested long-term incentives. The table does not include: amounts paid after 30 June 2021 relating to FY21; long-term
incentives that have been granted and have yet to vest (based on grant values, the total value of which was NZ$9.5 million as at 30 June 2021); product and service concessions
received by employees; contributions paid towards health and other insurances; contributions paid to the Government Superannuation Fund (a legacy benefit provided to a small
number of employees); and, if the individual is a KiwiSaver member, contributions of 3% of gross earnings towards that individual’s KiwiSaver scheme.
114
Spark New Zealand Annual Report 2021
Corporate governance disclosures
Shareholdings
As at 30 June 2021 there were 1,867,125,093 Spark ordinary shares on issue, each conferring to the registered holder the right to one vote on a
poll at a meeting of shareholders on any resolution, held as follows:
SIZE OF HOLDINGNUMBER OF HOLDERS
1
%NUMBER OF SHARES%
1-1,00013,78430.317,055,7630.38
1,001-5,00019,28542.4150,335,6122.70
5,001-10,0006,39814.0747,323,0252.53
10,001-100,0005,75112.65133,521,4267.15
100,001 and over2540.561,628,889,26787.24
Total45,472 100.001,867,125,093100.00
1. Includes 566,041 shares on issue held by Spark Trustee Limited on behalf of 45 holders for the Spark Long-Term Incentive Plan (as further described in note 6.2 of the financial
statements). There are 1,392,385 shares on issue held by Spark Trustee Limited on behalf of 1,266 holders for Spark Share.
As at 30 June 2021 there was an additional class of 111,003 redeemable ordinary shares on issue all held by Mr Simon Moutter (the former
Managing Director). Redeemable ordinary shares have the same voting rights as ordinary shares (but are subject to restrictions regarding
disposal).
The 20 largest registered holders of Spark shares at 30 June 2021 were:
NAME
1
NUMBER OF SHARES%
1.HSBC Nominees (New Zealand) Limited
2
338,776,85418.14
2.HSBC Nominees (New Zealand) Limited
2
192,611,77510.32
3.JP Morgan Chase Bank166,357,0918.91
4.Citibank Nominees (NZ) Limited151,798,6298.13
5.HSBC Custody Nominees (Australia) Limited62,635,7773.35
6.National Nominees New Zealand Limited54,760,7852.93
7.New Zealand Superannuation Fund Nominees Limited49,641,1912.66
8.BNP Paribas Nominees NZ Limited
3
46,980,0652.52
9.Accident Compensation Corporation46,242,3942.48
10.FNZ Custodians Limited34,302,9841.84
11.BNP Paribas Nominees NZ Limited
3
33,037,9251.77
12.Forsyth Barr Custodians Limited32,572,2231.74
13.Cogent Nominees Limited32,108,2601.72
14.Tea Custodians Limited26,207,8841.40
15.Premier Nominees Limited25,270,5221.35
16.Citicorp Nominees Pty Limited24,875,6051.33
17.JB Were (NZ) Nominees Limited24,057,5411.29
18.JP Morgan Nominees Australia Pty Limited23,834,0871.28
19.New Zealand Depository Nominee21,336,0401.14
20.New Zealand Permanent Trustees Limited19,130,5501.02
1. The shareholding of New Zealand Central Securities Depository Limited (custodian for members trading through NZClear) has been reallocated to the applicable members.
2. Has a different holder identification number to the other HSBC Nominees (New Zealand) Limited entry.
3. Has a different holder identification number to the other BNP Paribas Nominees NZ Limited entry.
115
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Spark New Zealand Annual Report 2021
According to substantial holder notices as at 30 June 2021 the substantial holders in Spark were as follows:
NAMENUMBER OF ORDINARY SHARES% OF ORDINARY SHARES ON ISSUE
1
Blackrock Investment Management (Australia) Limited137,946,7717.39
The Vanguard Group, Inc95,668,0545.12
1. Based on issued share capital of 1,867,125,093 as at 30 June 2021.
As at 30 June 2021 directors, or entities related to them, held relevant interests (as defined in the Financial Markets Conduct Act 2013) in Spark
shares as follows:
NAME
RELEVANT INTEREST IN SPARK SHARES AT 30 JUNE 2021
NUMBER%
1
Alison Barrass37,7160.002
Paul Berriman43,0000.002
Warwick Bray31,2300.002
Pip Greenwood33,325
2
0.002
Jolie Hodson580,255
3
0.031
Charles Sitch32,729
4
0.002
Justine Smyth430,201
5
0.023
1. Each percentage stated has been rounded to the nearest 1/1000th of a percent.
2. Relevant interest in beneficial ownership of 33,325 ordinary shares held by Custodial Services Limited as custodian for Rakino Trust.
3. Includes 142,214 ordinary shares, 390,747 options and 47,294 restricted shares.
4. Relevant interest in beneficial ownership of 32,729 ordinary shares held by Sitch Superannuation Pty Limited.
5. Relevant interest in beneficial ownership of 375,201 ordinary shares held by Miksha Trust and beneficial ownership of 55,000 ordinary shares held by PJ Trust.
All non-executive directors are expected to hold Spark shares. Subject to personal circumstances (that should be discussed with the Chair or, in
the case of personal circumstances of the Chair, with the Chair of the ARMC, as appropriate), there is an expectation that each non-executive
director will purchase and hold an amount of shares that are at least equivalent in value to the non-executive director base member fee as at
the date of their appointment or, in the case of directors appointed before 1 July 2017, as at 1 July 2017. Shares are to be purchased within a
three-year period from the date of appointment or, in the case of directors appointed before 1 July 2017, within a three-year period from that
date. To assess whether this expectation has been met, the aggregate purchase price for all shares acquired, less the aggregate sale price for all
shares disposed (if any), is used to calculate value.
116
Spark New Zealand Annual Report 2021
Corporate governance disclosures
Subsidiary company directors
The following people held office as directors of subsidiary companies at 30 June 2021. Alternate directors are indicated with an (A).
SUBSIDIARY COMPANYPRINCIPAL ACTIVITYCURRENT DIRECTORSDIRECTORS WHO
RETIRED DURING
THE YEAR
Computer Concepts LimitedIT infrastructure and Cloud services M Anastasiou, G McBeath, S Knight
Digilife New Zealand LimitedHolding companyM Stribling, M Sheppard
Digital Island LimitedBusiness telecommunications providerS Knight, G McBeath
Gen-i Australia Pty LimitedProvides outsourced
telecommunications services
F Evett, I Hopkins
Gen-i LimitedHolding company S Knight, G McBeath
Mattr LimitedSoftware company focused on
decentralised identity and verifiable data
C Barber, J Hodson, F Evett
Qrious LimitedBig-data analytics businessN Morris, S Knight
Qrious Consulting LimitedData consulting companyN Morris, S Knight
Revera LimitedIT infrastructure and data centre
provider
M Anastasiou, G McBeath, S Knight
Spark Finance LimitedGroup finance companyM Anastasiou, M Sheppard, S Knight,
A White
Spark New Zealand Cables LimitedInvestment companyM Sheppard, C Fraser
Spark New Zealand Trading LimitedProvides local, national and
international telephone and data
services
M Anastasiou, S Knight, M Beder
Spark Retail Holdings LimitedRetailer of telecommunications
products and services
M Anastasiou, S Knight
Spark Trustee LimitedTrustee companyM Anastasiou, S Knight
TCNZ Australia Investments Pty
Limited
Australian operationsF Evett, I Hopkins
TCNZ (Bermuda) LimitedHolding companyD Havercroft, J Wesley-Smith
TCNZ Financial Services LimitedInvestment companyM Anastasiou, F Evett
TCNZ (United Kingdom) Securities
Limited
Holding/investment companyF Evett, M Palmer, J Reader
Teleco Insurance LimitedGroup insurance companyC Phipps, C Feathers, A White,
M Anastasiou (A), F Evett (A)
M Beder,
A Dyer-Fagundo
Teleco Insurance (NZ) LimitedMobile phone insuranceA White, R Quince
Telecom Capacity LimitedHolding companyS Knight, J Wong
Telecom Enterprises LimitedInvestment companyM Anastasiou, S Knight
Telecom New Zealand (UK)
Enterprises Limited
Holding/investment companyF Evett, M Sheppard
Telecom New Zealand USA LimitedProvides international wholesale
telecommunications services
D Reeve, J Wong
Telecom Pacific LimitedHolding companyM Anastasiou, M Sheppard
Telecom Southern Cross LimitedHolding companyM Anastasiou, S Knight
Telecom Wellington Investments
Limited
Investment companyM Anastasiou, F Evett
Telegistics LimitedMobile phone repair and equipment
distribution
R Singh, J Bahlman, R Patel, G Clark D Reeve, C Fletcher,
R Adams
117
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Spark’s managing risk framework roles and responsibilities
ACTIVITY PERFORMED
BOARD
& ARMC
LEADER-
SHIP
SQUAD RISK
LEGAL
(DIGITAL
TRUST)
ORG
UNIT
LEADS
CENTRE OF
EXCELLENCE
LEADS
POLICY
OWNERS
ALL
SPARK
PEOPLE
Approves the Managing Risk Policy
✔
Monitors the managing risk framework
✔
Reviews principal risk updates
✔
Performs other items from its charter
✔
Prepares strategy and annual plan
✔
Runs QBR process and determines priorities
✔
Coaches and guides Leads
✔
Assigned as owners of identified principal risks
✔
Designs and continuously improves the managing
risk framework
✔
Helps the business apply the framework
✔
Prepares principal risk updates for the LS and ARMC
✔
Helps Leads to capture their risks for the QBR
content
✔
Executes Internal Audit plan (objective assurance)
✔
Designs and continuously improves the
empowerment framework
✔
Creates empowerment & and functional
guidance kits
✔
Oversees essential policies and webpage
✔
Creates and delivers training modules
✔
Use the Empowerment and Managing
Risk Frameworks
✔
Understand and adhere with the essential policies
✔
Maintain view of risks for OKRs and fill in QBR Memo
✔
Provide input into principal risk process
✔
Escalate risks to LS or Risk Team (if required)
✔
Review risk sections in QBR packs across Spark
✔
Maintain view of risks for their OKRs and fill in QBR
✔
Support Leads to manage identified risks
✔
Provide input into principal risks
✔
Maintain policy and guidance material
✔
Complete assessments of effectiveness
✔
Participate in policy owner working groups
✔
Follow this framework and the essential policies
✔
Make informed decisions after assessing the benefits
and risks
✔
118
Spark New Zealand Annual Report 2021
Corporate governance disclosures
Stakeholder engagement
Spark engages with a broad range of stakeholders as detailed in the table below. We have also engaged a small number of stakeholders
specifically for the purposes of developing and improving our non-financial reporting and as part of our reporting materiality process. In
selecting the stakeholders we engaged with, we are guided by the definition set out in GRI 101: “entities or individuals that can reasonably be
expected to be significantly affected by the organisation’s activities, products or services; or whose actions can reasonably be expected to affect
the ability of the organisation to implement its strategies or achieve its objectives.”
STAKEHOLDER GROUPHOW WE ENGAGE
Spark employees• Regular engagement through eNPS (employee net promotor score) methodology and newly launched
Joyous real-time employee feedback tool.
• Comprehensive programme of internal communication and engagement from Leadership Squad (through
roadshows and online channels).
• Engagement with cross-section of employees in the preparation of this report.
ShareholdersRegular engagement with investors including:
• Semi-annual earnings announcements, together with semi-annual post result investor briefings;
• Semi-annual shareholder newsletters;
• Annual meeting that allows shareholders a chance to meet and ask questions directly of the Spark Board and
management;
• Regular investor road shows; and
• Periodic investor strategy briefings.
Suppliers• Ongoing conversations with our suppliers – both informal and formal.
Customers• Regular feedback from customers on their experiences with us and their views of Spark as a business through
our Net Promotor Score methodology and through our Voice of the Customer programme.
Government• Engagement with central Government on issues related to the telecommunications industry, competition,
infrastructure investment, environmental sustainability and digital equity.
• Engagement with local government to manage the process and impacts of infrastructure investment.
Media• Responding to media enquiries and through a proactive programme of engagement with key members of
New Zealand’s media.
Local communities• Spark engages with local communities affected by our activities, in particular where we are building new
network infrastructure.
Community partners• Spark Foundation works in partnership with, and engages, our community partners on an ongoing basis
through its work on Jump and other initiatives..
Industry organisations• Engagement with a number of industry organisations, representing the telecommunications and technology
sector, community groups, and the New Zealand business community.
• Spark is a founding member of the Climate Leaders Coalition (CLC). The CLC is a group of CEOs who have collectively committed to
voluntary action on climate change, measuring and publicly reporting on their emissions, and setting an absolute target for reducing
emissions in line with the Paris Agreement. See page 39.
• Spark has committed to a government-accredited voluntary Product Stewardship scheme for mobile phones, which is actioned by the
Re:Mobile initiative. See page 41.
External initiatives Spark subscribes to or endorses
Spark was an active member of the following associations in FY21:
International Telecommunication Union (Radiocommunication Sector membership)
GSM Association (GSMA)
New Zealand Internet Task Force
Telecommunications Forum (TCF)
NZ Tech (Including Internet of Things Alliance and AI Industry Forum)
Business NZ
Sustainable Business Council
Aotearoa Circle
Global Women
Champions for Change
119
Whakaahu whakamua
Spark New Zealand Annual Report 2021
Global Reporting Initiative (GRI) content index
To prioritise Spark’s reporting on sustainability topics we have followed GRI’s materiality principle (set out in GRI 101) to identify and prioritise
topics which substantively influence the assessments and decisions of stakeholders or have a significant environmental, social, or economic
impact.
Our assessment of material topics includes analysis of stakeholder feedback, review of industry peers and interviews with external stakeholders.
Internally we consult with a range of employees, including members of our strategy, finance, community, corporate relations, risk, legal and HR
teams, to determine Spark’s view of topics meeting the GRI materiality principle criteria.
In FY21 we have reviewed and updated our list of material impacts, taking into account new and emerging issues particularly related to the
recovery after Covid-19. This has prioritised our role to support economic recovery and highlighted the importance of investment in resilient
and adaptable infrastructure. We have also followed the materiality principles of the Integrated Reporting International <IR> Framework,
considering whether a matter could substantively affect Spark’s ability to create value in the short, medium or long term.
• Customer experience and support
• Data privacy and security
• Digital equity
• Equipping people for the future of work
• Operational excellence and financial performance
• Building partnerships for a strong Aotearoa
• Resilient, adaptable network infrastructure
• Supporting business customers through partnership
• Competition and regulation
• Diversity and Inclusion
• Ethical behaviour
• Ethical supply chain and procurement practices
• Adaptation to physical risk from climate change
• Disaster and crisis response
• Heath, Safety and Wellbeing
• Investment in innovation
• Leveraging services for community and
environmental outcomes
• Product stewardship
• Responsible and fair use of our products
and services
• Community investment
• Infrastructure impact
• Operational efficiency, emissions and waste
• Responsible employment practices
• Ta x
SIGNIFICANCE OF ECONOMIC, ENVIRONMENTAL AND SOCIAL IMPACTS
INFLUENCE ON STAKEHOLDER ASSESSMENTS AND DECISIONS
120
Spark New Zealand Annual Report 2021
Corporate governance disclosures
GRI content index
Our disclosure against each material topic includes our management approach, considering the requirements of GRI 103:
Management Approach.
