Market Release
21 August 2015

SPARK NEW ZEALAND FY15 RESULTS

Solid execution of strategy and a greater focus on
customers leads to a return to sustainable EBITDA growth
Dividends increasing on the back of growing confidence
Spark New Zealand Chairman Mark Verbiest said the results for the financial year ended 30
June 2015 reflect years of hard work and confirm that the company is on track to deliver the
Spark New Zealand turnaround story.
“A clear strategy with solid execution and a greater focus on customers has seen Spark
New Zealand continue to gain customer numbers and return to sustainable EBITDA and free
cash flow growth.
“We are generating positive market momentum, especially in mobile, despite a highly
competitive market. We have strengthened our portfolio of digital services and related
capabilities, reshaped our IT systems around our customers, invested in network leadership,
and successfully focused on costs and capital management.
“The bold decision to rebrand as Spark New Zealand continues to be vindicated with the
core Spark brands performing well, appealing to a broader customer base and registering
big improvements in brand preference measures.
“Particularly pleasing is the significant underlying improvement in free cash flow which
emerged in the second half of the year, demonstrating that the repositioning of the business
is leading to better financial outcomes. This has provided the Board with the confidence to
increase the dividend payment to shareholders from 17 cents per share in FY14 to 20 cents
per share in FY15.
“The financial results support the Board’s view that a return to long-term, sustainable growth
in free cash flow, revenue and earnings over the coming years is both realistic and
achievable. As such, for FY16, Spark New Zealand anticipates paying an annual dividend of
22 cents per share and a special dividend of 3 cents per share as a means of returning
excess capital, subject to there being no material adverse changes in operating outlook.”
Key Financial Results
Operating revenues and other gains from continuing operations were down 2.9%, to $3,531
million, with growth in mobile and IT services revenues being moderated by the ongoing
decline in calling and access revenue.

Spark New Zealand Limited ARBN 050 611 277
Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand

 Earnings before interest, income tax expense, depreciation and amortisation (EBITDA) from
continuing operations were up 2.8% for the full year.
Spark New Zealand’s net earnings after tax from continuing operations for FY15 were $375
million, up 16.1%. Net earnings including discontinued operations were down 18.5%
compared to FY14, noting that financial year result included a gain on the sale of AAPT.
Mobile connections continued to grow, up 172,000 in the 12 months to 30 June 2015. We
have closed the connection number gap on our largest competitor, Vodafone, to just over
150,000, having been around 600,000 behind them just three years ago.
Total mobile revenue share grew by 2% to 41% driven by excellent growth in consumer
revenue, however the market remains very competitive, especially in the business market.
Broadband revenues returned to modest growth in FY15, driven by a focus on higher value
plans. Broadband connections increased 1.6% despite intense competition, particularly at
the entry-level end of the market.
IT services revenue rose 5.5%, underpinned by our investment in Cloud computing services
through Revera and Appserv, and in data centre infrastructure, including new and expanded
facilities in main centres.
Ongoing tight management of operating costs saw expenses from continuing operations
reduce 5.0% to $2,566 million. The Turnaround Programme was completed at the end of
June 2015, delivering significant improvement in sustainable free cash flow. The principles of
the programme have now been embedded into each part of the business.
Key Operational Results
Managing Director Simon Moutter said that the first phase of the Spark New Zealand
strategy that commenced in 2013 is now complete.
“We have now stabilised and reset the business to reflect the fast-changing and increasingly
digital world in which Spark New Zealand and our customers live.
“During that time we have reduced prices, cut costs, simplified products, overhauled IT
platforms, rebuilt networks, established a new fast and competitive organisational culture
and started winning in the market. We’ve also sold businesses that were no longer going to
be part of Spark New Zealand’s future, and invested in the new core Spark brands, together
with brands and new businesses like Skinny, Bigpipe, Revera, Qrious, Lightbox and
Morepork.
“The extent of the change the organisation has experienced over the last two years is
profound. Customers are sensing the shift and responding positively with improved brand
metrics and reputation measures across key customer segments.
“We’ve had sustained revenue and earnings growth in the Spark Home, Mobile & Business
business unit for three halves now, driven by an excellent performance in the market.
“While the FY15 results for the Spark Digital business unit reflect the impact of market
pressures, we have now finished repositioning the business model, and we’re focused on
closing high-quality sales and operating efficiency with a view to stabilising Spark Digital
earnings in FY16.
“Investment in digital service growth options has continued, with Lightbox surpassing its first
subscriber target, Qrious gaining a firm position in the emerging data analytics market, Cloud
IT growing strongly and Morepork Smart Living beta-launched. Our end-to-end Cloud
Spark New Zealand Limited ARBN 050 611 277
Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand

