SPARK STRATEGY UPDATE - Amazon AWS
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SPARK INVESTOR
STRATEGY UPDATE
16 September 2020
Justine Smyth Chair
SPARK
2023 STRATEGY
Jolie Hodson
Chief Executive Officer
The last three years
WHAT WE SAID
WE WOULD DO BY 2020 +30NPS
Outstanding customer Growing
experience key segments
1 Up-weight our emphasis on wireless
services and investment
2
Holding market share Top-decile culture
Do better at serving price-sensitive
customers, by further developing our multi-
brand strategy
3
Become the lowest cost operator, through
Lowest cost Top 10
radically simplified and digitised processes, global telco ROI
operator
products and services
NB: +30 NPS is the minimum standard we aspire to for all NPS measures including market,
relationship, interaction, journey and employee metrics
5
3 YEAR PLAN SUCCESSFULLY DELIVERED
WITH STRONG MARKET OUTCOMES AND INDUSTRY LEADING RETURNS
Outstanding customer Significant improvements across most key NPS(1) measures – with many above Solid
experience +30. progress
Winning in mobile, growing connections and outpacing the market in mobile
service revenue share growth.
Holding market share Achieved
New Zealand’s largest hybrid cloud provider.
Return to broadband connection growth with focus on stablising revenues.
$228m gross cost reduction since FY17. Delivered through Quantum programme
Lowest cost operator focused on digitisation, automation and simplification and ongoing focus on Delivered
productivity and efficiency.
Revenue
Achieved
Sustained growth in mobile, cloud, security and service management. 0-2% CAGR
Growing key markets Achieved
Broadband market remains challenging.
EBITDAI
Employee NPS +66. Continue to mature Agile ways of working. Strong diversity Achieved
Top decile culture Achieved at least 31% margin
and inclusion focus.
Ranked #1 against international peers(2) for Total Shareholder Returns. Dividend
Compound annual growth rate of 13%(3) . Sustainable total dividend of Solid
Top 10 global telco ROI 25cps or above that is not progress
Three-year(3) Return on Invested Capital 16% per annum. Ranked #2 against
international peers(2). supplemented by debt
(1)NetPromoter Score is an index ranging from -100 to 100 that measures the willingness of an employee or customer to recommend a company to others
(2)Pre-taxROIC and TSR versus international peers: Verizon, BT Group, Telstra, Swisscom, Singapore Telecom, AT&T, Orange, KT Corporation, Vodafone Group, Telecom Malaysia
(3)Representing the last three reported years for each peer
6
3 YEAR TSR(1) & ROIC(2)
VS INTERNATIONAL PEERS(3)
Ranked #1against international peers for Total Shareholder Ranked #2 against international peers.
Returns. Compound annual growth rate of 13%. Spark three-year Return on Invested Capital 16% per annum.
18%
13% 12% 16%
15%
7%
4% 13% 13%
3%
11%
10% 10%
(2%) 8%
(4%) (5%) 7% 6% 6%
(7%) 5%
(9%)
(11%)
(13%)
(22%)
BT Group
Telstra
BCE
Deutsche Telekom
Spark
Swisscom
AT&T
KT Corporation
Vodafone Group
Singapore Telecom
Verizon
Orange
Telstra
Deutsche Telekom
BT Group
Spark
BCE
Telekom Malaysia
Swisscom
AT&T
KT Corporation
Vodafone Group
SingTel
Telecom Malaysia
Verizon
Orange
(1)TSR calculated as share price and dividend per share (reinvested at the ex-dividend date) over Spark's FY18 – FY20 period (1 July 2017 to 30 June 2020)
(2)ROIC: pre-tax ROIC calculated as the average of annual operating EBIT divided by average invested capital, for the last three reporting years for each peer
(3)Peer group is not exhaustive but is a selected group of primarily integrated telco operators that are deemed the closest peers to Spark in terms of market exposure
7
Our new context
WE ARE NOT IMMUNE TO COVID-19 IMPACTS
BUT ARE WELL POSITIONED TO ADAPT TO OUR NEW NORMAL
• IMF has predicted the largest global economic downturn since the Great Depression of the 1930s, this will have flow on impacts for New Zealand
given our dependence on global trade and tourism.