Note: CGS refers to Spark’s Annual Corporate Governance Statement, which may be found here:
www.sparknz.co.nz/about/governance
IndicatorDisclosurePage number / reference
GRI 102: General disclosures 2016
102-1Name of the organisation5
102-2Activities, brands, products and services8
102-3Location of headquarters124
102-4Location of operations8
102-5Ownership and legal form66, 103, 109
102-6Markets served8
102-7Scale of the organisation8-9, 63
102-8Information on employees and other workers37 and FY21 Modern Slavery Statement
102-9Supply chain57
102-10Significant changes to the organisation and its supply chain67
102-11Precautionary principle or approach38
102-12External initiatives119
102-13Membership of associations119
102-14Statement from senior decision-maker10-13
102-16Values, principles, standards and norms of behaviour6, 27, 48, 52, CGS Principle 1
102-18Governance structure48–49, 52, CGS Principles 2, 3 and 4
102-40List of stakeholder groups119
102-41Collective bargaining agreements<1% of Spark employees in FY21
102-42Identifying and selecting stakeholders119
102-43Approach to stakeholder engagement119
102-44Key topics and concerns raised120
102-45Entities included in the consolidated financial statements66, 117
102-46Defining report content and topic boundaries119–120
102-47List of material topics120
102-48Restatements of information58 (iNPS)
102-49Changes in reportingN/A
102-50Reporting period5
102-51Date of most recent reportSpark’s FY20 Annual Report was
published on 26 August 2020
102-52Reporting cycleSpark reports annually. Our financial
year is 1 July – 30 June
102-53Contact point for questions relating to the report124
102-54Claims of reporting in accordance with GRI standards5
102-55GRI content index121–122
102-56External assurance105–108
GRI 200 Economic Standard Series
201-2Financial implications and other risks and opportunities due to climate
change
55–56
203-1Infrastructure investments and services supported28–31
206-1Legal actions for anti-competitive behaviour, anti-trust and monopoly
practices
27
207-1Approach to tax52–53
121
Whakaahu whakamua
Spark New Zealand Annual Report 2021
IndicatorDisclosurePage number / reference
GRI 300 Environmental Standard Series
305-1Direct (Scope 1) emissions40 and www.sparknz.co.nz/
sustainability/environment
305-2Energy indirect (Scope 2) emissions40 and www.sparknz.co.nz/
sustainability/environment
305-3Other indirect (Scope 3) emissions40 and www.sparknz.co.nz/
sustainability/environment
306-2Management of significant waste-related impacts41
306-3Waste generated41
308-1New suppliers that were screened using environmental criteria57
308-2Negative environmental impacts in the supply chain and actions taken57
GRI 400 Social Standard Series
401-1New employee hires and employee turnover37
401-2Benefits provided to full-time employees that are not provided to
temporary or part-time employees
113
401-3Parental leave36
403-1
(2018)
Occupational health and safety management system34
403-9
(2018)
Work-related injuries34 (TRIFR reporting)
404-2Programmes for upgrading employee skills and transition assistance
programmes
32–33
405-1Diversity of governance bodies and employees36–37, 49
405-2Ratio of basic salary and remuneration of women to men36
414-1New suppliers that were screened using social criteria57
414-2Negative social impacts in the supply chain and actions taken57
417-3Incidents of non-compliance concerning marketing communications27
418-1Substantiated complaints concerning breaches of customer privacy and
losses of customer data
26–27
GRI content index (continued)
122
Spark New Zealand Annual Report 2021
Corporate governance disclosures
Glossary
4Gfourth-generation mobile network as defined by the International Telecommunications Union.
5Gfifth-generation mobile network as defined by the International Telecommunications Union.
ADRan American Depositary Receipt.
ARMCthe Audit and Risk Management Committee.
ASXthe Australian Securities Exchange.
CCLComputer Concepts Limited.
CCNConverged Communications Network.
CompanySpark New Zealand Limited.
EBITDAIearnings before finance income and expense, income tax, depreciation, amortisation and net investment income.
eNPSemployee Net Promoter Score and is our measure of employee satisfaction.
GRIthe Global Reporting Initiative.
Groupthe Group in relation to these financial statements, which are prepared for Spark New Zealand Limited (the
Company) and its subsidiaries (together the Group).
HRCCthe Human Resources and Compensation Committee.
IoTthe Internet of Things.
IFRSInternational Financial Reporting Standards.
LT ILong-Term Incentive, which is part of Spark Leadership Team and former Managing Director and CEO remuneration.
NOMsthe Nominations and Corporate Governance Committee.
NPSNet Promoter Score.
NZ GAAPGenerally Accepted Accounting Practice in New Zealand.
NZ IFRSNew Zealand Equivalent to International Financial Reporting Standards.
NZXNZX Limited.
OTNOptical Transport Network.
PSTNPublic Switched Telephone Network.
QBRQuarterly Business Review.
SMESmall and medium enterprise.
Southern CrossSouthern Cross Cables group of companies, which consists of two sister companies, Southern Cross Cables
Holdings Limited and Pacific Carriage Holdings Limited and their subsidiaries.
SRANSingle Radio Access Network.
STIShort-Term Incentive, which is part of Spark Leadership Team and former Managing Director and CEO
remuneration.
TSRTotal Shareholder Return and is a measure of share price appreciation and dividends paid over a given period.
123
Whakaahu whakamua
Spark New Zealand Annual Report 2021
insightcreative.co.nz
SPARK046
Contact details
Registered office
Level 2
Spark City
167 Victoria Street West
Auckland 1010
New Zealand
Ph +64 4 471 1638 or 0800 108 010
Company secretary
Silvana Roest
For more information
For inquiries about transactions, changes of address or dividend payments contact the share registries below.
New Zealand registry
Link Market Services Limited
Level 30, PWC Tower
PO Box 91976
15 Customs Street West
Auckland 1142
Ph +64 9 375 5998 (investor inquiries)
Fax +64 9 375 5990
enquiries@linkmarketservices.com
www.linkmarketservices.co.nz
Australian registry
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Australia
Locked Bag A14
Sydney South NSW 1235
Australia
Ph +61 1300 554 484 (investor inquiries)
Fax +61 2 9287 0303
registrars@linkmarketservices.com.au
www.linkmarketservices.com.au
United States registry
Computershare Investor Services
P.O. Box 505000
Louisville, KY 40233-5000
United States of America
Ph +1 888 BNY ADRS (+1 888 269 2377) or
+1 201 680 6825 (from outside the
United States)
shrrelations@cpushareownerservices.
com
www.mybnymdr.com
Spark New Zealand Limited
ARBN 050 611 277
For inquiries about Spark’s operating and financial performance contact:
investor-info@spark.co.nz
Investor Relations
Spark New Zealand Limited
Private Bag 92028
Auckland 1142
New Zealand
investors.sparknz.co.nz
124
Spark New Zealand Annual Report 2021
Corporate governance disclosures
The ‘Kora Aotearoa’ logo on the front cover of
our report sits alongside the ‘Spark
New Zealand’ logo, symbolising our
partnership with Māori and our commitment
to Te Korowai Tupu (our Māori Strategy).
The literal translation of Spark New Zealand is
Kora Aotearoa as ‘Spark’ in te reo Māori is
‘Kora’ and ‘Aotearoa’ is the Māori name for
‘New Zealand’.
Ngā Hau e Whā - The four koru forms
represent ‘Ngā Hau e Whā’ or ‘coming from
the four winds’ and this symbol has been used
to signify our embracing all nationalities as
part of our Spark whanau.
External star - The external star draws a
connection with the Spark logo and
represents the revealed world that we know.
Internal star - The star at the centre of the logo
symbolises enlightenment – it is our central
point of understanding.
As a whole the Kora Aotearoa logo expresses
the revealed world of enlightenment. The
‘DAWN OF LIGHT’. By location Aotearoa is the
first to see the light of dawn. Echoing the
‘DAWN OF LIGHT’ approach.
investors.sparknz.co.nz
ARBN 050 611 277
---
SPARK
PAGE
2
Results overview
SPARK
PAGE
3
FY21 Operating Conditions and Performance
•Stronger than expected New Zealand economic recovery, with low unemployment and GDP back in growth.
•Closed international borders and the loss of roaming revenueresulted in top-line revenue decline.
•Strongunderlying revenueperformancein mobile and cloud, security and service management.
•DeliveredFY21 EBITDAI
(1)
growth at the top end of theguidancerangethrough disciplined cost management.
•NPATdeclinedriven by higher depreciation and amortisation costsand increase in tax expense.
•DeclaredFY21 total dividend of 25 cents per share, 100% imputed,supported byresilientfreecash flow.
•Phase one of Spark’s Infrastructure Review completed, with further significant infrastructure investments planned
forFY22 – including accelerated 5G rolloutand datacentrecapacity expansion.
•Further opportunities identified to drive value from the passive components of Spark’s mobile network and fibre. Spark
is activelyexploringshared ownership models; however, discussionsare ongoingand there is no certainty that any
transaction will proceed.
[1}
Earnings before finance income and expense, income tax, depreciation, amortisation and net investment income (EBITDAI) is a non-Generally Accepted Accounting Practice performance measure that is defined and reconciled to net earnings in
Spark New Zealand’s Financial Statements
SPARK
PAGE
4
FY21 Financial Snapshot
EBITDAI
(2)
$1,124m
REVENUE
(1)
$3,593m
NPAT
(3)
$384m
1.0% increase vs. FY20
(0.8%) decrease vs. FY20
(8.6%) decrease vs. FY20
H2 FY21 Dividend confirmed at
12.5cps (100% imputed)
25.0c
TOTAL FY21 DIVIDEND
(1)
Operating revenues and other gains
(2)
Earnings before finance income and expense, income tax, depreciation, amortisation and net investment income (EBITDAI) is a non-Generally Accepted Accounting Practice performance measure that is defined and reconciled to net earnings
in Spark New Zealand’s Financial Statements
(3)
Prior year NPAT has been restated to reflect a reduction in NPAT of $7m for the amortisation of reacquired rights that were previously regarded as indefinite life and therefore not amortised
(4)
The calculation of free cash flow is defined within the ‘cash flows’ worksheet of the FY21 detailed financials workbook - excludes $51m spectrum payment
CAPEX
$354m
FREE CASH FLOW
(4)
$433m
(1.1%) decrease vs. FY20
(5.3%) decrease vs. FY20
Resilient revenues and disciplined cost reduction delivered EBITDAI growth towards the top end of guidance.
SPARK
PAGE
5
Strategy update
SPARK
PAGE
6
FY21 Established Market Performance
(1.5%) decrease vs. FY20
$670m
BROADBAND
REVENUE
0.5% increase vs. FY20
$852m
MOBILE SERVICE
REVENUE
5.5% increase vs. FY20
$443m
CLOUD, SECURITY, &
SERVICE MANAGEMENT
Mobile service revenue growthdespite loss of
$31m roaming revenues. Underlying growth of
4.3%
(2)
demonstrates strong momentum.
Mobile service revenue market share
(1)
41.5%, up
1.1pp vs. FY20, and driven by pay monthly
connection growth of 56k.
Growth in total mobile and prepaid ARPU, driven
by 89% increase in Endless mobile plans as
customers seek more data, and fewer low ARPU
pre-paid travellers.
Remain committed to target of ~30-40% of base
on wireless broadband, targeting lower end of
that range by FY23. Accelerating5G rollout in
FY22 willincrease addressable base.
Wireless broadband performance below target
due to challenging marketplace. Increased
momentum in Q4resulting in +19k YoY
connection growth.
Lower overall market growth in FY21 vs. FY20
(1)
.
Connection base at 701k despite increased
competitive intensity.
Strong momentum in service management with
revenue up 10.8% –driven by increased annuity
and project revenues as businesses transform to
cloud-based solutions.
CCL achieved certification against
ISO/IEC27001:2013 international standard
demonstrating itscommitment to maintaining
robust security for clients and partners.
Collaboration revenue up 4.6% YoY as COVID-19
increased demand for flexible working solutions.
(1)
Market share estimates sourced from IDC
(2)
Mobile service revenue loss of $31m for outbound roaming. NOTE: mobile non-service revenue loss of $7m for inbound roaming. Total mobile roaming revenue loss of $38m
Leading Mobile Service Revenue
(1)
#1 Broadband
(1)
#1 Hybrid Cloud
(1)
SPARK
PAGE
7
•600k unique MySparkApp users completing ~3.6m interactions per month –supporting a 32% increase in digital sale and change customer journeys.
•Enhanced online messaging functionality for customer care supporting ~15k conversations per month and delivering a higher iNPSthan traditional
voice and chat.
•Retired 210 legacy mobile and broadband plans – simplifying product stack and right planning customers.
•Legacy PSTN lines reduced to under 300k in June 2021 with an average of 10k connections migrating off this technology every month.
SIMPLE,
INTUITIVE
CUSTOMER
EXPERIENCES
•Increased coverage of household view to ~83% of New Zealand households –improving our ability to understand and serve the needsof Kiwis.
•Delivered ~22 core machine learning models, enabling highly targeted marketing campaigns.
•Precision marketing supporting 89% YoY growth in adoption of Endless mobile plans.
•Overall improvement in marketing efficiency of 16%.
DEEP
CUSTOMER
INSIGHTS
S M ART,
AUTOMATED
NETWORK
•5G now live in 9 locations, including Auckland, Christchurch, Dunedin and Hamilton. Accelerating rollout and increasing overall investment in mobile
connectivity to $125m in FY22 – targeting ~90% population coverage by end of calendar year 2023, assuming necessary spectrum is made available
by the New Zealand Government.
•Continued investment in rural connectivity, with RCG cell tower builds
(1)
opening up additional wireless broadband and IoT opportunities, and 445
marae connected through the Marae Digital Connectivity initiative.
•First stage of next generation Optical Transport Network complete, continued investment in SX Next Cable build supporting resili ence and capacity.
•Completed first phase of infrastructure review, now progressing to phase 2. See infrastructure review section, pages 8-14.
•Continued to grow Agile maturity, with 86% of squads now at 3.5 or above.
•Significant growth in employee engagement, with eNPS +76, up 10 points YoY.
•Substantial program of leadership capability delivered to high potential leaders, focussed on creating the conditions for innovation and growth.
•Continued to create a culture of inclusion with 42% of senior roles outside the Board and Leadership Squad now held by women,collaboration across
the business community to drive data-driven ethnic inclusion strategies, and progress against TeKorowai Tupu, our Māori Strategy.
GROWTH
MINDSETS
Strategic Update: World Class Capabilities and Culture
Strong progress across core capabilities supporting ongoing transition to digital services future
(1)
Rural Connectivity Group (RCG) launched 261
st
tower during FY21 – targeting more than 400 sites by the end of 2022
SPARK
PAGE
8
Infrastructure Review
SPARK
PAGE
9
Infrastructure Review Recap
In February we announced a review of our infrastructure assets, with the aim of driving greater capital efficiency, increasedresilience,
and better experiences for customers.Spark has a significant infrastructure asset portfolio, and we have seen an increased interest in
quality infrastructure assets.
(1)
Portfolio includes a mix of dedicated tier 3datacentres, tier 2 facilities and converted exchange buildings.
Satellite
station
Metro & regional data
networks fibre/wireless
Ownership stake in
3 sub-sea cables
1,200 km national fibre
backhaul network
35 major network
exchanges
18 Datacentres
(1)
1,500 mobile
sites
Review status
Phase 1
Complete
Categorising our different infrastructure assets into
classes based on their strategic importance,
competitive advantage and how they support
network resilience for our customers
Ongoing
Define and pursue opportunities to grow the value
of asset portfolio – either by investing, optimising
or shared ownership
Phase 2
Overview
SPARK
PAGE
10
& GROW
IMPORTANT FOR
COMPETITIVE ADVANTAGE
AND RESILIENCE
•Active mobile
•Critical network exchanges
•Datacentre capacity
•Multi-access edge compute
Clear approach to the assets in each class
INVEST
CLASS 1
INVESTMENT
ASSETS THAT ARE
IMPORTANT FOR NETWORK
RESILIENCE
•Regional & local network
exchanges
•Sub-sea cables
•Spark’s satellite station
OPTIMISE
CLASS 2
MODELS
ASSETS THAT CAN BE
SHARED
•Passive mobile
•Fibre
SHARED
OWNERSHIP
CLASS 3
SPARK
PAGE
11
& GROW
IMPORTANT FOR
COMPETITIVE ADVANTAGE
AND RESILIENCE
Class 1: Invest & Grow
INVEST
CLASS 1
•Active mobile
•Critical network exchanges
•Datacentre capacity
•Multi-access edge compute
(1)
RATIONALE & OPPORTUNITY
•Active mobile when combined with Spark’s spectrum holdings currently drives
competitive advantage. Our 5G rollout will bring significant increases in capacity and
speed and will further expand the addressable market for wireless broadband and open
up commercialisation opportunities across business and consumer.
