Spark New Zealand Limited · NZX:SPK
Spark New Zealand — Investor Day (April 2023)
74 slides from Spark New Zealand's investor day presentation, Apr 5, 2023
Slide 1: Empowering the people and businesses creating Aotearoa's tomorrow
Empowering the people and businesses creating Aotearoa’s tomorrow. 5 April 2023
Slide 2: Welcome
NAU MAI HAERE MAI WELCOME
Slide 3: Strategy Overview
Strategy Overview Spark CEO Jolie Hodson, 5 April 2023
Slide 4: We are focused on delivery as we close out the FY21-23 strategy
We are focused on delivery as we close out the FY21-23 strategy With one quarter to go, we are making strong progress towards our goals +33 iNPS for +10pp 70% +25k lift ~31% best cost Sustainable FCF consumer and brand strength employee digital equity EBITDAI margin growth and SME customers1 engagem
Slide 5: We have built competitive advantage through a capability-focused strategy
We have built competitive advantage through a capability-focused strategy Delivering in-year growth while laying strong foundations for future success and growing customer engagement by +9 Simple, intuitive Deep Smart, Growth customer experiences customer insights automated network mindsets o ~350 l
Slide 6: These capabilities have supported our marketplace success
These capabilities have supported our marketplace success Driving growth in both established and future markets Mobile Broadband Cloud Future markets o #1 market share for o #1 market share for o Leading cloud provider3 o Spark IoT connections connections and service connections and from ~250k to 1.
Slide 7: With three months to go we are on track to achieve our financial aspirations
With three months to go we are on track to achieve our financial aspirations Delivering targeted revenue growth and cost efficiencies FY23 aspiration FY23 aspiration Status Revenue1 Cost efficiencies1 Simple intuitive ~$40m-$50m customer experiences Deep customer insights ~$30m-$40m Smart automated
Slide 8: Focused execution has resulted in strong returns for shareholders
Focused execution has resulted in strong returns for shareholders Total shareholder returns of ~12% over the last 3 years, outperforming most international peers 3-year TSR CAGR1 14.7% 11.7% 11.6% 11.2% 7.9% 7.0% 5.8% 4.8% 1.7% 0.7% (0.1%) (0.6%) (6.4%) KT Spark Deutsche Telecom BCE Swisscom Vodafon
Slide 9: These strong foundations provide a platform for growth
These strong foundations provide a platform for growth Spark is well positioned to capitalise on this momentum and take advantage of supportive tailwinds Competitively positioned – simpler, data-driven, high-performing culture Continued momentum in largest market of mobile with high demand for data
Slide 10: Looking ahead, our country is changing – and we need to change with it
Looking ahead, our country is changing – and we need to change with it Population growth provides tailwinds, while changing demographics bring longer term pressures and opportunities In the next 3 years: We expect supporting mobile and broadband immigration connection growth to return1 In the next 1
Slide 11: We see five key trends shaping our operating environment
We see five key trends shaping our operating environment In this environment adaptability is key – leveraging positive tailwinds for growth, while insulating Spark from risk Exponential Technology Network Political volatility Rising bar on growth in data convergence virtualisation and economic susta
Slide 12: This drives a dual focus on resilience and growth
This drives a dual focus on resilience and growth
Slide 13: Our strategy aims to position Spark for success in an uncertain future
Our strategy aims to position Spark for success in an uncertain future Ensuring investment for future growth also reinforces the core and enables optionality o Without differentiation the market will move towards connectivity as a commodity 1 o We see two key avenues to differentiate: 1 Holding cust
Slide 14: This guides a series of 'no regrets' investments for future growth
This guides a series of ‘no regrets’ investments for future growth We will invest in the capabilities we need to protect and promote differentiation, and grow in higher value segments Through effective portfolio management over the last three years, we can invest to support our strategy: Divestments
Slide 15: Our purpose and FY24-26 focus
Our purpose Our FY24-26 focus We will empower the people and businesses creating Aotearoa’s tomorrow by: TO HELP ALL OF Bringing New Zealanders the best digital-first Enabling New Zealand Businesses to grow and become NEW ZEALAND experiences, curated to their needs more productive and sustainable th
Slide 16: We will empower the people and businesses creating Aotearoa's tomorrow
We will empower the people and businesses creating Aotearoa’s tomorrow Investing in data-driven personalisation and tomorrow’s technology to drive growth in the core, while opening up new commercialisation opportunities o Deepening data-driven personalisation by individuals and households, while Con