• Tourism unlikely to return to historical levels for some time.
• New Zealand will enter a recession and unemployment is forecast to increase.
• The impact on small-medium businesses, many of whom are our customers, may be significant.
• This creates an environment of volatility and uncertainty, which has been further exacerbated by the resurgence of COVID-19.
• Billing collection risk as customers experience financial hardship and wage subsidies roll off.
• Mobile market growth likely to be slower, particularly roaming and mobile handsets.
• IaaS and SaaS(1) likely to benefit, but potentially some offset in other IT outsourcing programmes.
• Greater confidence to increase caps and drive wireless broadband uptake after strong network performance during lockdown.
• Accelerate cost reduction programmes.
• 5G rollout and sustainability focus on digital divide even more critical to support New Zealand’s recovery.
(1)Infrastructure as a Service and Software as a Service 9
MACRO TRENDS WILL INCREASE
THE MAGNITUDE AND PACE OF DISRUPTION
A seismic shift of business and Increasing pace of technology
society from physical to digital disruption and business
solutions. transformation.
An unprecedented recessionary Greater emphasis on connectivity as a
event requiring a period of basic social need.
nation building and a focus on
affordability.
COVID-19 has accelerated the macro trends we have been planning for
10The next three years
ENERGISED AND CAPABLE
LEADERSHIP TEAM
Chief Executive Officer Product Director Marketing Director Technology Director
Jolie Hodson Tessa Tierney Matt Bain Mark Beder
Customer Director Finance Director Corporate Relations General Counsel Human Resources
Grant McBeath Stefan Knight Melissa Anastasiou
Director Director
Leela Gantman Heather Polglase
12FOUR KEY INSIGHTS HAVE EMERGED
AND HELPED SHAPE OUR THINKING
1 2 3 4
Customers expect Data growth and Data insights unlock Wireless is
‘uber-like’ digital new content creating better customer increasingly able
experiences, opportunities for experiences to meet most
and will choose growth and customer needs
those who offer it monetisation
13MACRO TRENDS AND INSIGHTS
SHAPED OUR STRATEGIC CHOICES
CONSIDERATIONS
1 Stay the course •
•
Historical sources of value creation will erode over time
Macro trends create clear upside opportunity to capture additional value
2 Become a super lean, lowest • Incumbent players face greater challenges due to legacy products, systems and channels
• More exposed to future disruptive market entrants
cost connectivity provider • Macro trends create clear upside opportunity to capture additional value
3 Expand into new growth • Few attractive growth markets where showing up and deploying capital is enough to
succeed – need best-in-class, foundational capabilities that underpin success
adjacencies beyond the core • Limits optionality and increases risk through ‘big bets’
• Divided leadership focus and resource allocation between ‘core’ and new markets
4 Adopt a capability centric • Focuses on protecting and expanding Spark’s differentiation – value-accretive in the
short-term through the core and the long-term through new markets
approach within the core • Increases optionality in a rapidly changing environment
and beyond • Attracts the best talent
14OUR STRATEGY FOCUSES ON INCREASING OUR
COMPETITIVE ADVANTAGE
BY BUILDING FOUR WORLD CLASS CAPABILITIES
CUSTOMER BENEFIT
Simple, intuitive Deep customer Automated, Growth mindsets
customer experience insights smart network
My interactions with Spark offers me the Spark delivers me I want to work at Spark to
Spark ‘just work’ right products at the connectivity, grow my career and help
right time anytime, anywhere deliver Spark’s purpose
Engaged customers Marketing efficiencies Growth opportunities Highly engaged talented
SPARK BENEFIT
Upsell and cross sell ROI Efficient cost base people will strive to
Efficiency in cost to serve Upsell and cross sell Core foundation to great deliver more
digital experiences
15THESE FOUR CAPABILITIES WILL REINFORCE GROWTH
IN OUR ESTABLISHED MARKETS AND FUTURE MARKETS
Established Future
markets Simple, intuitive customer experience
markets
Wireless Deep customer insights IoT(1)
Digital
Broadband Automated, smart network
Health
Cloud Growth mindsets Sport
(1)Internet of Things
16WHERE WE ASPIRE
TO BE BY 2023
Primarily Digitally Leading Cloud 5G Future
Wireless Native Custodian Everywhere
. Workforce
~80% of relationships Digital channels are the Bringing the best of 5G and IoT(1) deployed Skills rebalanced
on wireless predominant choice private and public cloud nationwide Top decile culture, defined
technology Experience consistently together with our Unconstrained by inclusivity and growth
replicated across all service expertise mobile capacity Best-in-class adaptive
channels leadership
Delivery of these aspirations will result in highly engaged customers and people, growth and top decile returns
(1)Internet of Things 17A STRATEGIC FOCUS ON UNCONSTRAINED CAPACITY
WILL UNDERPIN GROWTH IN WIRELESS
1. Simplification and moving off legacy technology will pave the way for technology
evolution, new revenue streams, improved cost base and environmental performance.