•Critical network exchanges ~10% of sites: provide resilience and will become future
multi-access edge compute nodes.
•Datacentre capacity such as IaaS and hybrid-cloud platforms supports our growing
cloud business which in turn creates opportunity to cross-sell other IT and Managed
Services offerings such as service management.
Retain control of assets that drive competitive advantage, accelerate smart
automated network objectives, and support innovation and emerging
technologies
(1)
Multi-access edge compute reduces the physical distance from an end user to compute and the networking service, reducing latencyand supporting new use cases that require real-time performance to work e.g. cloud gaming
Accelerated 5G rollout and datacentre capacity expansion mark a
significant investment intoNew Zealand’s connectivity and resilience
SPARK
PAGE
12
& GROW
Class 1: Invest & Grow
INVEST
CLASS 1
Leverage growth and changing dynamics of datacentre market through
substantial investment in datacentre capacity and multi-access edge compute
•Investing in a material upgrade of criticalexchange at Mayoral Drive and scaling Spark’s
Tier 3 datacentre at Takanini to support strategy to lead in cloud.
•Mayoral Drive: investment to develop quality multi-access edge compute and leveraging
the site’s existing position as a key connection point for national and international
connectivity to be at the core of New Zealand’s cloud.
•Takanini: intend to increase the existing datacentre by approximately 10MW of capacity –
which will make it the largest in New Zealand once completed. Investment will be staged
to meet contracted demand. We are in advanced negotiations to contract at least 60% of
the initial ~10MW expansion.
•Investments will deliver revenue growth and enable Spark to continue to be a leader in the
New Zealand datacentre market as the cloud market rapidly evolves:
-Significant uplift in demand for customer cloud solutions;
-Migration of customers to multi-cloud solutions; and
-Onshore investment by global public cloud providers.
Multi-year growth opportunity supported by capital investment managed within
targeted capital envelope of 10-11% of revenues, albeit at top end of this range
•Active mobile
•Critical network exchanges
•Datacentre capacity
•Multi-access edge compute
(1)
CRITICAL NETWORK EXCHANGE & DATACENTRE OPPORTUNITY
(1)
Multi-access edge compute reduces the physical distance from an end user to compute and the networking service, reducing latencyand supporting new use cases that require real-time performance to work e.g. cloud gaming
IMPORTANT FOR
COMPETITIVE ADVANTAGE
AND RESILIENCE
SPARK
PAGE
13
Class 2: Optimise Investment
INVESTMENT
ASSETS THAT ARE
IMPORTANT FOR NETWORK
RESILIENCE
•Regional & local network
exchanges
•Sub-sea cables
•Spark’s satellite station
OPTIMISE
CLASS 2
RATIONALE
Resilience is critical to the ongoing performance and experience of our
networks. Future planning for assets that support network resilience will
ensure that customer outcomes are not only maintained but enhanced
•Regional and local network exchange portfolio provides a combination of resilience and
housing for legacy network equipment; and is split across two key categories:
•Exchanges that enable resilience ~40% of sites: provide secondary network
connectivity and datacentre locations for Spark’s modern technology, products and
services.
•Exchanges that house legacy equipment ~50% of sites: are not part of Spark’s
future technology roadmap. These aresmaller legacy sites which Spark will
progressively exit as infrastructure consolidates into exchanges that are critical and/or
provide resilience (with proceeds unlikely to be material).
•Sub-sea cables support international resilience and we intend to maintain our long-term
shareholding as there is value through shared ownership of key data transport assets.
•Satellite station has lower strategic value today but provides resilience and has potential
future value as satellite market grows.
Focus on optimisation through efficient operation and investment while
right-sizing the portfolio
SPARK
PAGE
14
Class 3: Shared Ownership Models
MODELS
ASSETS THAT CAN BE
SHARED
•Passive mobile
•Fibre
CLASS 3
RATIONALE & OPPORTUNITY
Maximising the value of passive infrastructure assets through
efficiency, increasing asset utilisation, and exploring shared
ownership models
Passivemobile towers are not considered a driver of competitive advantage. Global focus on
these assets is shifting to operational efficiencies and shared ownership models. Our portfolio
has:
•Approximately 1,500 mobile sites (~70% macro towers, ~15% on building, ~15% on light
poles)
•Current tenancy ratio on Spark owned mobile sites: 1.07
Fibre network sharing models are considered a potential driver of efficiency in a market that is
highly competitive with large amounts of overlapping network.
Actively exploring opportunities. Discussions are ongoing in relation to potential shared
ownership models for passive infrastructure assets –no certainty that any transactions will
proceed.
SHARED
OWNERSHIP
SPARK
PAGE
15
Strategic Update: Future Markets
IoT
(1)
Digital
Health
Sport
•First ‘summer of cricket’: successfully delivered with over 3 million hours of live cricket streamed to ~240k Spark Sport
viewers
(4).
•Continued to build capability and content: establishing pay-per-view content model, introduced e-sports, and secured
exclusive New Zealand rights to the UEFA Champions League
(5)
and the Rugby League World Cup.
•Future investment expected to be consistent with current levels:focus on partnerships to drive access to additional
premium content, subscription growth and improve returns.
•IoT connection growth underpinned by Spark’s IoT networks which cover ~99% of the population
(2)
: connection growth of
83% vs. FY20, with over 450k devices connected across a range of industries including utilities, health and logistics.
•Spark Innovation Studio launched: ~150 tours conducted to date with over 1,000 customers visiting to identify howIoT and
5G can help them adapt, transform, and grow.
•IoT-enabled smart-city infrastructure: inpartnership with Auckland Transport at Auckland's Wynyard Quarter with the goal of
accelerating the digitisation of operations, enhancing productivity and sustainability.
•Spark Health: brand identity launched into market, with telco, IT and business transformation solutions tailored to the
healthcare sector – delivering revenue growth of 10.6%, on a revenue base of ~$200m.
•Digital Health Platform ‘Kete Waiora:’
(3)
platform vendor selected.Targeting launch to clients in Q1 FY22.
•Supported large healthcare providers: during the pandemic response, including Whakarongorau Aotearoa’s COVID-19
hotline for COVID-19 information.
(1)
Internet of Things
(2)
Spark’s CAT-M1 network covers ~99% of the population with LoRa and NB-IoT coverage expanding with customer demand
(3)
The basket of health and wellness
(4)
The Spark Sport viewing number has been derived using real time platform data and a co-viewing factor based on results of the customisedstudy commissioned by Spark Sport with leading international research firm Nielsen
(5)
Includes rights to UEFA (Union of European Football Associations) Champions League, UEFA Europa League and UEFA Europa Conference League for thenext three seasons
Building foundations in future markets in support of long term growth
SPARK
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16
Strategic Update: Sustainability
Significant progress establishing strong sustainability foundations across Spark:
•Launched new Sustainability Framework to the market and operationalised it into the business.
•Grew Skinny Jump connections by 5.6k – a 58% increase vs. FY20 and surpassing 15k
connections in total by year end.
•Spark Foundation continued to pursue its vision of ‘no New Zealander being left behind in a
digital world’, focussing on digital access, digital skills and pathways and digital wellbeing.
•Introduced a new Environment Policy to guide internal decision making.
•Assessed climate change risks and opportunities across the business, aligned to the Taskforce for
Climate-related Financial Disclosures (TCFD) and incorporated into reporting.
•Set a science-based emissions reduction target, approved by the Science Based Target Initiative.
•Focus now shifting to designing and executing an emissions reduction plan and supporting
businesses to harness the power of technology to shift to a low-carbon future.
Spark’s Science-Based Emissions Reduction Target
Spark New Zealand commits to reduce absolute Scope 1 and 2 GHG emissions 56% by FY30 from
a FY20 base year.
Spark New Zealand commits that 70% of its suppliers by spend covering purchased goods and
services and capital goods will have science-based targets by FY26.
SPARK
PAGE
17
FY21 Indicators of Success
Strategic PillarFocus AreaMeasureTarget 30 June 2021Status
World Class Capability
Customer ExperienceConsumer and small business iNPS8 point liftNot achieved
(1)
Data driven insights80% of customer base
(2)
in household view
(3)
enabling
15% efficiency gain in
marketing spend
Achieved
Wireless futureProgressive rollout of 5GLive in 5-7 locationsAchieved
Mature Agile
Leadership
Percentage of Agile squads at or above level 3.585%Achieved
Grow established markets
WirelessMobile service revenue growth0-3%Achieved
WirelessWireless broadband connections+40kNot achieved
CloudCloud, security and service management revenue growth5-8%Achieved
Accelerate future markets
IoTGrowth in number of connected IoT devices50%Exceeded
Spark SportSuccessfully deliver season 1 of New Zealand cricket
Platform availability of
99.9%
Achieved
Lowest Cost ProviderDeliver best costEBITDAI margin31%Achieved
Build a sustainable future
Championing digital
equity
Skinny Jump connections+10kNot achieved
Sustainable Spark
Set emissions reductions target aligned to New Zealand being
carbon neutral by 2050
(4)
By 30 June 2021Achieved
(1)
The iNPSscore has been rebased to include a larger sample of customer interaction feedback
(2)
Spark and Skinny consumer and Spark SME customer base
(3)
Household view is an insights platform that allows us to better anticipate the needs of New Zealand households to deliver more targeted, relevant and personalised services
(4)
As part of commitment to Climate Leaders Coalition
SPARK
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18
FY20 ActualFY21 GuidanceFY21 Actuals
EBITDAI
$1,113m$1,100m to $1,130m$1,124m
Capital expenditure
$374m~$350m
$354m
FY21 Spectrum Renewals
(1)
-$50m$51m
Dividend per share
25.0cps
(H1 75% imputed, H2 100% imputed)
25.0cps
(100% imputed)
25.0cps
(2)
(100% imputed)
(1)
1800MHz and 2100MHz spectrum renewals paid in January 2021
(2)
The Dividend Reinvestment Plan (DRP) has been retained for the H2 FY21 dividend. Shares issued under the DRP will be issued at prevailing market price as determined around the time of issue
FY21 Guidance Delivered
SPARK
PAGE
19
Financials
SPARK
PAGE
20
FY21 Financial Performance Summary
Strong momentum in key markets and disciplined cost reduction resulting in all FY21 guidance metrics met
REVENUE
MOVEMENT
($30m)
(0.8%) decrease vs. FY20
EBITDAI
MOVEMENT
$11m
NPAT
(1)
MOVEMENT
($36m)
1.0% increase vs. FY20
(8.6%) decrease vs. FY20
OPEX
MOVEMENT
$41m
1.6% decrease vs. FY20
Top line revenue of $3,593m declined 0.8%,
driven by:
•Loss of $38m roaming revenues
(2)
.
•Non-recurring refunds of historical wire
maintenance charges.
Operating expenses of $2,469m declined 1.6%
due to:
•Cost-out programme.
•Lower marketingand travel expenses.
Reported EBITDAI of $1,124m, up 1.0% on prior
year andtowards the top end of guidance range.
NPAT declined 8.6% due to:
•Higher D&A as a result of shorterasset lives; and
•Increased customer and commercial lease
activity.
•FY22 D&A expected to be broadly flat.
•Increase in tax expense of $21m due to one-off
decreases recorded in FY20
(3)
not repeated in
FY21.
FREE CASH FLOW
MOVEMENT
($5m)
(1.1%) decrease vs. FY20
H2 FY21 dividend 12.5c
25.0c
TOTAL FY21
DIVIDEND
Free cash flow of $433m (excluding spectrum).
Strong cash flow management offsetting $48m
additional cash tax.
Reported net debt to EBITDAI ratio within Spark’s
internal threshold of 1.4x.
H2 FY21 dividendper share of 12.5cps to be
100% imputed.Total FY21 dividend of25.0cps in
line FY21 guidance.
The Dividend Reinvestment Plan (DRP) has been
retained for the H2 FY21 dividend at a zero
discount
(4)
.
(1)
Prior year NPAT has been restated to reflect a reduction in NPAT of $7m for the amortisation of reacquired rights that were previously regarded as indefinite life and therefore not amortised
(2)
Total mobile roaming revenue loss of $38m. NOTE: mobile service revenue loss of $31m for outbound roaming revenue and mobilenon-service revenue loss of $7m for inbound roaming revenue
(3)
These one-off decreases resulted from legislation enacted to reintroduce tax depreciation on commercial building structures and a higher amount of non-taxable gains in FY20
(4)
Shares issued under the DRP will be issued at prevailing market price as determined around the time of issue.
SPARK
PAGE
21
Financials
FY20
(1)
$m
FY21
$m
CHANGE
Operating revenues and other gains3,6233,593(0.8%)
Operating expenses(2,510)(2,469)(1.6%)
EBITDAI1,1131,1241.0%
Finance income3634(5.6%)
Finance expense(94)(81)(13.8%)
Depreciation and amortisation(488)(523)(7.2%)
Net investment income1(1)NM
Net earnings before tax expense568553(2.6%)
Tax expense(148)(169)(14.2%)
Net earnings after tax expense420384(8.6%)
Capital expenditure
(2)
374354(5.3%)
Free cash flow
(3)
438433(1.1%)
EBITDAI margin30.7%31.3%0.6pp
Effective tax rate26.1%30.6%4.5pp
Capital expenditure to operating revenues10.3%9.9%(0.4pp)
Earnings per Share22.920.7(9.6%)
Total Dividend per Share25.0c25.0c-
(1)
Prior year NPAT has been restated to reflect a reduction in NPAT of $7m for the amortisation of reacquired rights that were previously regarded as indefinite life and therefore not amortised
(2)
Excluding spectrum of $51m and finance lease receivable terminations of $3m
(2)
The calculation of free cash flow is defined within the ‘cash flows’ worksheet of the FY21 detailed financials - excludes $51m spectrum payment
SPARK
PAGE
22
EBITDAI
$1,124m
REVENUE
$3,593m
1.0% increase vs. FY20
(0.8%) decrease vs. FY20
OPERATING EXPENSES
$2,469m
(1.6%) decrease vs. FY20
Accelerated cost out programme delivering
significant gross cost out benefits across product,
labour, and other operating expenses, allowing
investment into future markets.
Net labour cost reduction of $20m, or 3.9%, as
services and customer care interactions continue
to transition to digital channels and self-service
options.
Other operating expenses decreased due to:
•Lower bad debt expense, with impacts of
COVID-19 lower than expected.
•Data led marketing spend efficiencies.
•Reduced travel expenses.
Reduction in product costs due to Lightbox
divestment and ongoing savings from wireless
broadband growth; partially offset by additional
Spark Sport content and production costs.
EBITDAI growth driven by strong momentum in
established markets, focussed execution, coupled
with ongoing benefits of cost management
activities.
Total estimated COVID-19 impacts of ~$40m
lower than revised estimate of ~$50m as a result
of:
•Improving economic conditions resulting in
lower bad debts.