 computing capabilities have continued to expand with both Revera and Appserv exceeding
performance expectations and attracting a significant number of new business customers.
“We believe our combined data network is second to none in New Zealand. This includes the
quality and national reach of our 4G mobile network, our optical transport core network and
our nationwide broadband and WiFi networks. We have accelerated our rollout of 4G mobile
broadband services using the 700MHz spectrum to make the most of owning more spectrum
in this band range than any other provider.
“Release 2 of the re-engineered IT systems has been delivered and our centralised
Turnaround Programme to drive process and cost improvements has been completed,
laying the foundation for future operational efficiency gains.
“All up, Spark New Zealand is in the best shape it’s been in for many years. We’re now
shifting to the next phase of our strategy with even greater emphasis on digital self-service
capability and leveraging our outstanding networks to create truly great customer
experiences, and in turn generate sustainable margin and revenue growth.
“This is one of the key drivers behind our newly launched Digital First Programme. Digital
First is the next step in transforming Spark New Zealand into a smarter, more agile, more
efficient company, with great digital customer experiences at its heart.”
Mr Verbiest said, “The Board would like to acknowledge the people of Spark New Zealand.
They have taken on the challenge of transforming this iconic New Zealand business and
making a difference, and they have made massive strides towards that ambition.
“We are excited by the opportunity to build on the momentum created from the platform the
Spark New Zealand team has developed over the past two years. We recognise the
important and privileged role we have in helping New Zealanders and New Zealand
businesses achieve their aspirations. We are determined to make a meaningful and
sustainable contribution to New Zealand’s digital future.”
-ENDS-

For media queries, please contact:
Richard Llewellyn
Head of Corporate Communications +64 (0) 27 523 2362
For investor relations queries, please contact:
Stefan Knight
General Manager Finance and Business Performance +64 (0) 27 252 9438

Spark New Zealand Limited ARBN 050 611 277
Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand

 FY15 Financial
Results
Simon Moutter
Managing Director

Jolie Hodson
Chief Financial Officer
sparknz.co.nz

Spark New Zealand Annual Results 2015

Investor Presentation

 Spark New Zealand 2015

FY15 Highlights
• Clear strategy with solid execution and a greater focus on customers leading to a return to
EBITDA growth in a challenging market
• Brands continuing to perform strongly with improvements in preference measures and Net
Promoter Score (NPS) scores across all segments
• Winning in the mobile markets with 2% growth in mobile revenue share and excellent
connection gains
• Sustained revenue and earnings growth in Home, Mobile & Business for 3 halves

• Finished repositioning Spark Digital’s business model, now focused on closing high-quality
sales, operating efficiency and a return of the business unit to earnings stability in FY16
• Investing in digital service growth options, with Lightbox reaching first target, Qrious wellpositioned, Cloud IT growing strongly and Morepork Smart Living beta-launched
• Release two of the re-engineered IT systems delivered and Turnaround Programme
completed laying the foundation for future operational efficiency gains
• Successful divestment of three non-core legacy businesses generating $169 million of cash
flow and enabling commencement of $100m on-market share buyback
• Dividends increased on the back of a good second half performance, growing confidence in
earnings outlook and a step-change in forward cash generation
Page 2

 Spark New Zealand 2015

Results scorecard
Key financials
FY15

Revenue
Growth

EBITDA
Growth (3)

DPS

(2.9%)

2.8%

20 cps

Product revenue
H2

(3.2%)

8.7%

11 cps

Market share and connections
FY15

Mobile
Revenue
Growth

Broadband
Revenue
Growth
IT services
Revenue
Growth

H2
Mobile share
(revenue)

4.4%

6.4%

Mobile Customers

Broadband share
(connections)
0.6%

5.5%

0.6%

4.2%

Broadband
customers
IT services share
(revenue)

30 June
2015

Change

41% (1)

2% (2)

2,178k

8.6%

46% (1)

(1%)

680k

1.6%

14.5% (1)

0% (2)

(1)

Market share estimate
Percentage Point estimate vs June 2014
(3) H1 FY15 includes re-brand costs, while H2 FY15 includes $32m gain on sale from divestments

(2)

(2)

Page 3

 Spark New Zealand 2015

Strategy shifting into next phase
FY14 & FY15: Stabilised
revenue/margin and reduced costs:
•
•
•
•
•
•
•
•
•
•

Reduced prices to compete
Refocused on NZ market
Rebranded as Spark New Zealand
Divested non-core assets
Completed Turnaround Programme
Reduced costs for financial stability
Invested in new growth areas and
brands
Expanded and upgraded data
networks
Re-engineered IT systems
Built new organisational culture

FY16 & beyond: Drive market
revenue/margin growth with continuing
improvement in unit costs:
•
•