Slide 17: We will continue to invest in the enablers of our marketplace success
We will continue to invest in the enablers of our marketplace success Further building our differentiation and supporting growth across mature and growing markets o Continuing to deliver a highly secure, automated, and resilient network, while Next investing in the digital infrastructure our custome
Slide 18: How we do business remains just as important as what we will do
How we do business remains just as important as what we will do Our commitment to sustainability and supporting Māori aspirations is enduring and integrated throughout our strategy Toitū o We will continue to pursue growth that supports Aotearoa New Zealand’s Sustainability economic transformation,
Slide 19: With this focus we will deliver sustainable growth for our shareholders
With this focus we will deliver sustainable growth for our shareholders Growing our business by enabling others – our customers, our people, and Aotearoa Top-line revenue growth Reinvestment in the business for incremental returns Our FY24-26 EBITDAI growth through strategy will increasing revenue a
Slide 20: Our purpose and FY24-26 focus
Our purpose Our FY24-26 focus We will empower the people and businesses creating Aotearoa’s tomorrow by: TO HELP ALL OF Bringing New Zealanders the best digital-first Enabling New Zealand Businesses to grow and become more NEW ZEALAND experiences, curated to their needs productive and sustainable th
Slide 21: Bringing New Zealanders the best digital-first experiences, curated to their needs
Bringing New Zealanders the best digital-first experiences, curated to their needs Leveraging our competitive advantages in brand, data, and technology investment Multi-brand market approach 1 through Spark and Skinny Unique ability to target the right 2 product to the right person through data and
Slide 22: We have strong momentum in the growing mobile market
Mobile Broadband We have strong momentum in the growing mobile market Spark is well positioned to serve increasing customer demand for data and richer entertainment experiences Spark Mobile Service Revenue Growth vs Total Market1 1200 o Spark #1 connections and mobile service revenue in a growing CA
Slide 23: We will grow value by focussing on three core customer benefits
Mobile Broadband We will grow value by focussing on three core customer benefits Deepening personalisation by individual and household, while delivering the latest digital experiences to Aotearoa Just what I need Just what my household needs The latest digital experiences Leverage multi-brand positi
Slide 24: The broadband market will remain highly competitive
Mobile Broadband The broadband market will remain highly competitive The role of wireless broadband remains critical to our competitiveness, allowing Spark to offer more value and choice Current broadband market performance FY24-26 tailwinds o High levels of competition, increasing access costs o Sp
Slide 25: We will grow broadband value by focussing on two core customer benefits
Mobile Broadband We will grow broadband value by focussing on two core customer benefits Leveraging maturing 5G capabilities to grow WBB and leading the market in optimising connectivity value Just what my household needs The best value for my money o Leverage data capability to identify o Leverage
Slide 26: Our purpose and FY24-26 focus
Our purpose Our FY24-26 focus We will empower the people and businesses creating Aotearoa’s tomorrow by: TO HELP ALL OF Bringing New Zealanders the best digital-first Enabling New Zealand Businesses to grow and become more NEW ZEALAND experiences, curated to their needs productive and sustainable th
Slide 27: Enabling SMEs to grow and become more productive and sustainable
SME Business Enabling SMEs to grow and become more productive and sustainable Leveraging our competitive advantages in brand, national and local reach, data capability, and strategic partnerships Strong position in market with 1 ~120k customers and effective ‘Local like you’ brand positioning Data a
Slide 28: In SME challenging economic conditions are driving a focus on productivity
SME Business In SME challenging economic conditions are driving a focus on productivity This is supporting a predicted ~$90 million increase in the addressable IT market by 2026, in addition to telco growth Estimated addressable IT revenue, $m, SME4 of New Zealand businesses are Data centre IT servi
Slide 29: We will support SMEs to improve revenue generation and efficiency
SME Business We will support SMEs to improve revenue generation and efficiency Growing value beyond mobile and broadband and positioning Spark as the ‘go to’ telco and ICT provider SMEs 3-20 employees SMEs 20+ employees Standardised, digital-first Higher value solutions o Productised, scalable IT se