•Modest return of roaming revenues due to
limited opening of Australian and Cook Island
travel bubble.
EBITDAI margin of 31.3% – in line with aspiration.
FY21 Revenue growth underpinned by
established market momentum:
•Total cloud, security, and service
management growth of $23m, including
service management growth of $17m, and
cloud growth of $4m reflecting change in
mix towards public cloud.
•Increase in other mobile revenue driven by
device and accessory sales.
•Mobile service revenue and market share
growth despite ongoing roaming impacts.
FY21 revenue impacts include:
•Higher rate of voice revenue decline due to
non-recurring refunds of historical wire
maintenance charges.
•Broadband revenue decline with lower
overall market growth and persistent
competitor price pressure.
FY21 Operational Performance Summary
Ambition to return to revenue growth in FY22 by maintaining established market momentum and accelerating future market growth
SPARK
PAGE
23
FY21 Capital Investment and Free Cash Flow
Prioritised allocation of capex combined with long-term investments in
mobile spectrum of $51m resulting in greater overall investment in FY21 vs.
FY20.
Key capital expenditure projects for the year included:
•5G rollout of mobile and WBB services to nine locations;
•Investment in Optical Transport Network (OTN 2.0), increasing resiliency
and capacity;
•Continued investment in the converged communication network (CCN),
advancing exit strategy for legacy PSTN network, and enabling delivery of
IP-based voice services in the future.
Delivered free cash flow of $433m, due to continued focus on working capital
with full year cash conversion rate of 100%.
Free cash flow includes impact of $48m increase in tax payments vs. FY20
(1)
.
Working capital broadly flat vs. FY20 with gains offset by:
•Timing of receivables due to strong Q4 sales – expected to unwind in Q1.
•Higher rate of growth in device receivables due to increase in high end
device sales.
Free cash flow, when combined with DRP, sufficient to fund total FY21
dividend of 25.0cps and renewal of 1800MHz and 2100MHz spectrum.
CAPEX
excluding spectrum
$354m
(5.3%) decrease vs. FY20
SPECTRUM
$51m
1800MHz & 2100MHz
spectrum renewals
TOTAL CAPEX
(2)
including spectrum
$405m
8.3% increase vs. FY20
+=
Investing in New Zealand’s wireless future. Committing an
additional $35m to accelerate 5G rollout, boosting total mobile
connectivity investment to ~$125m in FY22
FREE
CASH FLOW
$433m
(1.1%) decrease vs. FY20
WORKING
CAPITAL
$4m
Increase in working
capital vs. FY20
TOTAL FY21
DIVIDEND
$0.25c
H2 FY21 dividend 12.5c
FY22 free cash flow aspiration of $420m-$460m supported by a
targeted return to revenue growth to fund shareholder
distribution of $0.25c
(1)
Tax payments increased due to an increase in provisional tax paid during the period (FY20 P3 payment paid in FY21)
(2)
Excludes finance lease receivable terminations of $3m
SPARK
PAGE
24
Net Debt
Reported net debt to EBITDAI ratio of 1.16x
(1)
consistent with S&P A- credit rating
•Total net debt of $1,303m, down $46m YoY due to:
•EBITDAI growth;
•Planned reduction in capital investment;
•Strong DRP participation; partially offset by
•Payments for renewal of 1800MHz and 2100MHz
spectrum - securing long-term right of use to 2041.
•Strong liquidity with $72m of cash and $630m of undrawn
committed bank facilities.
•Weighted average cost of debt 3.8%.
•Weighted average life of debt 4.3 years with good spread of
maturities across bank funding, domestic and offshore bonds.
(1)
Spark’s internal capital management policy is to ensure that on a long-run basis reported net debt to EBITDAI does not exceed 1.4x; which Spark estimates is approximately equivalent to S&P’s 1.7x adjusted net debt to EBITDA threshold
Spark’s internal threshold of 1.4x excludes S&P’s adjustments in relation to IFRS16, and captive finance operations
(2)
Businessacquisitions and minority investments includes: reacquired rights for business hub and retail licences, Rural Connectivity Groupand SX Next equity contributions
(3)
Proceeds from asset and business sales includes: receipts from business hub portfolio consolidation, divestment of Lightbox and Now New Zealand Ltd and sale of surplus mobile network equipment
1,349
1,303
330
51
38
10
(433)
(42)
900
1,000
1,100
1,200
1,300
1,400
Net debt as at
30 June 2020
Free cash flowDividends paidSpectrumBusiness
acquisitions and
minority
investments
Proceeds from
asset and
business sales
Other
movements
Net debt as at
30 June 2021
Movement in net debt during FY21 ($m)
(2)
(3)
SPARK
PAGE
25
FY22 indicators of success
Strategic PillarFocus AreaMeasureTarget 30 June 2022
World class capability
Customer experienceConsumer and small business iNPS+6 point lift
Data driven insightsUplift in data driven marketing campaign conversion
(1)
15%
Smart automated networksAccelerate 5G10-15 locations
(2)
Growth mindsetseNPS+70
Grow established markets
WirelessMobile service revenue growth2-4%
BroadbandWireless broadband connections+15-20k
CloudCloud, security and service management revenue growth5-8%
Accelerate future markets
IoTGrowth in number of connected IoT devices+300k
Spark Health
Successful launch of Digital Health Platform
Growth in Spark Health revenues
5 DHP customers onboarded
8-10%
Lowest cost providerDeliver best costEBITDAI margin31%
Build a sustainable future
Championing digital equitySkinny Jump connections+5k
Sustainable SparkEstablish emissions reduction programme30 June 2022
(1)
Spark consumer base
[2]
This includes a mix of new locations and existing locations where our 5G footprint will be expanded
SPARK
PAGE
26
Guidance
(1)
FY21 ActualFY22 Guidance
EBITDAI$1,124m$1,130m-$1,160m
Capital expenditure
(2)
$354m~$400m
Dividend per share
Total 25.0cps
(3)
(100% imputed)
Total 25.0cps
(100% imputed)
(1)
Subject to no adverse change in operating outlook
(2)
Excluding expenditure on mobile spectrum of $51m and finance lease receivable terminations of $3m
(3)
Dividend Reinvestment Plan (DRP) has been retained for the H2 FY21 dividend. Shares issued under the DRP will be issued at prevailing market price as determined around the time of issue.
Disclaimer
This announcement may include forward-looking statements regarding future events and the future financial performance of Spark New
Zealand. Such forward-looking statements are based on the beliefs of and assumptions made by management along with information
currently available at the time such statements were made.
These forward-looking statements may be identified by words such as ‘guidance’, ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘will’,
‘plan’, ‘may’, ‘could’, ‘ambition’, ‘aspiration’ and similar expressions. Any statements in this announcement that are not historical facts are
forward-looking statements. These forward-looking statements are not guarantees or predictions of future performance, and involve
known and unknown risks, uncertainties and other factors, many of which are beyond Spark New Zealand’s control, and which may
cause actual results to differ materially from those projected in the forward-looking statements contained in this announcement.
Factors that could cause actual results or performance to differ materially from those expressed or implied in the forward-looking
statements are discussed herein and also include Spark New Zealand's anticipated growth strategies, Spark New Zealand's future results
of operations and financial condition, economic conditions and the regulatory environment in New Zealand, competition in the markets
in which Spark New Zealand operates, risks related to the sharing arrangements with Chorus, any impacts or risks to Spark’s anticipated
growth strategies, future financial condition and operations, economic conditions or the regulatory environment in New Zealand arising
from or otherwise with COVID-19, other factors or trends affecting the telecommunications industry generally and Spark New Zealand’s
financial condition in particular and risks detailed in Spark New Zealand's filings with NZX and ASX. Except as required by law or the
listing rules of the stock exchanges on which Spark New Zealand is listed, Spark New Zealand undertakes no obligation to update any
forward-looking statements whether as a result of new information, future events or otherwise.
---
Spark New Zealand
Group result - reported
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Operating revenues and other gains1,7541,7791,8241,7991,7961,7973,6233,593(30)(0.8%)
Operating expenses(1,265)(1,178)(1,324)(1,186)(1,294)(1,175)(2,510)(2,469)411.6%
EBITDAI4896015006135026221,1131,124111.0%
Finance income1819181817173634(2)(5.6%)
Finance expense(40)(45)(46)(48)(43)(38)(94)(81)1313.8%
Depreciation and amortisation expense(245)(232)(239)(250)(263)(260)(488)(523)(35)(7.2%)
Net investment income-14(1)2-(1)1(1)(2)NM
Net earnings before income tax222357233336213340568553(15)(2.6%)
Tax expense(69)(101)(69)(79)(65)(104)(148)(169)(21)(14.2%)
Net earnings for the period153256164257148236420384(36)(8.6%)
Capital expenditure264153247127192162374354(20)(5.3%)
Free cash flows
10818450388113320438433(5)(1.1%)
Reported EBITDAI margin27.9%33.8%27.4%34.1%27.9%34.6%30.7%31.3%0.6%
Reported effective tax rate31.1%28.3%29.7%23.5%30.5%30.6%26.1%30.6%4.5%
Capital expenditure to operating revenues15.1%8.6%13.5%7.1%10.7%9.0%10.3%9.9%(0.4%)
Reported basic and diluted earnings per share (cents)8.314.08.914.08.01322.920.7-2.2(9.6%)
Gross margin by product
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Mobile376399405424407430
82983781.0%
Voice1431381231198793
242180(62)(25.6%)
Broadband168176175166166173
341339(2)(0.6%)
Cloud, security and service management159158173175179179
348358102.9%
Procurement and partners192820252023
4543(2)(4.3%)
Managed data, network and services697070687273
13814575.1%
Other product252615332842
48702245.8%
Total product gross margin9599959811,0109591,013
1,9911,972(19)(1.0%)
Other gains-15431424
3528(7)(20.0%)
Total gross margin9591,0109851,0419631,037
2,0262,000(26)(1.3%)
Connections
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
000's000's000's000's000's000's000's000's000's
%
Mobile connections
1
2,464 2,515 2,500 2,519 2,431 2,421 2,519 2,421 (98) (3.9%)
Voice connections by type
2
POTS & ISDN356329288220197168220168(52)(23.6%)
VoIP5455546169696169813.1%
Voice over wireless1826262423242424--%
428410368305289261305261(44)(14.4%)
Broadband connections
Copper296249211186157131186131(55)(29.6%)
Fibre273306340367381395367395287.6%
Wireless1291401411561651751561751912.2%
698695692709703701709701(8)(1.1%)
1 Mobile connections excluding MVNO connections but including legacy machine to machine and SIM based SmartWatch connections
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
2
Voice connections include all voice technology types, including POTS, ISDN, VoIP and wireless voice. Voice connections exclude connections where
Spark also provide a bundled broadband service, but include all wholesale voice connections (including those where the underlying customer has a
bundled broadband service).
Spark New Zealand
Group FTE's
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21#
%
FTE permanent5,1075,1095,1194,9834,9614,8894,9834,889(94)(1.9%)
FTE contractors 21216720014612115014615042.7%
Total FTE5,3195,2765,3195,1295,0825,0395,1295,039(90)(1.8%)
Dividends
FY20FY21
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21$$$
%
Ordinary dividends (cents per share)11.0011.0012.5012.5012.5012.5025.0025.00--%
Special dividends (cents per share)1.501.50-------NM
12.5012.5012.5012.5012.5012.5025.0025.00--%
FY20 vs FY21
FY20 vs FY21
Spark New Zealand
Group operating revenues and other gains
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Operating revenues
Mobile
Service revenue40341342542342043284885240.5%
Non-service revenue219236228212231228440459194.3%
6226496536356516601,2881,311231.8%
Voice
Access10910495856267180129(51)(28.3%)
Calling878379817167160138(22)(13.8%)
Other voice revenue2928232321204641(5)(10.9%)
225215197189154154386308(78)(20.2%)
Broadband344341345335337333680670(10)(1.5%)
Cloud, security and service management187197209211217226420443235.5%
Procurement and partners19117320720023617840741471.7%
Managed data, network and services12913113414314014227728251.8%
Other operating revenue56587555578013013775.4%
Total operating revenues1,7541,7641,8201,7681,7921,7733,5883,565(23)(0.6%)
Other gains-154314243528(7)(20.0%)
Total operating revenues and other gains1,7541,7791,8241,7991,7961,7973,6233,593(30)(0.8%)
Operating revenues includes revenues from Consumer, Business, Wholesale and other customer segments.
Wireless broadband revenues and connections are included in broadband revenues and connections.
Operating revenues and other gains by customer segment
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Operating revenues and other gains$m$m$m$m$m$m$m$m$m
%
Consumer7908148257577697811,5821,550(32)(2.0%)
Business8618519069219409021,8271,842150.8%
Wholesale and other124137119148113142267255(12)(4.5%)
Eliminations(21)(23)(26)(27)(26)(28)(53)(54)(1)(1.9%)
1,7541,7791,8241,7991,7961,7973,6233,593(30)(0.8%)
Finance income
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Finance income$m$m$m$m$m$m$m$m$m
%
Finance lease interest income7776671313--%
Other interest income1112111211102321(2)(8.7%)
1819181817173634(2)(5.6%)
Net investment income
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Net investment income$m$m$m$m$m$m$m$m$m
%
Dividend income-15-------NM
Share of associates' and joint ventures' net losses-(1)(1)2-(1)1(1)(2)NM
-14(1)2-(1)1(1)(2)NM
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
Spark New Zealand
Revenue classification changes
Product lineServices providedPrevious customer productCurrent customer product
Telephony Products
IT and Managed
Services
Previous reclassifications remain in place from the IT & Managed Services presentation in March 2021.
As part of the ongoing revision of the Agile business model, the management of certain customer segment lines have been reallocated from one part of
the business to another. The details of the key changes and the associated impact on revenue reporting are as follows:
Granular classification of CCL products
across the IT and Managed Services
portfolio to more accurately reflect the
composition of client revenues
CloudProcurement and Managed Networks
Voice and Cloud, Security
and Service Management
Managed NetworksReclassification of two CCL cloud-based
telephony products to algin with the
classification of similar telephony
solutions (including connections)
Spark New Zealand
Group operating expenses
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Product costs
Mobile246250248211244230459474153.3%
Voice827774706761144128(16)(11.1%)
Broadband176165170169171160339331(8)(2.4%)
Cloud, security and service management28393636384772851318.1%
Procurement and partners17214518717521615536237192.5%
Managed data, network and services606164756869139137(2)(1.4%)
Other product costs3132602229388267(15)(18.3%)
7957698397588337601,5971,593(4)(0.3%)
Labour250225267244255236511491(20)(3.9%)
Other operating expenses
Network support costs37243530434065831827.7%
Computer costs4647494951509810133.1%
Accommodation costs373033303235636746.3%
Advertising, promotions and communication4740473144287872(6)(7.7%)
Bad debts66710(1)(6)17(7)(24)NM
Impairment expense5(2)-2-222--%
Other4239473237307967(12)(15.2%)
220184218184206179402385(17)(4.2%)
Total operating expenses1,2651,1781,3241,1861,2941,1752,5102,469(41)(1.6%)
Finance expense
Finance expense on debt2325252821225343(10)(18.9%)
Other interest and finance expense4775641210(2)(16.7%)
Lease interest expense1515151615113126(5)(16.1%)
Leased customer equipment interest expense22334468233.3%
44495052464110287(15)(14.7%)
Capitalised interest(4)(4)(4)(4)(3)(3)(8)(6)225.0%
4045464843389481(13)(13.8%)
Depreciation and amortisation expense
Depreciation - property, plant and equipment12811811911412411823324293.9%
Depreciation - right-of-use assets25312836354264771320.3%
Depreciation - leased customer equipment assets99151219172736933.3%
Amortisation of intangibles83747788858316416842.4%
245232239250263260488523357.2%
FY20 vs FY21
Spark New Zealand
Analysis & KPI's - Mobile
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Mobile revenue by type (Consumer and Business)$m$m$m$m$m$m$m$m$m
%
Mobile service revenue39840942141941542784084220.2%
Mobile non-service revenue
1
206224216197223221413444317.5%
6046336376166386481,2531,286332.6%
1816161913123525(10)(28.6%)
Total mobile revenue6226496536356516601,2881,311231.8%
Mobile product costs
3
(246) (250) (248) (211) (244) (230) (459) (474) (15) (3.3%)
Mobile gross margin37639940542440743082983781.0%
Mobile gross margin %60.5%61.5%62.0%66.8%62.5%65.2%64.4%63.8%(0.6%)
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Total mobile revenue by customer segment$m$m$m$m$m$m$m$m$m
%
Consumer410443443419438441862879172.0%
Business194190194197200207391407164.1%
Wholesale and other1816161913123525(10)(28.6%)
6226496536356516601,2881,311231.8%
Average revenue per user (ARPU) - 6 month active
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Consumer and Business
$ per
month
$ per
month
$ per
month
$ per
month
$ per
month
$ per
month
$ per
month
$ per
month
$ per
month %
Total ARPU27.5627.5728.4828.0528.5129.6628.2729.080.81 2.9%
Pay-monthly ARPU42.8242.4342.8241.1939.9740.3141.9940.14(1.85)(4.4%)
Prepaid ARPU12.2912.6613.2813.3714.3615.4213.3314.871.54 11.5%
H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H2 FY21 FY20 FY21
000's000's000's000's000's000's000's000's000's
%
Pay-monthly connections1,2251,2511,2871,3301,3551,3861,3301,386564.2%
Prepaid connections1,2061,2321,1811,1611,0471,0081,1611,008(153)(13.2%)
Internal connections44444444--%
Total mobile connections2,4352,4872,4722,4952,4062,3982,4952,398(97)(3.9%)
1
Mobile non-service revenue includes handset sales and mobile interconnect.