2.
5G rollout will cater to customers with high data needs, underpin innovation and free
up 4G spectrum to increase capacity in regional and rural areas.
3. Wireless broadband take-up will continue to grow as 5G delivers greater capacity and
speeds over time.
4. Big data and AI(1) driving enhanced customer experience, lower cost of acquisition and
improving data insights and return on marketing investment.
(1)Artificial Intelligence
18Our 3 Year Goals
• Brand Strength +10pp
• +40 Customer
Engagement (NPS)
• +70 Employee
Engagement (eNPS)
• Sustainable Free Cash
Flow Growth and Top
Decile TSR
• Best Cost ~31% EBITDAI
margin
• Lift Digital Equity +25k
Our Strategic Pillars
• World Class Capabilities
and Culture
• Grow Established Markets
• Accelerate Future Markets
• A Positive Digital Future
for all of New Zealand
Our Values
• Whakamana, We Empower
• Matomato,
We Succeed Together
• Tūhono, We Connect
• Māia, We are Bold1 World Class Capabilities
and Culture
• Simple, intuitive customer experience
• Deep customer insights
• Smart, automated networks
• Growth mindsets
2 Grow Established Markets
Our • Wireless
• Broadband
Strategic • Cloud
Pillars 3 Accelerate Future Markets
• IoT
• Digital Health
• Sport
4 A Positive Digital Future for all
of New Zealand
• Create a Sustainable Spark
• Economic Recovery and Transformation
• Champion Digital EquityCreate a • Invest in the capabilities of our people, equipping them to thrive in a
Sustainable Spark digital future
• Reduce our footprint and meet our emissions target of -25% by 2025,
Be bold in our business to have a positive investing in our fleet and infrastructure
impact on our communities and the
environment.
• Be responsible, transparent and accountable for our social and
environmental performance
Economic Recovery and • Focus our infrastructure investment on supporting New Zealand’s
Transformation recovery and transformation
• Support Kiwi businesses to adapt to become more
Help New Zealand transform to a high productive, resilient and sustainable through technology
productivity, low carbon economy.
• Support New Zealanders to upskill and adapt to new ways
We will work alongside New Zealand to harness of working
the power of technology and create a positive
digital future for all.
Champion • Extend the reach of Skinny Jump to benefit more households
Digital Equity – 35,000 by June 2023
• Partner alongside the Spark Foundation to address barriers
Champion digital equity so all New to digital equity, including access, skills, trust and motivation
Zealanders have the opportunity to thrive • Champion diversity and inclusion in our business and
in a digital future. our communitiesOUR PURPOSE
TO HELP ALL OF NEW ZEALAND
WIN BIG IN A DIGITAL WORLD
Āwhinatia ngā tangata katoa o Aotearoa Kia matomato te tipu I te ao matihiko.