Slide 30: Enabling NZ businesses to grow and become more productive and sustainable
SME Business Enabling NZ businesses to grow and become more productive and sustainable Leveraging our competitive advantages in end-to-end capabilities, specialist skills, scale, and strategic partnerships End-to-end capability, from 1 connectivity to transformation – a one-stop-shop for customers H
Slide 31: The B2B market remains attractive with strong growth predicted
SME Business The B2B market remains attractive with strong growth predicted As businesses continue to harness the power of technology for productivity and efficiency gains IT & Managed Services market revenue growth o Continued strong market growth expected across Spark’s projected at ~7% CAGR to FY
Slide 32: We will right size investment in products and upweight infrastructure
SME Business We will right size investment in products and upweight infrastructure While maintaining our position as an end-to-end service provider with local knowledge and service CURRENT FOCUS FUTURE FOCUS Services and o Service Management – outsourced IT services o Maintain as a point of differen
Slide 33: We will optimise our cost base through accelerated simplification
SME Business We will optimise our cost base through accelerated simplification We see four key drivers of simplification that will improve returns while delivering enhanced customer experiences Standard Modern portfolios solutions Consolidation Standardisation Efficiency Digitisation Data-driven ope
Slide 34: We will continue to invest in the high growth data centre market
SME Business We will continue to invest in the high growth data centre market Exploring opportunities for further infrastructure investment with incremental returns o Data centre built capacity is expected to grow from ~50MW today to >200MW by 2026 (>40% CAGR)1 GROWTH OPPORTUNITY o Delivers long-ter
Slide 35: Our purpose and FY24-26 focus
Our purpose Our FY24-26 focus We will empower the people and businesses creating Aotearoa’s tomorrow by: TO HELP ALL OF Bringing New Zealanders the best digital-first Enabling New Zealand Businesses to grow and become more NEW ZEALAND experiences, curated to their needs productive and sustainable th
Slide 36: We will leverage growing demand for high-tech solutions in three key areas
We will leverage growing demand for high-tech solutions in three key areas Delivering better outcomes for people and businesses from new technology adoption 1. 2. 3. Supporting the digitisation Offshore growth in digital Solving business problems of the healthcare sector identity and verifiable thro
Slide 37: The healthcare sector is under significant strain, as patient needs grow
High-tech: Health MATTR Converged solutions The healthcare sector is under significant strain, as patient needs grow Now more than ever technology is a critical enabler of making patient care more efficient, personalised, and accessible o 94% of doctors surveyed believe o In 2022, 1 in 6 New Zealand
Slide 38: We will support sector transformation with core services and high-tech solutions
High-tech: Health MATTR Converged solutions We will support sector transformation with core services and high-tech solutions Helping patients live healthier lives through the power of technology Ongoing growth in core: Digital health Digital hospital and connect, digitise, transform platform expansi
Slide 39: A new type of freedom through digital trust
High-tech: Health MATTR Converged solutions Introducing MATTR A Spark subsidiary, operating as a standalone business A new type of freedom through digital trust Solving the historically difficult challenges of security, privacy, and data verification PAGE 39 SPARK
Slide 40: MATTR is creating a new world of digital trust
High-tech: Health MATTR Converged solutions MATTR is creating a new world of digital trust Providing real world solutions to human impacting problems NEWS 06/03/2023 Nearly 1 billion emails were exposed in a single year, affecting 1 in 5 internet users 23/02/2023 Investors Lost $3.8 Billion to Scams
Slide 41: Spark's investment in MATTR reached commercialisation in FY22
High-tech: Health MATTR Converged solutions Spark’s investment in MATTR reached commercialisation in FY22 MATTR is a SaaS company providing platform products for Enterprise, Governments and OEMs Our approach Creating new opportunities Customers and Partners Consent and privacy Simple and convenient
Slide 42: The global digital identity market is significant
High-tech: Health MATTR Converged solutions The global digital identity market is significant With a predicted CAGR of 91.3%1 over the decade from 2021 to 2031 Decentralised Identity: Flexible Infrastructure for Market Size (non-biometric) business model innovation Verifiable Credential Ecosystems A