2
Includes MVNO revenue.
3
Includes handset, interconnect and cellphone tower access costs.
4
Excludes MVNO connections but includes SIM based SmartWatch connections
Number of mobile connections at period end - 6
month active - Consumer and Business
4
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
Wholesale and other customer segment mobile
revenue
2
Spark New Zealand
Analysis & KPI's - Voice
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Revenue by type$m$m$m$m$m$m$m$m$m
%
Access10910495856267180129(51)(28.3%)
Calling878379817167160138(22)(13.8%)
Other voice revenue2928232321204641(5)(10.9%)
Total voice revenue225215197189154154386308(78)(20.2%)
Voice product costs
1
(82) (77) (74) (70) (67) (61) (144) (128) 16 11.1%
Voice gross margin1431381231198793242180(62)(25.6%)
Voice gross margin %63.6%64.2%62.4%63.0%56.5%60.4%62.7%58.4%(4.3%)
H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H2 FY21 FY20 FY21
000's000's000's000's000's000's000's000's000's
%
POTS and ISDN356329288220197168220168(52)(23.6%)
VoIP5455546169696169813.1%
Voice over wireless1826262423242424--%
Total voice connections
2
428 410 368 305 289 261 305 261 (44) (14.4%)
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
000's000's000's000's000's000's000's000's000's
%
Consumer1041039349586049601122.4%
Business174171161157149138157138(19)(12.1%)
Wholesale and other1501361149982639963(36)(36.4%)
Total voice connections
2
428 410 368 305 289 261 305 261 (44) (14.4%)
1
Includes voice access (baseband), interconnect, and international calling costs.
2
Excludes Cloud Telephony which has been moved to Managed Networks.
Analysis & KPI's - Broadband
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Total broadband revenue344341345335337333680670(10)(1.5%)
Broadband product costs
3
(176) (165) (170) (169) (171) (160) (339) (331) 8 2.4%
Broadband gross margin168176175166166173341339(2)(0.6%)
Broadband gross margin %48.8%51.6%50.7%49.6%49.3%52.0%50.1%50.6%0.5%
H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H2 FY21 FY20 FY21
000's000's000's000's000's000's000's000's000's
%
Copper296249211186157131186131(55)(29.6%)
Fibre273306340367381395367395287.6%
Wireless1291401411561651751561751912.2%
Total broadband connections698695692709703701709701(8)(1.1%)
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
000's000's000's000's000's000's000's000's000's
%
Consumer598593587595585577595577(18)(3.0%)
Business989910010310310510310521.9%
Wholesale and other2351115191119872.7%
Total broadband connections698695692709703701709701(8)(1.1%)
3
Includes broadband access (UBA/UCLL/Fibre), modem and e-mail platform support costs.
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
Voice connections by type
Voice connections by customer segment
FY20 vs FY21
Broadband connections by technology
Broadband connections by segment
FY20 vs FY21
FY20 vs FY21
Spark New Zealand
Analysis & KPI's - Cloud, Security and Service Management
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Cloud Revenue10211011111411311622522941.8%
Security revenue201618191920373925.4%
Service Management revenue6571807885901581751710.8%
Cloud, Security and Service management revenue187197209211217226420443235.5%
Cloud, Security and Service management product costs(28)(39)(36)(36)(38)(47)(72)(85)(13)18%
Cloud, Security and Service management gross margin159158173175179179348358103%
Cloud, Security and Service management gross margin %85.0%80.2%82.8%82.9%82.5%79.2%82.9%80.8%(2.1%)
Contribution margin (approximated) %
1
35.8%40.6%34.4%39.3%34.6%38.5%34.4%34.6%0.2%
Cloud KPI'sH1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Number of IaaS clients375367361347329336347336(11)(3%)
Power usage efficiency for dedicated data-centre sites1.511.481.471.501.501.481.501.48-0.02(1%)
Megawatt hours for dedicated data centre sites2,5992,6452,6872,6362,6172,6002,6362,600(36)(1%)
Security KPI'sH1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Number of security clients1,2291,2181,1911,1831,1531,1741,1831,174(9)(1%)
Average monthly revenue per security client2,7122,1892,5192,6772,7462,8392,5982,7931968%
Service management KPI'sH1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
Number of service management clients726642681730671772730772426%
Average monthly revenue per service management client14,92218,43219,57917,80821,11319,43018,66320,2131,5508%
Recalculation of IaaS Clients and Security Clients
Analysis & KPI's - Procurement and Partners
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Procurement and partners revenue19117320720023617840741471.7%
Procurement and partners product costs(172)(145)(187)(175)(216)(155)(362)(371)(9)(2.5%)
Procurement and partners gross margin1928202520234543(2)(4.3%)
Procurement and partners gross margin %9.9%16.2%9.7%12.5%8.5%13.0%11.1%10.4%(0.7%)
Analysis & KPI's - Managed data, network and services
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Collaboration282530353335656834.6%
Managed data and networks10110610410810710721221420.9%
Managed data, network and services revenue12913113414314014227728251.8%
Managed data, network and services product costs
2
(60)(61)(64)(75)(68)(69)(139)(137)21.4%
Managed data, network and services gross margin69707068727313814575.1%
Managed data, network and services gross margin %53.5%53.4%52.2%47.6%51.4%51.4%49.8%51.4%1.6%
2
Includes wide area network access, international data, network backhaul and videoconferencing platform costs.
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
FY20 vs FY21
The client count measures for IaaS, Security and Service Management have been retrospectively updated following improvements in the classification of clients that
consume more than one variant of a service across the Spark Group.
Spark New Zealand
Statement of cash flows
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Cash flows from operating activities
Cash received from customers 1,770 1,654 1,861 1,733 1,828 1,719
3,5943,547(47)(1.3%)
Interest receipts 18 17 17 17 16 16
3432(2)(5.9%)
Dividend receipts - 15 - - - -
---NM
Payments to suppliers and employees (1,314) (1,169) (1,396) (1,101) (1,319) (1,134)
(2,497)(2,453)441.8%
Payments for income tax (44) (91) (82) (58) (118) (70)
(140)(188)(48)(34.3%)
Payments for interest on debt (22) (23) (26) (26) (23) (23)
(52)(46)611.5%
Payments for interest on leases (13) (17) (14) (16) (16) (10)
(30)(26)413.3%
Payments for interest on leased customer equipment
assets
(2) (2) (3) (3) (4) (4)
(6) (8) (2) (33.3%)
Net cash flows from operating activities 393 384 357 546 364 494
903858(45)(5.0%)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment - 1 13 - - 6
136(7)(53.8%)
Proceeds from sale of business - - - 23 8 22
2330730.4%
Proceeds from long-term investments - 2 - - 6
-66NM
Payments for purchase of businesses - - (11) - - (25)
(11)(25)(14)NM
Payments for, and advances to, long-term investments (6) - (30) (5) (4) (9)
(35)(13)2262.9%
Payments for purchase of property, plant and
equipment and intangibles (excluding spectrum)
(258) (157) (273) (120) (214) (121)
(393) (335) 58 14.8%
Payments for spectrum intangible assets - - - - - (51)
-(51)
(51)NM
Payments for capitalised interest (3) (5) (4) (4) (3) (3)
(8)(6)
225.0%
Net cash flows from investing activities (267) (159) (305) (106) (213) (175)
(411)(388)235.6%
Cash flows from financing activities
Net proceeds from debt 182 (28) 207 (177) 100 (138)
30(38)(68)NM
Receipts from finance leases 3 3 2 4 2 4
66--%
Payments for dividends (229) (230) (229) (230) (167) (163)
(459)(330)12928.1%
Payments for leases (19) (17) (19) (23) (20) (36)
(42)(56)(14)(33.3%)
Payments for leased customer equipment assets (8) (9) (13) (15) (16) (18)
(28)(34)
(6)(21.4%)
Receipts from loans receivable - - - - - 1
-1
1NM
Net cash flows from financing activities (71) (281) (52) (441) (101) (350)
(493)(451)428.5%
Net cash flow 55 (56) - (1) 50 (31)
(1)1920NM
Opening cash position 55 110 54 54 53 103
5453(1)(1.9%)
Closing cash position 110 54 54 53 103 72
53721935.8%
FY20 vs FY21
Spark New Zealand
Analysis & KPIs - Free cash flows
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Net cash flows from operating activities
393 384 357 546 364 494 903858(45)(5.0%)
Payments for purchase of property, plant and
equipment and intangibles (excluding payments for
(258) (157) (273) (120) (214) (121) (393) (335) 58 14.8%
Payments for capitalised interest
(3) (5) (4) (4) (3) (3) (8)(6)225.0%
Payments for leases
(19) (17) (19) (23) (20) (36) (42)(56)(14)(33.3%)
Payments for leased customer equipment assets
(8) (9) (13) (15) (16) (18) (28)(34)(6)(21.4%)
Receipts from finance leases
3 3 2 4 2 4 66--%
excluding
-NM
Dividend receipts
- (15) - - - - ---NM
Increase/(decrease) in working capital
38 99 31 (48) (11) 15 (17)421NM
Underlying free cash flow146 283 81 340 102 335
421437163.8%
including
(Increase)/decrease in working capital
(38) (99) (31) 48 11 (15) 17(4)(21)NM
Free cashflow108 184 50 388 113 320
438433(5)(1.1%)
Analysis & KPIs - Movement in working capital
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
EBITDAI 489 601 500 613 502 622
1,1131,124111.0%
excluding
-NM
Impairments (5) 2 - (2) - (2)
(2)(2)--%
Other gains - 15 4 31 4 24
3528(7)(20.0%)
EBITDAI excluding impairments and other gains494 584 496 584 498 600
1,0801,098181.7%
Net cash flows from operating activities 393 384 357 546 364 494
903858(45)(5.0%)
excluding
-NM
Interest receipts 18 17 17 17 16 16
3432(2)(5.9%)
Dividend receipts - 15 - - - -
---NM
Payments for income tax (44) (91) (82) (58) (118) (70)
(140)(188)(48)(34.3%)
Payments for interest on debt (22) (23) (26) (26) (23) (23)
(52)(46)611.5%
Payments for interest on leases (13) (17) (14) (16) (16) (10)
(30)(26)413.3%
Payments for interest on leased customer equipment
assets
(2) (2) (3) (3) (4) (4)
(6) (8) (2) (33.3%)
Net cash flows from operating activities excluding
dividends, tax and net interest
456 485 465 632 509 585 1,097 1,094 (3) (0.3%)
EBITDAI excluding impairments and other gains 494 584 496 584 498 600
1,0801,098181.7%
less
Net cash flows from operating activities excluding
dividends, tax and net interest
456 485 465 632 509 585
1,097 1,094 (3) (0.3%)
Increase/(decrease) in working capital38 99 31 (48) (11) 15 (17)4 21 NM
Cash conversion92%83%94%108%102%97%102%100%-2%
FY20 vs FY21
FY20 vs FY21
Spark New Zealand
Group capital expenditure
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Cloud26101689112420(4)(16.7%)
Converged Communications Network (CCN)20111171512
1827950.0%
International cable construction and capacity purchases
111-1118119(2)(18.2%)
IT systems706273566656
129122(7)(5.4%)
Mobile network892992245848
116106(10)(8.6%)
Core sustain and resiliency362750153422
6556(9)(13.8%)
Other12135695
1114327.3%
Total capital expenditure (Excl. Mobile Spectrum)
264153247127192162374354(20)(5.3%)
Total capital expenditure (Excl. Mobile Spectrum) to
Operating Revenue
15.1% 8.6% 13.5% 7.1% 10.7% 9.0% 10.3% 9.9%
Mobile Spectrum-----51
-5151NM
Total capital expenditure (Incl. Mobile Spectrum)
264153247127192213374405318.3%
Total capital expenditure (Incl. Mobile Spectrum) to
Operating Revenue
15.1% 8.6% 13.5% 7.1% 10.7% 11.9% 10.3% 11.3%
Analysis & KPI's - Capital expenditure depreciation and amortisation
H1 FY19H2 FY19H1 FY20H2 FY20H1 FY21H2 FY21FY20FY21
$m$m$m$m$m$m$m$m$m
%
Depreciation - property, plant and equipment12811811911412411823324293.9%
Depreciation - right-of-use assets
1
91310111111
212214.8%
Amortisation of intangibles
83747788858316416842.4%
Total capital expenditure depreciation and amortisation
220205206213220212418432143.3%
1
Includes depreciation on capacity right-of-use assets only as these are included within Spark’s definition of capital expenditure.
FY20 vs FY21
Capital expenditure is presented on an accruals basis, and includes purchase of property, plant and equipment and intangible assets, capacity purchases
(including Southern Cross) but excludes leased customer equipment assets.
FY20 vs FY21
On adoption of NZ IFRS 16 Leases, assets associated with capacity arrangements which were previously recognised within intangible assets have been
reclassified to right-of-use assets. Payments for capacity purchases remain within Spark’s definition of capital expenditure. Total depreciation on property
plant and equipment, depreciation on capacity right-of-use assets and amortisation of intangibles is reconciled below:
---
Principle 1:
Codes of Conduct
Spark has an integrated Company-wide
compliance framework. A Code of Ethics
(which applies to all employees) and a
Directors’ Code of Ethics, together set out
the standards by which Spark people are
expected to conduct themselves.
The Codes provide guidance on decision-
making and set out to instill a culture of
acting lawfully, ethically and responsibly.
The Code of Ethics contains links to Spark’s
core policies and details Spark’s values,
expected behaviours and sets out Spark’s
approach to conflicts of interest, bribery
and corruption, gifts and hospitality,
confidentiality, use of assets and
information, and compliance with laws. The
Codes also set out Spark’s compliance
escalation procedures that are designed to
be used to report breaches of Spark’s legal
obligations, the Codes themselves and
other Spark policies, either through the
Honesty Box confidential whistle-blowing
online portal or other avenues.