•
•
•

•

Invest in market-leading digital products
and services
Digital First Programme to lead the
market on digital customer experiences
Drive revenue growth through brand
preference
Shift focus from acquisition to monetising
demand
Continue evolving leading data networks
and digital platforms
Maintain disciplined management to
reduce unit costs

Page 4

 Spark New Zealand 2015

Executional discipline maintained
Announced
intention to reprice following
draft FPP

Launched Naked
VDSL and ADSL
Naked Ultra
Fibre released to
market

Jul

Expanded
Huawei
partnership

Sep

Oct

Aug

Rebranded
from
Telecom to
Spark New
Zealand

Lightbox
launched

Takanini Data
Centre opened

Connect
8 JV
formed

Mobile
SRAN
roll out
started

Nov

Voice over
fibre
launched

Telecom
Cook
Islands
divested

Jan

Dec

TGA cable
investment
confirmed

Mar

Feb

May

Apr

Telecom
Rentals and
Int. Voice
businesses
divested

4G network
lead
established

JV between
Coliseum and
Lightbox Sport
announced

Rural
Wireless
Broadband
launched

Digital First
Programme
started

Reengineering
Customer
Release
Two

Spark Digital
Apps
launched

Jun

Turnaround
Programme
completed

Morepork
(smart living)
launched

Page 5

 Spark New Zealand 2015

Brands on the rise
• Decision to rebrand
delivering uplift in brand
preference measures across
wider segments
• Spark New Zealand rising in
reputation indices
• Net promoter scores (NPS)
improved across all key
areas – in HMB up 10 points
for consumers and 13 points
for business
• Increase in foot traffic and
online traffic driving sales
performance
• Multi-brand strategy paying
off with key flanking brands
performing well
Page 6

 Spark New Zealand 2015

Re-engineering & Turnaround contributing
Re-engineering delivering

Turnaround delivered

• Simplified customer systems (CRM and
SingleView)

•

3 year programme executed in 2 years

•

Performance management capability with
owners’ mind-set

•

Cash benefits to enable greater competitive
intensity and investment in Spark Ventures
growth options

•

Incremental cash that has uplifted free cash flow
projections

• Re-usable building blocks and agile architecture
• Improved online capability, bundling capability,
speed to market and business intelligence
• Contact centre cost savings
• Enablement of Digital First Programme

June 2013

Re-engineering programme to be completed by end of FY16

Foundation Capability
Prepaid Mobile

Customer
Release

Consumer
Fibre

Postpaid
Mobile

June 2016

Managed
Fibre
Page 7

 Spark New Zealand 2015

Reported Profit & Loss
FY15
$M

Reported Results
Revenues

FY14
$M

CHANGE
%

3,531

3,638

(2.9%)

2,569

2,702

(4.9%)

EBITDA from continuing operations

962

936

2.8%

Depreciation & amortisation

453

451

0.4%

27

31

(12.9%)

Income tax expense

107

131

(18.3%)

Net earnings from continuing operations

375

323

16.1%

-

137

NM(2)

375

460

(18.5%)

Operating expenses

(1)

Net finance expenses

Net earnings from discontinued operation
Net earnings

(1)

(2)

Includes share of Joint Ventures
NM = Not Meaningful comparison

Page 8

 Spark New Zealand 2015

EBITDA waterfall
Underlying operating EBITDA improving on solid operational performance

Operating

Non-Operating

Investing in
growth options

• Underlying operating
EBITDA improved on
solid operational
performance
• Divestments deliver oneoff gains but are mostly
offset by lower SX
dividends and one-off
rebrand costs
• Operating EBITDA
funding investment in
Spark Ventures’ growth
options

Page 9

 Spark New Zealand 2015

Revenue waterfall
Revenue rate of decline slowing as fixed calling is offset by mobile and IT services growth

REVENUES
FY14 vs FY15

• $52m reduction due to
primary service regulatory
changes (nil impact on
margin)

3,750

(1.5%)
3,700

$M

3,650

3,638

29
52

2

29

• Strong growth in Mobile and
IT Services

70

43

3,586

3,600

27
14

3,550

15

4

3,531

• Broadband revenue stabilised
• Access and calling revenue
decline continues

3,500

FY15

Divestments

Other

SX Dividends

Managed Data

Fixed Calling

Fixed Access

Broadband

IT Services

Mobile

FY14 Rebased

Primary Service

FY14

3,450

• Managed data down due to
competitive pricing pressure
• An increase in net gains on
disposals reflected in Other
revenues

Page 10

Note – Broadband revenues exclude the impact of 1 Feb price increase which have been fully provided against in the financial statements

 Spark New Zealand 2015

Operating Expenses waterfall
Productivity improvements funding growth
• $52m reduction due to
primary service regulatory
changes (nil impact on
margin)