Slide 43: MATTR provides end-to-end credential lifecycle management
High-tech: Health MATTR Converged solutions MATTR provides end-to-end credential lifecycle management Flexible product capabilities for customers across journeys, profiles, and roles Credential User Credential lifecycle experience profiles management journeys PAGE 43 MATTR Security Framework SPARK
Slide 44: MATTR has secured several overseas clients in public and private sectors
High-tech: Health MATTR Converged solutions MATTR has secured several overseas clients in public and private sectors Over the next three years MATTR will scale further as the market forms and growth accelerates The market is starting to form and MATTR is working with MATTR’s long-term product invest
Slide 45: Spark's high-tech capabilities are rapidly maturing
High-tech: Health MATTR Converged solutions Spark’s high-tech capabilities are rapidly maturing Each capability is enabling new business solutions – but at this stage, largely independently of each other Data analytics and AI 5G Internet of Things (IoT)2 Digital identity o Increasing demand o Nation
Slide 46: Spark is starting to trial converged solutions that unite these capabilities
High-tech: Health MATTR Converged solutions Spark is starting to trial converged solutions that unite these capabilities Successful deployments will identify use cases that can be productionised and applied across multiple sectors o Spark and Qrious pilot for EnviroNZ o Hazard detection system using
Slide 47: In the next three years we will leverage convergence for growth
High-tech: Health MATTR Converged solutions In the next three years we will leverage convergence for growth Unlocking new value through solutions that solve business problems – from cost inflation and labour shortages to emissions reductions, efficiency, and regulatory compliance PAGE 47 SPARK
Slide 48: We are not starting from scratch – with presence across multiple sectors
High-tech: Health MATTR Converged solutions We are not starting from scratch – with presence across multiple sectors Providing a strong connectivity-based foundation for future growth into higher-value converged solutions MONITOR INDOORS MONITOR OUTDOORS TRACKING Current IoT use cases TEMP OCCUPANCY
Slide 49: Our purpose and FY24-26 focus
Our purpose Our FY24-26 focus We will empower the people and businesses creating Aotearoa’s tomorrow by: TO HELP ALL OF Bringing New Zealanders the best digital-first Enabling New Zealand Businesses to grow and become more NEW ZEALAND experiences, curated to their needs productive and sustainable th
Slide 50: We will focus on a core set of technology capabilities that enable differentiation
Enablers: Technology Simplicity & Data Culture We will focus on a core set of technology capabilities that enable differentiation Our investment will deliver a leading network for New Zealand and the technologies that enable innovation PAGE 50 SPARK
Slide 51: We will deliver next evolution technology that enables a more digital tomorrow
Enablers: Technology Simplicity & Data Culture We will deliver next evolution technology that enables a more digital tomorrow Our technology investment will continue to underpin growth in our consumer and business segments What we will do What it delivers o Greater diversification – smaller impact z
Slide 52: Sustained investment in cyber security capability
Enablers: Technology Simplicity & Data Culture Sustained investment in cyber security capability Spark’s technology investment is underpinned by robust cyber security capability, operations, and governance CAPABILITY OPERATIONS GOVERNANCE o Large security operations, with over 180 o Spark Cyber Secu
Slide 53: A simple, data-driven organisation
Enablers: Technology Simplicity & Data Culture A simple, data-driven organisation Making it easier and faster for customers to find and purchase products or services that meet their individual needs What we will do What it delivers o Customer and household data-driven marketing o Personalised conten
Slide 54: To deliver our aspirations, our data capability will be extended enterprise-wide
Enablers: Technology Simplicity & Data Culture To deliver our aspirations, our data capability will be extended enterprise-wide Delivering revenue generation and efficiency benefits across all markets and Spark-wide o Targeting acquisition and retention o Understanding customer level at highest valu
Slide 55: We will invest in future business systems that support our success in market
Enablers: Technology Simplicity & Data Culture We will invest in future business systems that support our success in market Adding further value to our re-engineered systems, with CRM that supports innovation and future growth o A platform that supports o Greater interoperability across Digital serv
Slide 56: What will Spark look like in the future?