Online training modules as part of Spark’s
continuous education programme are used
to educate all staff about the Code of Ethics
and how to apply it. We reinforce this
training through regular in person sessions
and broader internal communication (emails
and intranet articles) across the business. We
also embed relevant aspects of the Code
into Spark “plays”. Plays are one-page online
guides on how to carry out common
activities at Spark. Training on the Directors’
Code of Ethics is coordinated by the
Company Secretary.
Copies of the Code of Ethics and the
Directors’ Code of Ethics can be found at:
www.sparknz.co.nz/about/governance
Trading Policies
The Insider Trading Policy and the Disclosure
Policy (together with the associated
procedures for implementation) are two of
Spark’s core policies that address the
treatment of material information and trading
in Spark and other issuers’ financial products
while in possession of material information.
Copies of the Insider Trading Policy and
the Disclosure Policy can be found at:
www.sparknz.co.nz/about/governance
Code of
Ethical Behaviour
“Directors should set high
standards of ethical behaviour,
model this behaviour and hold
management accountable for
these standards being followed
throughout the organisation.”
The Board and management of Spark New Zealand Limited (Spark) are committed to
maintaining high standards of corporate governance. The Board regularly reviews and
assesses Spark’s governance structures and processes to ensure that they are consistent with
international best practice, in both form and substance.
Spark is required to report against the NZX Corporate Governance Code (NZX Code) and,
as part of its commitment to best practice governance, has elected to take into consideration
and substantially complies with the ASX Corporate Governance Council’s Principles and
Recommendations (the Fourth Edition).
This statement is a snapshot view of Spark’s practices, processes and policies measured
against the principles of the NZX Code. It was approved by the Board on 17 August 2021
and is accurate as at that date.
Annual Corporate
Governance Statement
2021
1
Spark New Zealand Annual Corporate Governance Statement 2021
2
Principle 2:
Board Composition
and Performance
“To ensure an effective board,
there should be a balance of
independence, skills, knowledge,
experience and perspectives.”
Board
A key factor in Spark’s long-term growth
framework is strong governance, with focus
areas including proactive risk management
policies and having a diverse Board.
A biography of each Board member and the
Board skills matrix that outlines the
qualifications, capabilities, geographical
location, tenure and gender of each member
of the Board can be found in the Our Board
section of the 2021 Annual Report.
The Board of Directors is elected by
shareholders to protect and enhance the
value of the assets of Spark in the interests of
Spark and its shareholders. The Board has
statutory responsibility for the affairs and
activities of Spark, which in practice is
achieved through delegation to the Chief
Executive Officer (CEO) and those who are
charged with the day-to-day leadership and
management of Spark. The CEO has, in some
cases, formally delegated certain authorities
to direct reports and has established an
empowerment framework that sets out
decision rights at Spark.
More information regarding the respective
roles and responsibilities of the Board
and management is set out in the
Board Charter, which can be found at:
www.sparknz.co.nz/about/governance
The Board regularly reviews and assesses
Spark’s governance structures and processes
to ensure that they are consistent with
international best practice in both form
and substance.
Director Appointment
The procedures for the appointment and
removal of directors are governed by Spark’s
constitution, the Companies Act 1993 and
relevant stock exchange listing rules. Each
director has a signed letter of appointment or
employment agreement setting out the terms
of their appointment, including their duties,
terms, conditions of appointment,
expectations of the role and remuneration.
Spark directors have no fixed term of office
but are subject to the retirement provisions
contained in Spark’s constitution and relevant
stock exchange listing rules.
Recommendations for nominations of new
directors are generally made by the NOMs
and considered by the Board as a whole.
External consultants are from time to time
used to access a wide base of potential
candidates and to review the suitability of
candidates for appointment.
When recommending a candidate to act as
director, the NOMs takes into account such
factors as it deems appropriate, including the
candidate’s experience, qualifications,
judgement and personal qualities. In doing
so Spark will undertake appropriate checks,
including as to the candidate’s character,
education, criminal record and bankruptcy
history. The NOMs will review the candidate’s
skills and experience relative to the Board
skills matrix to determine whether they will
augment the existing Board skillset and
assess their availability to commit themselves
to the role.
If the Board appoints a new director during
the year, that person will stand for election
by shareholders at the next annual meeting.
Shareholders are provided with relevant
information on the candidates standing for
election in the notice of meeting.
Diversity and Inclusion
Spark’s talented workforce is a representation
of gender, ethnicity, culture and experience.
Spark’s Board believe that building greater
diversity and inclusion among our people
speaks to our role as a major New Zealand
company that shows leadership in areas
important to society. The Board also believes
that a highly inclusive, adaptive culture will
unlock future growth and ultimately deliver
enhanced customer experiences and
business performance. One of Spark’s major
initiatives is to invite all employees to make
the Blue Heart Pledge, which is an individual’s
personal commitment to support a ‘heart-led’
approach to diversity and inclusion at Spark.
Spark’s Diversity and Inclusion Policy sets out
the requirement for the Board to set and
review measurable objectives for achieving
diversity each year. The HRCC annually
reviews and reports to the Board on the
relative proportion of gender diversity that
Spark New Zealand Annual Corporate Governance Statement 2021
3
Principle 2 continued:
Board Composition
and Performance
“To ensure an effective board,
there should be a balance of
independence, skills, knowledge,
experience and perspectives.”
makes up Spark’s workforce and recommend
objectives to the Board. A copy of Spark’s
Diversity and Inclusion policy can be found
at: www.sparknz.co.nz/about/governance
For more details on the importance of
Diversity and Inclusion at Spark, and
reporting on our workforce demographics,
please see the Our People section of the
2021 Annual Report.
Director Training
The Board introduces new directors to
management and the business through
specifically tailored induction programmes,
depending on their needs. All directors are
regularly updated on relevant industry and
company issues. This may include visits to
Spark operations and briefings from key
Leadership Squad members or external
experts. There is an ongoing programme of
presentations to the Board by management
from across Spark. From time to time the
Board may also receive educational briefings
from companies in relevant industries. The
Board expects all directors to undertake
continuous education so that they may
appropriately and effectively perform
their duties.
Board, Committee and
Director Performance
The Board regularly discusses governance
and performance and annually reviews its
own performance as a whole against the
Board Charter and each committee’s
performance against its Charter. The Chair
meets with directors to discuss the
performance of each director individually.
Further, Board evaluations are undertaken
annually to seek director and Leadership
Squad feedback on a range of matters
relating to Board performance, including its
role and composition and engagement with
management, shareholders and stakeholders.
The collective results of the evaluation are
then reported to the Board by the Chair and
discussed individually with directors. The last
Board evaluation survey was undertaken in
August 2020 with the next Board evaluation
due to be completed by the end of the 2021
calendar year.
Director Independence
Spark’s Board Charter requires that a
majority of directors be independent.
When assessing independence the Board
will consider whether a director is free of
material relationships with Spark (other than
as a director) and other entities, and people
who could influence, or could reasonably be
perceived to influence, the director’s capacity
to exercise independent judgement and act
in the best interests of Spark and Spark’s
shareholders generally. The mere existence
of a relationship with Spark, or a customer
or supplier, may not necessarily mean that a
director is not independent. Rather, the Board
will assess each relationship on a case-by-
case basis to determine whether it is material
and might compromise the independence,
or perceived independence, of the director.
The Board will also consider the tenure of
each director when assessing independence
and succession planning.
Please see the Board’s statement regarding
Director independence at page 112 of the
2021 Annual Report.
Board Positions
The Chair is elected by the Board. The Board
supports the separation of the roles of Chair
and the CEO. The Chair’s role is to manage
and provide leadership to the Board and
to facilitate the Board’s interface with the
CEO. The current Chair, Justine Smyth, is a
non-executive and independent director as
required by the Board Charter. The Board
does not have a Deputy Chair.
The Company Secretary is responsible for
supporting the effectiveness of the Board by
ensuring that its policies and procedures are
followed and for coordinating the completion
and dispatch of the Board agendas and
papers. The Company Secretary is
accountable to the Board, via the Chair,
on all governance matters, as further
described in the Board Charter.
Spark New Zealand Annual Corporate Governance Statement 2021
4
Principle 3:
Board Committees
“The board should use committees
where this will enhance its
effectiveness in key areas, while
still retaining board responsibility.”
Spark’s Board establishes committees
to assist in the execution of the Board’s
responsibilities. Board committees do not
act or make decisions on behalf of the Board
unless specifically mandated by prior Board
authority to do so.
The current committees of the Board are:
• Audit and Risk Management
Committee (ARMC);
• Human Resources and Compensation
Committee (HRCC); and,
• Nominations and Corporate Governance
Committee (NOMs).
Other committees may be established from
time to time to consider matters of special
importance or to exercise the delegated
authority of the Board.
Each Board committee has a Charter
summarising the role, rights, responsibilities
and membership requirements for that
committee. The Board reviews the charters
of the Board committees annually and their
performance against those charters, with the
last review conducted in November 2020.
The Board committee charters can be found
at: www.sparknz.co.nz/about/governance
The Board is responsible for appointing
committee members and Chairs according
to the skills, experience and other qualities
they bring to the committee. All Board
committees are comprised of a majority of
independent directors. A committee Chair
is entitled to invite persons to attend
committee meetings as deemed necessary.
Spark management and employees can only
attend committee meetings at the invitation
of the committee.
Specific committee memberships and
attendance information are outlined on
pages 109 & 111 of the 2021 Annual Report.
ARMC
The Board has delegated responsibility to the
ARMC for reviewing Spark’s principal risks on
an at least annual basis. This ensures an
established risk management framework that:
• includes policies and procedures to
effectively identify, treat and monitor
principal business risks;
• assesses the effectiveness of the risk
management system and ensures it is
fit for purpose; and
• monitors compliance with the risk
management framework.
The ARMC is also tasked with ensuring the
quality, credibility and objectivity of Spark’s
accounting processes, including financial
reporting. The ARMC will discuss interim
financial statements with the Leadership
Squad, including whether the reporting is
consistent with the committee members’
information and knowledge and whether
it is adequate for shareholder needs.
The ARMC is comprised solely of non-
executive directors, and the Chair of the
ARMC is independent and is not the Chair
of the Board.
HRCC
The HRCC is responsible for reviewing
Spark’s remuneration policy and practices,
as well as Spark’s overall human resources
strategy, structure, policy and practices.
The remuneration of directors is reviewed
by the HRCC – taking account of Spark’s size
and complexity and the responsibilities, skills,
performance and experience of the directors
– with recommendations made to the Board
for approval.
NOMs
The NOMs role is to identify and recommend
to the Board individuals for nomination as
members of the Board and its committees
(taking into account such factors as it deems
appropriate, including experience,
qualifications, judgement and personal
qualities); and to develop and review Spark’s
corporate governance principles and make
recommendations to the Board. The NOMs is
also responsible for reviewing Board
succession planning.
Takeovers
Spark’s Board has put in place Takeover
Response Guidelines that set out the
procedure to be followed if there is a takeover
offer for Spark, including with regards to
communication between insiders and the
bidder, the preparation of an independent
advisor’s report and establishment of a Bid
Response Sub-committee.
Spark New Zealand Annual Corporate Governance Statement 2021
5
Principle 4:
Reporting and
Disclosure
“The board should demand
integrity in financial and non-
financial reporting, and in the
timeliness and balance of
corporate disclosures.”
Continuous Disclosure
Spark is committed to providing material
information regarding Spark’s business and
operational performance to shareholders and
other stakeholders in compliance with
applicable laws and stock exchange
requirements. Pursuant to its Disclosure
Policy, Spark has an appointed Disclosure
Officer to authorise all financial market
communications. Together with the Company
Secretary, the Disclosure Officer is
responsible for overseeing Spark’s disclosure
practices and ensuring that all material
information is lodged promptly and without
delay with the relevant stock exchanges and
ensuring that the Board receives copies of all
material market announcements and is kept
informed of the nature and quality of the
information being disclosed to the market.
Authorised spokespersons are restricted to
reduce the risk of inconsistent
communications and to ensure that public
comments are within the bounds of
information already in the public domain
and/or information that is not materially
price sensitive.
Reporting
Spark’s financial reports are prepared in a
manner that is balanced, clear and objective.
The financial statements in the Annual Report
are prepared in accordance with NZ GAAP
and comply with NZ IFRS.
The Board requires that, prior to its approval
of financial statements, the CEO and Finance
Director make a declaration that, in their
opinion, Spark’s financial records have been
properly maintained and that the financial
statements comply with the appropriate
accounting standards and give a true and fair
view of the financial position and
performance of Spark; and that their opinion
has been formed on the basis of a sound
system of risk management and internal
control, which is operating effectively.
In addition to the published financial
statements Spark’s Annual Report provides
information on Spark’s performance on a
number of non-financial matters, including
environmental, social and governance
commitments, integrating elements of the
Global Reporting Initiative Standards.
Spark’s 2019 Annual Report adopted the
Global Reporting Initiative (GRI) Standards
and its 2020 Annual Report also adopted
elements of the Integrated Reporting
International <IR> Framework. Building on
this holistic approach to reporting, Spark’s
2021 Annual Report has been prepared in
accordance with the International <IR>
Framework and with the GRI Core Option and
also incorporates climate risk disclosure
aligned to the recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD).
Key Governance Documents
Spark’s website has a dedicated governance
section that contains Spark’s policies that
outline its core governance structures and
processes. This includes the Code of Ethics,
Board Charter (and the charters of the various
committees), Disclosure Policy, Insider
Trading Policy, Diversity and Inclusion Policy
and other principal corporate governance
documents: www.sparknz.co.nz/about/
governance
Spark New Zealand Annual Corporate Governance Statement 2021
6
Principle 5:
Remuneration
“The remuneration of directors
and executives should be
transparent, fair and reasonable.”
Policies and Practices
The HRCC is responsible for Spark’s
remuneration policy and practices and is also
ultimately responsible for ensuring Spark
meets legislative and regulatory requirements
as they relate to remuneration matters.
Spark is committed to ensuring that the
remuneration of directors is transparent, fair,
and reasonable and subject to shareholder
approval if required.
For more details on director and executive
remuneration please see the Leadership and
Board Remuneration section of the 2021
Annual Report.
Directors
Non-executive director remuneration is
determined with consideration of the size
and complexity of Spark and relative market
activity. From time to time independent
consultants are engaged for benchmarking
purposes to ensure that the remuneration of
Spark’s non-executive directors is appropriate
and comparable to that of similar companies
in New Zealand and, as relevant, Australia.
Non-executive directors are also expected
to purchase and hold an amount of Spark
shares within the first three years of
their appointments.
Jolie Hodson, as an executive director, does
not receive any director fees.
Further details on non-executive director
remuneration can be found at pages 60, 109
& 110 of the 2021 Annual Report.
Further details on directors’ Spark
shareholdings can be found at pages 112 &
116 of the 2021 Annual Report.
Executives
The Leadership Squad’s remuneration
consists of a fixed remuneration component
and at-risk short-term and long-term
incentives. Spark’s STI rewards senior leaders
for the achievement of annual performance
objectives, with payments awarded from a
fixed cash pool that is set based on overall
Spark performance against financial and/or
non-financial annual performance objectives.
Spark believes that senior leaders should
have part of their remuneration linked to the
long-term performance of Spark. For the
Leadership Squad and a select group of
senior leaders, a long-term incentive,
which vests after three years contingent on
continued employment and Spark achieving
a performance hurdle, forms part of their
remuneration packages.
Further details on Leadership Squad
remuneration can be found at pages 58 & 59
of the 2021 Annual Report.