(3.1%)

(1)

• Cost of sales declined as
UBA prices fell
• Labour efficiencies driven by
H1 FY15 re-organisation
offset by growth in IT
Services and insourcing of
Alcatel Lucent network
operations contract
• Productivity benefits
delivered under Turnaround
Programme
• Investment in Rebrand and
Spark Ventures growth
options

(1) Includes

share of Joint Ventures

Page 11

 Spark New Zealand 2015

Spark Home, Mobile & Business
Excellent performance in market flowing to sustained revenue and EBITDA growth

FY15
$M
Revenues

Fixed

(1)

CHANGE
%

1,847
998

H2 FY15
$M

3.0%

935

(2.4%)

497

CHANGE
%

4.7%
(2.0%)

• Revenue and EBITDA growth, with
increasing momentum in H2 FY15
• Excellent performance in Mobile with
revenue up 8.5% and service revenue
up 5.4%
• Post-paid Mobile plan refresh driving
upgrades

807

8.5%

416

11.8%

42

55.6%

22

57.1%

• Broadband revenue growth achieved
in H2 FY15, driven by a focus on
higher value plans, albeit offset by
unprofitable competitive pricing of
lower end plans

Costs (2)

(1,125)

1.4%

(544)

1.5%

• Appserv contributing IT Services
revenue growth

EBITDA

722

5.4%

391

9.5%

• Lightbox now established as a quality
product with engaged customers

Mobile

IT Services & Other

NB: Results include Spark Ventures

(1) Broadband

revenues exclude the impact of 1 Feb price increase
(2) Includes share of Joint Ventures

• Costs reflect Turnaround efficiencies
and impact of change in UBA input
charges, offset by investment in Spark
Ventures’ growth options
Page 12

 Spark New Zealand 2015

Spark Digital
Repositioning work completed, now focused on operational effectiveness and high-quality dealflow to stabilise earnings in FY16
• Impact of repositioning, contract renegotiations and market pressure
FY15
CHANGE
H2 FY15
CHANGE
evident in FY15 result
$M
%
$M
%
1,215

(5.7%)

593

(8.1%)

Fixed

400

(11.3%)

189

(14.9%)

Mobile

200

(9.5%)

93

(12.3%)

IT Services (1)

345

7.8%

180

11.8%

IT Procurement & Other

270

(8.8%)

131

(16.0%)

(841)

(5.4%)

(401)

(8.7%)

374

(6.3%)

192

(6.8%)

Revenues

Costs
EBITDA

• H2 FY15 fixed revenues impacted by
exit of Gen-i Australia

• Business now repositioned to focus on
platform-centric telecommunications and
IT Services growth
• Good growth achieved in core IT
Services revenue, with low margin
procurement revenues falling
• Sales pipeline healthy with large
corporate and enterprise wins
transitioning in over next six months
• Managed data and mobile performance
key to improving revenue trajectory in
FY16
• Major work underway on customer
delivery performance and operating cost

(1)

Excludes IT procurement revenue

Page 13

 Spark New Zealand 2015

Spark Ventures model creating options
Built and now
In market and
returned to Spark generating
core
revenue

In fast start-up
phase

• Spark Ventures
model now proven
• Lessons learnt along
the way
• Digital services
design and agile
development
capability a real
asset for the
company

June 2016

Foundation capability
Prepaid mobile

Customer
release

Consumer
Fibre

Managed
Fibre
Page 14

 Spark New Zealand 2015

Capital Expenditure now at target levels
• Targeting sustainable
long term Capex of
below $400m per
annum

(1)

(1)

•

H2 FY15 Capex of $169m included strategic investments
in Single RAN and Re-engineering

•

FY15 Capex (excl spectrum) to sales ratio of 11.8%

Excludes $35m of Capex relating to AAPT discontinued operations

• Over time capital
investment will be
rebalanced from IT
Re-engineering to
other strategic
programmes that
deliver the best data
network and digital
services capability
• New Digital First
Programme to be
managed within this
envelope

Page 15

 Spark New Zealand 2015

We said our FY15 performance should be measured by:
Measure

Progress

A winning culture which is inspired by customers, performance driven and highly
competitive

Delivered

Spark brands programme driving greater brand differentiation, leadership, cut through
and preference in key markets

Delivered

Successful deployment of 4G using 700 MHz spectrum supporting mobile market
revenue share growth of 1.0 - 1.5pp(1)

Delivered with 2% growth

Broadband revenue market share maintained

Maintained in high value,
declined in low value

High single digit revenue growth from networked ICT (including Cloud)

Delivered

Successful introduction of Lightbox, with 70k paying subscribers by 30 June 2015

Surpassed

Deliver Release two of the re-engineered IT system

Delivered

Complete the Turnaround Programme and embed the methodologies into business as
usual