Enablers: Technology Simplicity & Data Culture What will Spark FRONTLINE AGENT EMPLOYEE • I have direct access to customer look like in the insights and AI-driven suggested • I am attracted to Spark’s culture and ways of working future? recommendations for the customer • My customers use the same di
Slide 57: Innovation culture will support growth for our people and Spark
Enablers: Technology Simplicity & Data Culture Innovation culture will support growth for our people and Spark Responding to our operating environment with four key focus areas critical to our success We will provide world-leading people experiences and market success for Spark as Aotearoa changes –
Slide 58: We will create a top decile innovation culture
Enablers: Technology Simplicity & Data Culture We will create a top decile innovation culture Fueling Spark’s growth through highly skilled people and unrivalled people experiences What we will do What it delivers o Attracting, developing and retaining critical roles o Adapting to changing talent ne
Slide 59: Our purpose and FY24-26 focus
Our purpose Our FY24-26 focus We will empower the people and businesses creating Aotearoa’s tomorrow by: TO HELP ALL OF Bringing New Zealanders the best digital-first Enabling New Zealand Businesses to grow and become more NEW ZEALAND experiences, curated to their needs productive and sustainable th
Slide 60: We want our culture to reflect and uplift New Zealand's unique heritage
Commitments: Te Korowai Tupu Toitū Sustainability at Spark We want our culture to reflect and uplift New Zealand’s unique heritage Through Te Korowai Tupu we aim to weave a te ao Māori perspective throughout Kora Aotearoa (Spark NZ) Te Korowai Tupu is inspired, driven, and led by kawa (protocol), ti
Slide 61: We will continue to pursue sustainable growth
Commitments: Te Korowai Tupu Toitū Sustainability at Spark We will continue to pursue sustainable growth Our three focus areas are enduring, representing the highest materiality to Spark and our stakeholders Progress since FY21 FY24-26 focus o Significant investment in accelerated 5G rollout Integra
Slide 62: Toitū Sustainability at Spark
TOITŪ SUSTAINABILITY AT SPARK Sustainable Our commitment KPIs Development Goals Economic New technologies: we will invest in the technologies • Deliver 5G Standalone nationwide by FY26 to enable Transformation Aotearoa needs to transform innovation Empower New Zealand Digital infrastructure: we will
Slide 63: Our purpose and FY24-26 focus
Our purpose Our FY24-26 focus We will empower the people and businesses creating Aotearoa’s tomorrow by: TO HELP ALL OF Bringing New Zealanders the best digital-first Enabling New Zealand Businesses to grow and become more NEW ZEALAND experiences, curated to their needs productive and sustainable th
Slide 64: Our plan for long term value creation
Our plan for long term value creation We will create long term value for our shareholders through five key focus areas Revenue Operating Invest for Free cash flow Disciplined capital growth efficiency long-term growth generation management PAGE 64 SPARK
Slide 65: We will target revenue growth of 2-4% p.a. through five key drivers
We will target revenue growth of 2-4% p.a. through five key drivers Delivering full-service offerings that create a portfolio effect to further grow revenue Wireless SME and Business High-tech 5G leadership SME and business Converged Digital Digital and use cases technology solutions technology heal
Slide 66: We will target gross cost reductions of $125m-$175m by FY26
We will target gross cost reductions of $125m-$175m by FY26 1 Simplification, automation, digitising customer journeys, and growing wireless broadband will underpin our efficiency Simplify the business Automate core services Digitise customer experiences Create owners economics o Reduce and exit leg
Slide 67: We will continue to invest for long term growth
We will continue to invest for long term growth TowerCo proceeds enable investment in assets that will generate long-term incremental returns Growth capex funded via $350m of TowerCo proceeds Investment in digital infrastructure creating resilient revenues and earnings: o An additional 13-171 MW by
Slide 68: Our investment is guided by our Capital Management Framework
Our investment is guided by our Capital Management Framework Focussed on maximising shareholder value, fueling growth, and maintaining financial strength and flexibility • Growing dividends via growth in earnings and sustainable free cash flow Maximising • Dividend Policy: pay-out ratio of ~80-100%
Slide 69: We will continue to invest in line with this framework
We will continue to invest in line with this framework Investing for growth in the long-term, while growing dividends in the nearer term o Revenue growth combined with operating efficiency will generate EBITDAI and free Maximise cash flow growth shareholder value o Aspiration to grow dividend in lin
Slide 70: Our financial aspirations by FY26
Our financial aspirations by FY26 Built on a foundation of better experiences for our customers and people and a sustainable Spark o Aspiring to top-line revenue growth of 2-4% p.a. Revenue o $100-150m revenue growth from high tech solutions1 by FY26 o Growing EBITDAI, through top-line revenue growt
Slide 71: Where we aspire to be by FY26
Where we aspire to be by FY26 Market differentiation supporting continued sustainable growth Digital and Home of Digital Innovative, data-driven, high-tech infrastructure diverse, and everywhere solutions fuelling growth sustainable PAGE 71 Delivery of these aspirations will result in highly engaged
Slide 72: The value proposition for investing in Spark
The value proposition for investing in Spark Growing differentiation and top-line revenues to deliver sustainable earnings growth and shareholder returns Increasing demand for data Future revenue Competitive advantage driving growth in key growth in through data and resilient mobile market high-tech
Slide 73: Thank you
NGĀ MIHI NUI THANK YOU PAGE 73 SPARK
Slide 74: Disclaimer
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