CEO
The CEO’s remuneration package reflects
the scope and complexity of the role and
is set by the Board, with reference to the
remuneration of CEOs of similarly sized
organisations. For FY21 the CEO’s
remuneration package comprises a fixed
cash component, an at-risk short-term
incentive and an at-risk long-term incentive.
The CEO’s annual cash-based short-term
incentive is subject to the achievement of
specific performance objectives set by the
Board based on Spark’s strategy and business
plan for the respective financial year. The
CEO’s annual long-term incentive will be
granted as options under Spark’s LTI,
contingent on continued employment
and Spark achieving a performance hurdle.
The CEO is also expected to purchase and
hold an amount of Spark shares.
Further details on CEO remuneration can
be found at pages 60, 110 & 111 of the 2021
Annual Report.
Spark New Zealand Annual Corporate Governance Statement 2021
7
Risk Management
“Directors should have a sound
understanding of the material
risks faced by the issuer and how
to manage them. The board
should regularly verify that the
issuer has appropriate processes
that identify and manage
potential and material risks.”
Spark’s Agile organisation design and
practices empower its people to make
decisions and manage the risks associated
with achieving Spark’s strategy and business
objectives. Strong corporate governance,
including a highly effective and integrated
risk management framework, helps Spark
people to make good business decisions that
create stakeholder value. Spark’s Managing
Risk Policy and Framework is benchmarked
to the COSO ERM 2017, a leading enterprise
risk management standard.
Spark’s Managing Risk Policy and Framework
is designed on the principles that managing
risk creates, protects and enhances value.
It is embedded in decision-making processes
and accountability structures so that uncertainty
and risks can be managed effectively. It is
iterative and responsive to change so that it
remains effective when external and internal
forces require Spark to adapt its priorities
and operating models. A copy of Spark’s
Managing Risk Policy can be found at the
following link:
www.sparknz.co.nz/about/governance/
The ARMC plays an important role and is
responsible for ensuring that management
has established a risk management
framework. Spark’s Risk Team is accountable
for designing and managing this framework
and provides the ARMC with regular updates
about its performance and evolution.
The ARMC reviews management’s principal
risk profile annually. It also receives reports
on the effectiveness of the implementation
and operation of the policies and systems
designed to manage risk. The ARMC receives
quarterly reporting from the Risk, Internal
Audit and Fraud Lead that discusses progress
against the approved Risk, Internal Audit and
Fraud Plan. Information reported includes the
priorities, updates about the evolution of the
Managing Risk Framework, findings from its
internal audit reviews, updates about the
status of previously raised items and fraud
risk management.
The ARMC receives an annual assessment to
confirm the Managing Risk Framework is
designed and operating effectively. The last
assessment was undertaken in August 2021
as part of year-end procedures. Every three
years Spark also has an external review to
ensure it continues to be fit for purpose and is
operating effectively. The next review is
scheduled to occur in FY22.
A summary of Spark’s Managing Risk
Framework and Spark’s identified principal
business risks and mitigations are outlined in
the Our Governance and Risk Management
section of the 2021 Annual Report.
Health and Safety
The health, safety and wellbeing of people
is of the utmost importance to Spark. A
safe and healthy workplace is one in which
people and suppliers are accountable and
empowered to work together to protect and
promote the health, safety and wellbeing of
all. To achieve this Spark has established four
pillars of health and safety: a clearly defined
Health and Safety framework; active hazard
and risk management; development of an
employee-driven safety culture; and the right
resources and processes to deliver on the
framework. Integral to the framework is the
H&S Information System, which shapes and
monitors key performance indicators across
the business, focusing on Spark’s strategic
objectives, targets and managing critical
hazards and risks. The Board and Leadership
Squad are both integrally involved in health
and safety strategic planning, implementation
and monitoring. Furthermore, Spark have
introduced a new wellbeing programme to
help create a healthy working environment
in which the promotion and maintenance of
the highest degree of physical, mental, and
social wellbeing will be applied for its people.
Further details regarding Spark’s health and
safety performance can be found in the Our
People section of the 2021 Annual Report.
Principle 6:
Spark New Zealand Annual Corporate Governance Statement 2021
8
Auditors
“The board should ensure the
quality and independence of
the external audit process.”
External Audit
Oversight of Spark’s external audit
arrangements is the responsibility of the
ARMC. The External Auditor Independence
Policy and ARMC Charter, together, establish
a framework for Spark’s engagement
with the external auditor. The objective
of this framework is to ensure that audit
independence is maintained, both in
fact and appearance, such that Spark‘s
external financial reporting is viewed as
being highly reliable and credible.
The ARMC is responsible for the appointment
of Spark’s external auditor, its terms of
engagement and the level of fees incurred
(subject to shareholder approval). The ARMC
Charter outlines the nature of the services
permitted to be performed and those
not permitted to be performed by the
external auditor.
The ARMC Charter requires that the
committee annually assesses and confirm to
the Board the independence of the external
auditor after consideration of the External
Auditor Independence Policy criteria. Regular
rotation of the external audit firm is not
mandated, however, rotation of the key audit
partner of Spark is required every five years.
Procedures for communication between the
ARMC, the External Auditor and Management
are set out in the ARMC Charter.
Representatives of Spark’s external auditor
are available at Spark’s annual meeting to
answer shareholder questions about the
conduct of the audit and the content of
the External Auditor’s reports.
Given KPMG had been Spark’s external
auditor since 1 July 2002, the Board
considered it was the appropriate time to
rotate its external auditor in time for FY21.
Following a formal request for proposal for
external audit services, the Board
recommended that Deloitte be appointed as
its new external auditor in March 2020. This
recommendation was formally approved by
shareholders at Spark’s Annual Meeting held
in November 2020.
The Audit and Risk Management Committee
Charter and the External Auditor
Independence Policy can be found at:
www.sparknz.co.nz/about/governance
Internal Audit
The Spark Internal Audit Team’s primary
objective is to assist the Board and CEO to
exercise good governance by providing
independent assurance on Spark’s control
and risk management processes. The ARMC
approves the appointment and oversees the
performance of Spark’s Risk, Internal Audit
and Fraud Lead, who is accountable for
leading Internal Audit and reports directly to
the Chair of the ARMC. The Internal Audit
Charter defines the objectives, scope,
independence, responsibilities and authority.
Internal Audit is independent from the
activities and operations it audits and has
unrestricted access to Spark’s records and
employees.
Internal Audit regularly performs audits
across Spark. It works to an annual Risk,
Internal Audit and Fraud Plan that outlines the
risk themes, objectives and key results over
the plan year. The ARMC approves this plan
and ensures that the Internal Audit is
appropriately staffed and that its scope of
work is appropriate for the key risks facing
Spark. Priorities for the next meeting are
approved following consultation with the
ARMC and other relevant stakeholders
e.g., Leadership Squad members.
Principle 7:
Spark New Zealand Annual Corporate Governance Statement 2021
9
Principle 8:
Shareholder Rights
and Relations
“The board should respect the
rights of shareholders and foster
constructive relationships with
shareholders that encourage
them to engage with the issuer.”
Shareholder Communications
and Disclosure
Spark is committed to promoting a fair,
orderly and transparent market through
comprehensive continuous disclosure and
ensuring shareholders are able to exercise
their rights in an informed manner.
Spark’s Disclosure Policy and associated
procedures governs communications with
shareholders and other stakeholders. All
material information is lodged promptly
and without delay with the relevant stock
exchanges. Once lodged the information
will also be published on Spark’s website,
with further dissemination through broadcast
emails to news agencies and other market
commentators where appropriate. Spark
may make available on its website any
other relevant information made available to
investors/analysts (e.g. presentation materials).
Spark provides shareholders with the option
to receive communications from, and send
communications to, Spark electronically.
Spark is committed to maintaining multiple
channels of shareholder communications
and engagement, which currently includes:
1. Semi-annual earnings announcements
via audio conference;
2. Semi-annual post-results briefings with
investors in New Zealand and Australia;
3. Regular ad hoc one-on-one and group
investor and analyst meetings;
4. An Annual Meeting with virtual
participation via webcast and audio;
5. An annual report and corporate
governance statement;
6. Semi-annual shareholder newsletters;
7. Investor briefing days (where
appropriate); and
8. Regular investor roadshows.
As a result of COVID-19 and ongoing travel
restrictions, the Investor Relations programme
has been adapted with engagement between
Spark and international investors being
held virtually. Spark remains committed to
maintaining its investment profile in key
investment markets in the US, UK, Asia and
Australasia to ensure that its strategies and
opportunities are understood and the market
is fully informed.
Spark’s Investor Website
Spark’s website is an important avenue of
communication with shareholders and other
stakeholders. Spark maintains a dedicated
investor website (investors.sparknz.co.nz)
which contains market releases, financial
information, current and past annual reports,
investor presentations and webcasts,
dividend and share price histories, notices
of meeting, biographies of Spark directors
and Leadership Squad, investor contacts,
important calendar dates and other
information about Spark.
Annual Meetings
All Spark shareholders are encouraged
to participate in the annual meeting
including virtually via an online annual
meeting platform or audio conference,
where shareholders can vote, ask questions
and watch the meeting via webcast.
Shareholders can also electronically appoint
and direct proxies to vote on their behalf at
the annual meeting.
The annual meeting webcast will be
archived on the Spark investor website
after the meeting.
The annual shareholders’ notice of meeting is
posted on Spark’s website as soon as possible.
Spark is committed to ensuring that each
shareholder who invests in Spark has the right
to vote on major decisions that may change
the nature of the Company. All of Spark’s
shareholders have the right to one vote per
share and voting at the annual meeting is
conducted by poll.
Spark New Zealand Annual Corporate Governance Statement 2021
10
ARMC
Audit and Risk Management Committee
HRCC
Human Resources and Compensation Committee
LTI
Long-Term Incentive Scheme, which is part of Spark
Leadership Squad and CEO remuneration
NOMs
Nominations and Corporate Governance Committee
NZ GAAP
Generally Accepted Accounting Practice in
New Zealand
NZ IFRS
New Zealand equivalents to International Financial
Reporting Standards
Spark
Spark New Zealand Limited
STI
Short-Term Incentive Scheme, which is part of Spark
Leadership Squad and CEO remuneration
There are terms used in this document that
may be unfamiliar these are what each mean:
Glossary
---
STATEMENT ON
MODERN SLAVERY
Spark New Zealand Statement on Modern Slavery 2021
2
This modern slavery statement is made on behalf of Spark New
Zealand Limited (“Spark” and together with its subsidiaries, the
“Spark Group”) for the period from 1 July 2020 to 30 June 2021.
It has been prepared pursuant to the requirements of the Australian
Modern Slavery Act 2018.
This report was approved by the Spark New Zealand Board on
17 August 2021.
Justine Smyth, CNZM
Chair
Spark New Zealand Limited (NZX: SPK, ASX: SPK)
Spark is committed to upholding human rights – both within our own
operations and throughout our supply chain. This means the fair and
respectful treatment of all our people, and a focus on providing
fulfilling and rewarding employment. It means complying fully with
the law, but also going above and beyond compliance – acting
professionally, ethically, and responsibly as we deliver customer
outcomes, contribute to the community, and create shareholder
value. It means sourcing our products and services from suppliers
that provide safe working conditions, treat workers with respect and
dignity and conduct business in an environmentally and socially
responsible manner.
We are committed to taking meaningful action to identify, mitigate
and manage any modern slavery risks – and to continuously
improving our approach.
2
Modern Slavery Act
Statement 2021
Contents
Our business 3
Our operations 4
Our people 5
Our supply chain 7
Effectiveness of Spark’s
approach 9
Spark New Zealand Statement on Modern Slavery 2021
3
The Spark Group
Spark New Zealand Limited is the parent
entity of the Spark Group. Spark is publicly
listed, and our issued shares are quoted on
the New Zealand Stock Exchange (NZX) and
Australian Securities Exchange (ASX).
Spark is a reporting entity for the purposes of
the Modern Slavery Act 2018. Spark
engaged and consulted with the relevant
companies we own or control (the Spark
Group) in the development of this statement.
As at 30 June 2021 the Spark Group
comprised 29 controlled entities.
Spark New Zealand Trading Limited is the
main trading entity within the Spark Group
and is the parent company of many of Spark’s
operating subsidiaries.
Spark Finance Limited is the finance company
for the Spark Group and raises debt funding
in New Zealand and Internationally. The
majority of these funds are then advanced to
other members of the Spark Group in order
to assist in funding the group’s operations.
Spark Finance is listed on the NZDX as SPF.
More information on significant subsidiaries
and controlled entities in the Spark Group as
at 30 June 2021 (including ownership
percentages and principal activity
information) is available in the Spark Annual
Report on pages 103 & 117.
More information on our financial
performance and business strategy may be
found on our corporate website at
investors.sparknz.co.nz/Investor-Centre
Corporate governance and
risk management
Our approach to managing modern slavery
risks is supported by our high standards of
operational performance, corporate
governance, and risk management.
The Board regularly reviews and assesses
Spark’s governance structures and processes
to ensure that they are consistent with
international best practice, in both form and
substance. Spark corporate policies apply at a
group level and our governance structures
ensure the Spark Group of entities adhere to
expected standards of conduct. Copies of,
and details about, Spark’s corporate
governance policies, practices and processes
can be found on our website at:
www.sparknz.co.nz/about/governance
Our managing risk policy and framework
helps people to manage uncertainty and
challenges as they pursue Spark’s strategy
and business objectives. The policy, overseen
by the Audit and Risk Management
Committee (ARMC), confirms the objectives
for identifying and managing risks that can
impact Spark’s organisational performance.
The policy and framework are benchmarked
to COSO ERM 2017 (COSO), a leading
practice risk management standard. Spark has
used this standard since July 2018 when we
transitioned to the Agile Operating Model.
For more information on our risk
management processes, see the Spark
Annual Report 2021, pages 52 to 54.
Spark’s purpose is to help all of
New Zealand win big in a digital
world. We are New Zealand’s
largest telecommunications and
digital services provider. Our
customers range from consumers
and households to large
enterprises, and our services
include mobile and broadband
connectivity, cloud connectivity
and IT services.
Spark New Zealand
Limited
Spark Finance
Limited
Spark New Zealand
Trading Limited
Spark New Zealand Trading
Entities (12)
Spark Group
Entities (15)
Our corporate structure
Our businesses
Spark New Zealand Statement on Modern Slavery 2021
4
Through the Spark, Skinny and BigPipe
brands we provide mobile and broadband
connectivity, digital services and devices,
to consumers and households, and to some
small businesses.
Through our Spark, CCL, Digital Island,
Qrious and Leaven Brands we provide a
range of digital services to
business customers, from small to medium-
sized enterprises through to government
departments and large enterprises. These
include cloud connectivity, IT services, data
analytics and data-powered marketing,
cyber security, procurement and business
transformation services. Our Telegistics
business assists our channel partners
across New Zealand with supply chain
and distribution solutions.
Spark owns a 50% shareholding in a network
construction business Connect 8. For the
purposes of this report, Connect 8 is treated
as a supplier of network construction services
to Spark, and has signed up to our Supplier
Code of Conduct (see below).
Through our Wholesale business we
resell telecommunications services within
New Zealand and provide International
Mobile Roaming connectivity to the
customers of offshore telecommunications
carriers. We have relationships with more
than 370 of these carriers globally.
We are building businesses in emerging
growth areas: we have a nationwide
Internet of Things (IoT) network and
platforms; through Spark Health we deliver
a tailored suite of telco and IT services for
the health sector and are developing a
Digital Health Platform; and we have a
sports streaming and production service,
Spark Sport. Our emerging technology
business Mattr creates solutions for
verifiable data and digital trust.
The Spark Foundation is the charitable arm
of Spark and has a mission to ensure no
New Zealander is left behind in a digital
world. It seeks to achieve this by
accelerating equitable access and
capabilities through giving, advocacy
and targeted investment opportunities.