Delivered

Return to EBITDA and net profit growth

Delivered for continuing
operations

(1)

Percentage Point estimate vs June 2014

Page 16

 Spark New Zealand 2015

Materially increasing shareholder returns
Principles
• Remain committed to conservative capital structure and single ‘A Band’ Credit Rating from S&P
• Preferred method of shareholder distributions is to sustainably grow ordinary dividends over time
in line with earnings growth
• On-market share buybacks and special dividends used as appropriate to reset capital structure
On-market share buyback
• Intention to return proceeds from asset divestments via an on-market share buyback of up to
$100m during 2015 calendar year - 30.6% complete at 30 June 2015
Dividends
• H2 FY15 dividend 11 cps, fully
imputed. FY15 full year dividend 20
cps
• Anticipate FY16 ordinary dividend
of 22 cps and special dividend of 3
cps (subject to no material adverse
change in operating outlook).
Imputation expected to be at least
75%
• FY16 dividend forecast up 25%
• DRP suspended
Page 17

 Spark New Zealand 2015

Bold strategic plan strengthened for next phase
In May 2013 we set out a bold strategy to shift from a traditional fixed and mobile infrastructure
company to a future-oriented, competitive provider of communication, entertainment and IT
services delivered over our networks and the cloud. We’re now shifting to the next phase with
even greater emphasis on customer experience and digital self-service.

Ambition

At Spark New Zealand, our ambition is to be a winning business,
inspired by customers to unleash the potential in all New Zealanders
To be New Zealand’s:

Goals

Strategic
Programmes

Foundation

•

Benchmark for amazing customer experiences

•

No 1 provider of mobility, data and cloud solutions

•

Market leader in digital life and business services

•

Best run and most efficient business
Win Key
Markets

Digital First

Spark
Talent

Customer
Inspired

Spark
Brands

New Zealand’s best data network and digital services capability
Page 18

 Spark New Zealand 2015

Digital First Programme established
Being world class at digital services will allow us to win with our customers, our people and our
shareholders
1

2
Outperform the market
and our competitors

Loyal customers
Deliver innovative,
differentiated and convenient
customer experiences
Deliver them mobile and
digital first focussing on rich
low friction experiences

Customer
experience

Cost
advantage

Move first and fast to a lean and
agile operating model that
Release 2 in H2 FY15
delivers a step change in
competitiveness
Provides single customer

Profitably lead the market on
management system
Attract best talent

both value for money and
innovation

3
Attract &
grow the best
talent

Deliver a creative and open workplace where experimentation is
encouraged and the latest digital methodologies and innovations are
embraced
Attract, retain and grow the best talent in NZ and future proof our business

Page 19

 Spark New Zealand 2015

With a clear plan for each product category
Our approach within each key category
Category

Goal….

Whilst….

Through

Fixed voice, data
and broadband

Optimise margin

Holding market share at
low-end and driving uptake
of high-end plans

A customer inspired
approach, all-of-life provider
and best digital experiences

Mobile

Achieve no.1 in revenue
share – better brand
preference, focus on key
markets and optimised
channels

Shifting focus from
acquisition to monetising
market demand by careful
pricing management and
upselling to higher value
plans

Introducing products that
grow engagement and data
usage such as Lightbox,
Spotify, Morepork, Putti,
Spark Digital apps

IT services

Reset toward platformcentric IT and high growth
segments like Cloud

Improving IT services’
profitability through scalable
standardised offerings, a
lower cost delivery model
and operational leverage

Investing in high growth
segments, including Cloud,
collaboration and security
Focus on developing new
business with existing
customers and partnerships
with global suppliers

New revenue
sources

Build, buy or partner new
options

Using an iterative agile
development process with
test and pivot in-market
approach

Rapid development of new
growth options. Passing
back to the core as they
mature, failing fast if not
successful
Page 20

 Spark New Zealand 2015

Aiming for modest revenue growth
Modest revenue share growth
• Gains in Data (Broadband and
Managed Data)
• Gains in Mobile

Fast-growth segments
•
•
•
•

On-demand video (Lightbox)
Smart Living (Morepork)
Big Data (Qrious)
Cloud and Data Centres (Revera)

Selective M&A
• Consider further bolt-ons
•

Core Mobile & IT Services revenues are already on a growth trajectory with broadband
stabilising and calling and access becoming a smaller part of the overall revenue mix

•

Not intended as earnings guidance
Page 21

(1)

FY15 rebased reflects adjustments for Primary Service and Business Divestments

 Spark New Zealand 2015

Productivity improvements will continue
Driven by technology and digital self-service enabling fundamental business change
•

Investments in networks, Re-engineering and Turnaround have laid the

foundation
•

Re-engineering and the Digital First Programme are a catalyst for ongoing
productivity improvements

•

Significant reduction in fixed cost of sales will be offset by volume driven
growth in Mobile and IT Services

•

Further productivity gains between Spark Connect and Spark Digital

•

Planning for software defined networking and network function
virtualisation (SDN & NFV)

Page 22

 Spark New Zealand 2015

FY16 Guidance
FY15 Actuals

FY16 Guidance

Reported EBITDA (1)

$962m

0-3% growth

Capex (excl spectrum)

$418m

around $380m

20 cps fully imputed

Ordinary Div 22 cps (2)
+Special Div 3 cps
At least 75% imputed

DPS

(2)

(1) EBITDA guidance is relative to FY15 continuing operations and assumes copper
broadband input costs based on IPP pricing to 1 Dec 2015 and then 2nd draft FPP
pricing, with no backdating
(2) Guidance subject to no adverse change in operating outlook

Page 23

 Spark New Zealand 2015

Two years ago, we set out our strategy to transform the company, in two
clear phases:
1. FY14 & FY15: Stabilise revenue/margin and reduce costs
2. FY16 & beyond: Drive market revenue/margin growth with continuing
improvement in unit costs

We’ve executed the first phase of our strategy exactly to plan, and the FY16
outlook confirms we are on track to deliver the Spark New Zealand
turnaround story.
Note that an Investor Day will be held in October 2015 to provide more detail
on the Spark New Zealand strategic roadmap.

 Spark New Zealand 2015

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 management as well as on assumptions made by and
information currently available at the time such statements were made.
These forward-looking statements may be identified by words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘plan’,
‘may’, ‘could’, ‘ambition’ 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 act ual
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, other factors or trends affecting th e
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.

Page 25

 Spark New Zealand 2015

Appendix 1: Regulated input charges
FY14

Prices

Impact

UCLL
UBA

•

•
•

•

(1) Based

From 1 Dec 2015
$26.74 (1)
$11.15 (1)
$37.89 (1)

From 1 Dec 2014
$23.52
$10.92
$34.44

$23.52
$21.46
$44.98

Broadband plan prices
lowered and value
expanded in anticipation
of lower UBA costs

FY16

FY15

Benefited from lower UBA
costs for 7 months
Voice and Broadband
plan prices raised in
February in anticipation of
higher input prices from
1st draft FPP
Commitment to pass
benefit of February price
increases back to
customers if decision to
not backdate is confirmed

on Further Draft FPP determination at 2 July 2015

•

•

Based on 2 July 2015 2nd
draft FPP determination,
UCLL and UBA input
charges will increase
from 1 December 2015,
annualised impact $42
million
Impact will be partially
offset by FY15 price rise

Page 26

 Spark New Zealand
Group result - continuing operations

Adjusted operating revenues and other gains
Adjusted operating expenses
Share of associates' and joint ventures' net (losses)
Adjusted EBITDA
Depreciation and amortisation expense
Net finance expense
Adjusted tax expense
Adjusted net earnings after tax

H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
1,905
1,830
1,847
1,791
1,797
1,734
1,425
1,335
1,395
1,307
1,361
1,205
(3)
480
495
452
484
436
526
228
22
62
168

231
20
62
182

227
17
61
147

224
14
70
176

224
12
53
147

229
15
54
228

EBITDA by business unit
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
EBITDA
Spark Home, Mobile & Business
Spark Digital
Spark Connect
Corporate

348
202
(67)
(3)
480

352
200
(47)
(10)
495

328
193
(64)
(5)
452

357
206
(46)
(33)
484

331
182
(60)
(17)
436

391
192
(53)
(4)
526

1,723
1,459
631

1,815
1,421
649

1,923
1,399
661

2,006
1,374
669

2,114
1,350
674

2,178
1,319
680

Connections
Mobile connections (000)
Local service connections (000)
Broadband connections (000)

 Spark New Zealand
Operating revenues and other gains by business unit
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Operating revenues and other gains
Spark Home, Mobile & Business
Spark Digital
Spark Connect
Corporate
Eliminations

904
663
339
53
(54)
1,905

877
644
312
62
(65)
1,830

901
643
294
67
(58)
1,847

893
645
280
44
(71)
1,791

912
622
267
51
(55)
1,797

935
593
191
70
(55)
1,734

Group operating revenues and other gains by type - continuing operations
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Operating revenues
Fixed revenue
Access
Voice/Calling
Broadband
Managed data
Other fixed revenue

Mobile revenue
Service revenue
Other mobile revenue

IT services
Other operating revenue
Total operating revenues
Other gains
Total adjusted operating revenues and other gains