How we mitigate modern slavery risks in
our operations
Our approach to corporate governance,
as outlined above, alongside our values,
Code of Ethics, Supplier Code of Conduct,
and Whistleblowing procedures (all detailed
below) assist us to mitigate the risks of
modern slavery in our operations. We strive
for a culture where Spark people are
committed to doing the right thing, to using
company policies (such as the Code of Ethics)
to help inform and determine what the right
thing is, and to feel safe raising the alarm if
they have concerns.
In addition, we have checks and balances in
place in specific areas. For example, our
wholesale business checks all requests for
roaming relationships against the UN, US, UK
and NZ MFAT sanctions lists and regularly
monitor these for changes. It also checks and
monitors the ownership of all new and
existing carrier partners – and will turn down
requests for roaming agreements where we
believe it is appropriate to do so.
Our operations
Spark provides a broad range
of telecommunications and
digital services.
Spark New Zealand Statement on Modern Slavery 2021
5
Our direct workforce
As at 30 June 2021, Spark directly employed
5,083 people, with more than 99% of these
people located in New Zealand.
We employ people with a broad range of
skillsets, ranging from customer service to
engineering to professional services.
Spark meets all the requirements of New
Zealand employment law for our NZ-based
direct workforce, and in many cases goes
above and beyond statutory requirements.
Our Hiring People Policy ensures that “right to
work” checks are undertaken, and work
cannot commence without valid
documentation. Our remuneration framework
and practices in most cases ensures that all
employees are paid rates above the
minimum wage, with governance provided
by our Human Resources and Compensation
Committee.
Spark has a diverse workforce and has a
strong diversity and inclusion programme
to ensure our people feel valued, respected,
and confident to bring their whole selves to
work. We use an open employee feedback
tool which enables our people to share their
views and ideas, and other internal
communication tools to ensure openness and
transparency regarding the way we work.
Spark people undertake compliance training
on a range of topics including (but not limited
to) our Code of Ethics, health and safety,
security and privacy, and our policies around
discrimination, bullying, diversity and
inclusion and harassment.
Spark employs interns across our business in
a range of areas. We have a general policy of
paying our interns at least the minimum wage
(rather than requiring them to give their time
for free), and we ensure they are given
meaningful career opportunities. Around one
in five of these interns are engaged through
programmes such as the First Foundation as
part of our focus on diversity and inclusion.
These interns are supported with
scholarships, work experience and
mentoring. Occasionally we have people that
volunteer their time in order to gain work
experience or knowledge in a particular area
– for example our Agile transformation. These
are short-term arrangements and we will
continue to monitor this practice to ensure it
is always beneficial for the volunteer.
Our indirect workforce
We have an indirect workforce of almost
3,000 with the majority of these located in
New Zealand and approximately 500 people
located offshore. We recognise our indirect
workforce could potentially face higher risks
of modern slavery than those employed
directly by Spark, and we have checks and
balances in place to mitigate this.
Our indirect workforce in New Zealand is a
diverse mix of agency contractors,
consultancy firms, independent contractors,
and people employed by our Business Hubs
- which operate under a licencing model. It
includes people such as cleaners and security
staff who work in Spark buildings.
Our New Zealand-based indirect employees
are all protected by New Zealand labour laws
and are governed by a range of different
contractual arrangements depending on the
type of work they do and where we have
engaged them. Our independent contractors
and agency staff who contract directly to
Spark are all engaged in accordance with our
own employment hiring process in terms of
proof of right to work and rates of pay.
Of our people located offshore, the majority
are in Manilla, where we contract with an
offshore partner to run customer care centres
to service our customer base in New Zealand.
We require our partner in Manilla to make
formal commitments around its mitigation of
modern slavery risk. Our partner has
confirmed that it adheres to fair pay practices,
including paying employees for all time
worked, and that all its employees,
contractors and suppliers must comply fully
with its Equal Employment Opportunity Policy
and applicable employment laws. We also
outsource some IT Services work to contract
staff at two different IT services businesses,
both headquartered in India. The number of
contractors from these businesses who are
Our people
1 See http://www.firstfoundation.org.nz/ for more information.
Spark New Zealand Statement on Modern Slavery 2021
6
working with Spark fluctuates depending on
the work required, but at 30 June 2021 it was
a little over 100 people, with around two
thirds based in New Zealand and a third
offshore in India or Australia. Both
organisations have signed up to our Supplier
Code of Conduct.
Our retail network
We operate 65 retail stores and 24 Business
Hubs (providing connectivity and digital
solutions to small-to-medium enterprises) –
and these are located throughout
New Zealand. We also have dealership
arrangements with major retail chains across
New Zealand to sell Spark products and
services.
Spark owns all of its retail stores, and all the
people working in Spark stores have an
employment agreement directly with Spark.
Our Business Hubs are operated by third-
party licensees. In this model we understand
the need to ensure the rights of Hub
employees are upheld, and we do this by
requiring within the licence terms that the
terms of employment between the licensee
and the staff member must “comply with all
statutory and legal requirements”. We have
recently revised the licence agreement, under
which licensees must now offer employment
on terms substantially consistent with a
template agreement provided by Spark
(being a fit-for purpose agreement that meets
minimum legal requirements).
Our Values and Code of Ethics
Our values are the cornerstones of our
culture. Our four values are:
• Tūhono: we connect
• Māia: we are bold
• Whakamana: we empower
• Matomato: we succeed together
Our Code of Ethics sets the standards we
expect of our people when it comes to how
they do business. Included in the document
are the behaviours expected of Spark people,
which include the expectation they will:
• Undertake their duties in accordance with
Spark New Zealand’s values;
• Conduct themselves in a way that
demonstrates that their honesty and
integrity is beyond question;
• Conduct themselves in a professional
manner that upholds and strengthens the
image and reputation of Spark New
Zealand;
• Deal fairly and honestly with Spark New
Zealand’s people, professional advisors,
customers, and suppliers;
• Not enter into transactions or make
promises on behalf of Spark New Zealand
that we are unable or do not intend to
honour;
• Undertake their duties with care and
diligence;
• Value individuals’ differences and treat
people with respect in accordance with
Spark New Zealand’s Equal Employment
Opportunities and Anti-Harassment and
Discrimination Policies.
The full Code of Ethics may be found here:
www.sparknz.co.nz/about/governance
Grievance mechanisms
We have a range of avenues for our people
to pursue if they are concerned about Spark
or people within Spark not living up to our
values or our Code of Ethics – including any
instances where our business or our people
are instigating or allowing modern slavery
practices. These are set out in detail for Spark
people in our whistleblowing process, which
is documented and available to all Spark
people. We encourage the reporting of any
concerns our people have about compliance
issues or serious wrongdoings. Anyone who
is not comfortable reporting an issue to their
people leader can use Spark’s Honesty Box
process, an online reporting tool that enables
investigation of any concerns raised by
specialist staff while maintaining the
confidentiality of the reporter. We also
provide avenues where people can raise
concerns without providing any information
about their identity at all.
Spark works with submitters to ensure they
do not suffer any adverse treatment as a
result of any reports made in good faith.
Our people (cont.)
Spark New Zealand Statement on Modern Slavery 2021
7
About our supply chain
Our business relies on more than 2,300 local
and global suppliers. Each year we spend
around $2 billion to support our business and
meet our customers’ needs. Our supply chain
is complex, as our direct suppliers often have
suppliers of their own – who themselves rely
on other suppliers and so on.
Through our supply chain we source a large
number of products and services from
New Zealand and around the globe. Of our
total spend, around 90% is with our top 100
suppliers – and for this reason, in this report
we have chosen to focus on data for those top
100 suppliers.
Around 65% of our spend with these top 100
suppliers is with suppliers offshore and 35%
with NZ-based suppliers. Approximately 6%
of this spend is with suppliers based in
countries identified as having higher-risk of
non-compliance with human rights or
modern slavery requirements
2
, and around
2% with suppliers in medium-risk countries.
However, we recognise the need to go
beyond the location of a supplier’s head
office when it comes to mitigating the risks of
modern slavery, because the manufacture of
many of our products will be in a different
location to the supplier’s head office. The
global nature of our supply chain means we
must constantly monitor and review our
approach to reduce the risks of modern
slavery (as further outlined below in
“Effectiveness of Spark’s Approach”), and we
require our suppliers to be accountable for
their own supply chain’s compliance with
modern slavery requirements. This sub tier
accountability is integrated into our Supplier
Code of Conduct (see below).
Most of our electronics and network
components spend is with large,
multinational companies who supply us with
finished products. We do not manufacture
our own products. Instead, we work with
original design manufacturers (ODM) to
produce Spark-branded devices. The goods
we procure are manufactured across the
world. Source locations include USA, China,
South Korea, United Kingdom, and Sweden.
The services we procure are predominantly
provided in New Zealand, Australia, India and
the Philippines.
Spark’s biggest categories of spend include:
• The purchase of equipment and services
for our customers (primarily business
customers) either when Spark is acting as
a reseller or a provider of managed
services. This includes items such as
mobile devices, IT equipment services
and support;
• Goods and services sold to Spark for the
purposes of maintaining and providing
telecommunication networks; and
• Goods and services sold to Spark to
enable our IT environment.
The remainder is spent on a range of services
such as marketing, corporate services,
content rights, electricity, travel, freight and
courier, office supplies, and leasing.
Managing modern slavery risks in our
supply chain
Spark is committed to sourcing our products
and services from suppliers that provide safe
working conditions, treat workers with respect
and dignity and conduct business in an
environmentally and socially responsible
manner. Our Supplier Code of Conduct (the
Code) sets out the minimum standards we
expect from our suppliers across labour and
human rights, health and safety,
environmental sustainability, and ethical
business practices.
Section 3.1 of the Code sets out our
approach to Labour and Human Rights. This
requires that our suppliers ensure workers are
treated in a manner consistent with
international human rights standards,
including the UN Universal Declaration of
Human Rights, UN Convention on the Rights
of the Child, and the International Labour
Organisation Core Conventions.
2 High risk countries as defined by guidance in the United Nations Environment Programme Finance Initiative.
This was cross-checked with other more recent data sources to ensure we’ve identified the most important
geographies.
Our supply chain
Spark New Zealand Statement on Modern Slavery 2021
8
See www.sparknz.co.nz/suppliers for
more detail.
The Supplier Code of Conduct was
introduced in FY18. To embed the Code, we
worked with our top 100 suppliers by
contract value to ensure they were signed up
to the Code or could demonstrate they are
adhering to an existing equivalent code of
practice. We also used the Code as a basis for
four comprehensive paper-based audits of
large, offshore-based suppliers. These were
significant suppliers operating in high-risk
locations. The assessments, which were
validated through evidence provided and
assertions by Supplier Management, showed
all four suppliers were adhering with the
Code.
We require all new suppliers to sign up to the
Code as part of their onboarding process and
have this process integrated into our
procurement systems and processes. We do
have a small number of legacy or non-
standard processes which do not yet require
a supplier to sign the Code, and we will be
working to remove and/or update those early
in FY22. After this time, signing up to the
Code will be fully integrated into our
procurement processes across all spend
categories.
In FY21 the only suppliers who did not sign
up to Spark’s Code were either global
suppliers that have their own code of conduct
which Spark deemed equivalent to the Spark
Code, or suppliers deemed low risk based on
the services provided and the nature of the
supplier – for example if the business is
subscribing to a piece of software for a short
period of time and there is no request for
proposal (RFP) process involved in
selecting it.
If we become aware that a supplier is
unable to meet the requirements of the
Code, we work with them to implement our
process of remediation plans and timeframes.
We have ongoing conversations with
suppliers that are managed in our framework.
Our Code enables us to suspend or cancel
a non-compliant supplier’s supply of any
goods or services to Spark, including
suspending the payment of any associated
invoices, until that non-compliance is
remedied to Spark’s satisfaction. It also
enables us to terminate any or all of the
supplier’s contracts with Spark.
We incorporate environmental, social and
ethical considerations into our supplier
selection processes, including using a scored
section in our RFP process where we seek
information from suppliers on their non-
financial performance and credentials. While
our initial focus for our Supplier Code of
Conduct audits and checks has been on our
top 100 suppliers, we are conscious there
may be suppliers who do not sit in this
category who also bring risks of modern
slavery due to the nature of their business –
for example, those that employ migrant
labour. In the coming financial year, we will
investigate how we can more effectively
monitor and mitigate any modern slavery
risks within this part of our supply chain.
In FY21 we recommenced our auditing of
suppliers against the Supplier Code of
Conduct. At the start of FY22 we completed
audits of a further four suppliers across a
range of product categories.
Our Supplier Code of Conduct is
underpinned by our Spark Value
Management Policy, which sets out detailed
guidelines for Spark people who are
engaging suppliers – including the
requirement to source and procure goods
and services ethically and responsibly. We
also require suppliers to sign up to Spark’s
Supplier Health and Safety Policy.
Our supply chain (cont.)
Spark New Zealand Statement on Modern Slavery 2021
9
We have an established operating model to
monitor achievements against our objectives.
This includes strong risk and issues
management, along with processes to ensure
we adapt and respond to planned and
unplanned challenges where necessary. We
are focused on maintaining and enhancing
awareness of modern slavery risks across
Spark and its supply chain, and have people
and processes align to deliver this.
We are a values and purpose-driven business,
with a strategic focus on building a diverse
and inclusive culture, a track record of strong
corporate governance, and a Code of Ethics
and a Supplier Code of Conduct – both of
which are deeply embedded in our relevant
business systems and processes. These are all
underpinned by a culture that encourages
our people to speak up if they are
uncomfortable or concerned about anything
they see.
As a publicly listed, consumer-facing and
high-profile (within New Zealand) business,
we are subject to a healthy level of scrutiny
from our stakeholders. Our shares are held by
a geographically diverse shareholder base
who hold us to account on issues of
sustainability and social responsibility.
Sustainability is a key pillar of our business
strategy, and we have been continuously
improving and expanding our disclosure on
our non-financial performance in the past few
years. Our Annual Report for FY21 was
prepared in accordance with the International
<IR> Framework and the GRI Core Option,
and we have worked to continuously improve
our compliance with both frameworks over
the past three financial years.
We are a New Zealand-based company with
the vast majority of our operations, people
and customers located in New Zealand and
subject to New Zealand’s strong labour,
employment, and anti-corruption legislation.
This means we have a lower risk of modern
slavery in our operations than we would
otherwise, but we cannot be complacent.
There have been recent instances of modern
slavery in New Zealand and we recognise the
need to raise awareness of slavery risks
amongst our people, many of whom may
assume “that doesn’t happen here”.
To fully assess our effectiveness in this area,
we will need to benchmark ourselves against
other, similar organisations and evaluate our
strengths and weaknesses. We will be doing
further evaluation of our approach, and will
identify actions for improvement, in FY22.
This will include engagement with relevant
companies we own or control to ensure
identification of risk and alignment with the
Spark Group approach.
As first steps we intend to back up our
Supplier Code of Conduct with regular audits
of our direct suppliers, to ensure we are
assessing for modern slavery risks effectively.
As outlined in the “Our Supply Chain” section
of this statement, we initiated four further
audits of suppliers against the Code in FY21.
These were completed at the start of FY22.
We also recognise that while our Supplier
Code requires our suppliers to provide
assurance there are no instances of modern
slavery in their own supply chains, best
practice is to identify modern slavery risks
beyond our immediate supplier relationships.
We will be investigating possible avenues for
assessing risk in this sub tier in FY22.
Effectiveness of Spark’s approach
Spark is committed to identifying,
monitoring, and measuring the
risks of modern slavery in our
operations and supply chain.
spark.co.nz
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.