419
327
177
126
18
1,067

410
285
169
122
14
1,000

399
272
166
117
15
969

394
250
168
118
16
946

378
241
167
110
17
913

334
209
169
98
15
825

360
105
465

364
92
456

366
126
492

369
115
484

367
137
504

376
139
515

269
88
1,889

261
101
1,818

276
102
1,839

285
74
1,789

295
85
1,797

297
65
1,702

16

12

8

2

-

32

1,905

1,830

1,847

1,791

1,797

1,734

 Spark New Zealand
Impact of UBA as primary service and divestments
Included in the above reported operating revenues are the following amounts related to the impact of UBA as a
primary service and the international voice business, TCNZ Cook Islands Limited (which held the Group's 60% share of
Telecom Cook Islands Limited) and Telecom Rentals Limited prior to their divestment. The revenue impact of UBA as a
primary service has an equal offsetting effect on operating expenses.
UBA as Primary Service:
Fixed revenue
Divestments:
Operating revenues
Fixed revenue
IT services
Other operating revenue

H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
47
45
44
43
35
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
63
1
10
74

46
2
9
57

56
1
10
67

41
9
50

57
1
13
71

38
2
2
42

 Spark New Zealand
Financial breakdown by business unit - Spark Home, Mobile & Business
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Adjusted operating revenues and other gains
Fixed
Mobile
IT services
Other operating revenue
Internal revenue

Adjusted operating expenses
Labour
Other operating expenses
Internal expenses

547
340
1
15
1
904

530
334
1
12
877

516
372
1
12
901

507
372
1
13
893

501
391
5
13
2
912

497
416
6
15
1
935

61
478
17
556

53
453
19
525

56
501
16
573

56
462
18
536

62
500
19
581

59
463
18
540

-

-

-

-

-

(4)

348

352

328

357

331

391

Share of associates' and joint ventures' net (losses)
Adjusted EBITDA

Analysis & KPI's - Spark Home, Mobile & Business
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Fixed revenue by type
Access
Voice/Calling
Broadband
Managed data
Other fixed revenue

245
143
149
1
9
547

248
130
142
1
9
530

247
119
141
9
516

247
110
143
7
507

245
103
145
8
501

242
97
150
8
497

Access and Broadband revenues by customer type
Broadband customers
Voice only customers

284
110

288
102

293
95

300
90

302
88

307
85

Local service
Broadband connections (000)
Voice only connections (000)
Total connections (000)

612
337
949

630
303
933

640
273
913

648
246
894

653
232
885

659
211
870

1,615
138
1,753

1,435
131
1,566

1,432
136
1,568

1,429
155
1,584

1,454
137
1,591

1,433
165
1,598

FTE Permanent
FTE Contractors
FTE Total

 Spark New Zealand
Financial breakdown by business unit - Spark Digital
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Adjusted operating revenues and other gains
Fixed
Mobile
IT services
Other operating revenue
Other gains
Internal revenue

Adjusted operating expenses
Labour
Other operating expenses
Internal expenses

Adjusted EBITDA

255
120
266
4
18
663

239
116
257
4
2
26
644

229
115
273
3
3
20
643

222
106
283
1
33
645

211
107
286
3
15
622

189
93
288
2
21
593

146
296
19
461

120
304
20
444

120
310
20
450

113
308
18
439

118
302
20
440

105
280
16
401

202

200

193

206

182

192

Analysis & KPI's - Spark Digital
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Fixed revenue by type
Access
Voice/Calling
Broadband
Managed data
Other fixed revenue

IT services revenue by type
IT services revenue
Procurement revenue

Local service
Total connections (000)
Broadband connections (000)
FTE Permanent
FTE Contractors
FTE Total

56
83
27
88
1
255

52
76
26
85
239

51
71
25
81
1
229

49
67
25
78
3
222

45
64
22
77
3
211

41
60
19
67
2
189

150
116
266

143
114
257

159
114
273

161
122
283

165
121
286

180
108
288

68
19

67
19

72
21

71
21

69
21

67
21

2,280
114
2,394

1,977
89
2,066

1,869
163
2,032

1,852
174
2,026

1,799
126
1,925

1,705
91
1,796

 Spark New Zealand
Financial breakdown by business unit - Spark Connect
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Adjusted operating revenues and other gains
Fixed
Mobile
IT services
Other operating revenue
Other gains
Internal revenue

Adjusted operating expenses
Labour
Other operating expenses
Internal expenses

Share of associates' and joint ventures' net profits
Adjusted EBITDA

265
5
1
47
21
339

231
6
1
43
5
26
312

224
5
1
40
24
294

217
6
1
31
25
280

201
6
3
33
24
267

139
6
1
22
23
191

81
319
6
406

60
295
4
359

70
283
5
358

66
255
5
326

72
249
6
327

62
179
4
245

-

-

-

-

-

1

(67)

(47)

(64)

(46)

(60)

(53)

Analysis & KPI's - Spark Connect
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Fixed revenue by type
Access
Voice/Calling
Broadband
Managed data
Other fixed revenue

Analysis of international transits
International transit revenue
International intercarrier costs
Local service
Total connections (000)
FTE Permanent
FTE Contractors
FTE Total

118
101
1
37
8
265

110
79
1
36
5
231

101
82
36
5
224

98
73
40
6
217

88
74
33
6
201

51
52
31
5
139

71
55

55
43

64
54

48
41

64
56

42
37

442

421

414

409

396

382

2,064
138
2,202

1,825
152
1,977

1,856
119
1,975

1,711
57
1,768

1,870
53
1,923

1,503
41
1,544

 Spark New Zealand
Financial breakdown by business unit - Corporate
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Adjusted operating revenues and other gains
IT services
Other operating revenue
Other gains
Internal revenue

Adjusted operating expenses
Labour
Other operating expenses
Internal expenses

Adjusted EBITDA

1
22
16
14
53

2
42
5
13
62

1
47
5
14
67

29
2
13
44

1
36
14
51

2
26
32
10
70

33
11
12
56

23
27
22
72

20
35
17
72

29
18
30
77

19
39
10
68

21
36
17
74

(3)

(10)

(5)

(33)

(17)

(4)

19

37

43

24

31

22

428
12
440

275
18
293

185
9
194

180
7
187

174
5
179

151
3
154

Analysis & KPI's - Corporate
Southern cross dividends - $m
FTE Permanent
FTE Contractors
FTE Total

 Spark New Zealand
Analysis & KPI's - Mobile (Spark Home, Mobile & Business and Spark Digital)
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
Mobile revenue
Service revenue - $m
Other mobile revenue1 - $m

355
105
460

358
92
450

361
126
487

363
115
478

361
137
498

371
138
509

Average revenue per user (ARPU) - 6 month active
ARPU - $ per month
Post-paid - $ per month
Prepaid - $ per month

33.75
56.43
11.32

33.55
54.84
11.92

32.78
52.79
11.90

30.10
50.08
11.39

29.77
48.56
11.57

28.61
46.94
11.39

Number of mobile connections at period end - 6 month active
Post-paid (000)
Prepaid (000)
Internal post-paid (000)
Total mobile connections2 (000)

863
847
13
1,723

908
895
12
1,815

948
967
8
1,923

979
1,021
6
2,006

1,018
1,092
4
2,114

1,045
1,129
4
2,178

1
2

Other mobile revenue includes handset sales and mobile interconnect.
Mobile connections exclude MVNO connections.

 Spark New Zealand
Group operating expenses summary - continuing operations
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Payments to telecommunications operators
Baseband and access charges
Other intercarrier costs
Broadband cost of sales
Field services

Mobile acquisition, procurement and IT services
Mobile cost of sales
IT services cost of sales

Labour
Other operating expenses
Direct network costs
Computer costs
Accommodation and co-location
Advertising, promotions and communication
Bad debts
Other

Total operating expenses

245
117
121
25
508

236
106
127
14
483

231
111
133
17
492

218
101
138
6
463

205
97
140
11
453

169
73
114
8
364

175
156
331

163
163
326

193
161
354

173
174
347

204
164
368

194
160
354

321

256

266

264

271

247

42
39
51
39
6
88
265

27
35
57
32
8
111
270

44
38
43
44
16
98
283

30
33
46
25
6
93
233

31
37
48
46
7
100
269

18
39
44
32
6
101
240

1,425

1,335

1,395

1,307

1,361

1,205

6,387
402
6,789

5,512
390
5,902

5,342
427
5,769

5,172
393
5,565

5,297
321
5,618

4,792
300
5,092

Group FTE's - continuing operations
FTE Permanent
FTE Contractors
FTE Total

 Spark New Zealand
Group capital expenditure summary
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15
$m
$m
$m
$m
$m
$m
Major programmes
Optical transport network and carrier ethernet
Re-engineering
Mobile network
Takanini data centre

Operating capital expenditure
Southern Cross
Customer growth and retention

Total relating to major programmes and operating expenditure
Mobile spectrum
Total capital expenditure from continuing operations
Discontinued operation - AAPT
Total capital expenditure
Capital expenditure is presented on an accruals basis.

14
8
29
51

19
17
55
91

22
44
89
155

5
31
41
77

6
29
57
61
153

10
43
35
88

11
109
120

105
105

10
101
111

11
105
116

5
91
96

81
81

171

196

266

193

249

169

54

-

-

-

158

-

225

196

266

193

407

169

21

23

27

8

-

-

246

219

293

201

407

169