Our 3 year goals
Sustainable
Best cost free cash flow
+40 NPS on Lift digital
Brand ~31% EBITDAI growth and
every +70 eNPS equity
strength margin top decile
measure +25k
+10pp(1) TSR(2)
WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES A POSITIVE DIGITAL FUTURE FOR WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES
WORLD CLASS CAPABILITIES
AND CULTURE AND CULTURE ALL OF NEW ZEALAND AND CULTURE AND CULTURE
AND CULTURE
A POSITIVE DIGITAL FUTURE FOR GROW ESTABLISHED MARKETS
GROW ESTABLISHED MARKETS GROW ESTABLISHED MARKETS ALL OF NEW ZEALAND
ACCELERATE FUTURE MARKETS ACCELERATE FUTURE MARKETS
ACCELERATE FUTURE MARKETS
A POSITIVE DIGITAL FUTURE FOR A POSITIVE DIGITAL FUTURE FOR
ALL OF NEW ZEALAND ALL OF NEW ZEALAND
(1)Percentage points
(2)Total Shareholder Returns 22SIMPLE INTUITIVE CUSTOMER EXPERIENCE Tessa Tierney Product Director
WHAT IS IT? SIMPLE INTUITIVE
CUSTOMER EXPERIENCE
Delivering scalable, distinctively ‘Spark’ customer journeys that ‘just
work’ and drive customer engagement and loyalty
Discovering Using our Changing
Joining Spark Enquiring about
our products products and and renewing
our products
paying for them
24WHERE WE ARE
ON THE JOURNEY
~570k customers One unified cloud ~1.1m Spark App users(2) Significant reduction in
migrated(1) onto new fit portfolio established completing ~3.6m customer care interactions
for purpose plans across Spark transactions per month(3) down 40% since 2017
141 Bots automating tasks ~33% of legacy Public 70% of broadband customers now on new broadband
across the business and Switched Telephone Network technologies in line with our ambition to be mostly
proactively solving customer (PSTN) decommissioned(2) ex-copper by 2020 and reducing complexity of legacy
issues products and services
(1)Forthe three year period from rom 1 July 2017 to 30 June 2020
(2)Asat 30 June 2020
(3)Average self service interactions for the period 1 July 2019 to 30 June 2020
25OUR 2023
AMBITION
Where Spark is today Ambition for FY23
‘Product of the 100s of plans that are built ‘one off’ and managed 10s of simple modular products with less complex
future’ by complicated eligibility processes rules and conditions
Taking agility to the Up to 4 months to release new products and Ability to release on demand products and
next level customer experiences customer experiences
Multiple screens used by customers and frontline ‘Apple like’ frontline model, where a single screen is
Digitisation employees across our various channels/portals shared across customers and employees
Partnering Onboarding new partners takes ~6 months Onboarding any partner takesDELIVERING CLEAR CUSTOMER,
OPERATIONAL AND FINANCIAL BENEFITS
• Strong acquisition and retention benefits from simplified plan
offerings and enhanced digital customer experience
• On demand product and customer experience releases
Revenue providing churn benefits Ambition for FY23(1)
• Partnering to deliver customers with best-in-class value added
services resulting in new revenue streams
Financial Performance
Revenue growth captured under deep customer
insights capability and key market strategic pillars
• Investment in development and testing to support
propositions and on demand product and customer ~$40m-$50m cost efficiencies over the next three
Investment experience releases years
• New partner onboarding costs
• IT system investment to support ongoing digitisation of
customer experience and completing IT consolidation
Operational Performance
~20% reduction in customer care interactions
• Plan rationalisation driving reductions in customer care and IT
maintenance costs ~90% of broadband customers migrated off copper
Efficiencies • Digitisation delivering channel and customer care efficiencies to fibre and wireless
• Completion of IT consolidation lowering customer care, IT
system and channel cost base
(1)Refer to financial aspiration section for overall summary of FY23 financial performance ambitions
27BALANCING OPPORTUNITIES
AND RISKS
Opportunities Risks
Faster customer migration to simplified product offerings to unlock Revenue loss due to higher MITIGATED Deep experience in large scale,
better customer experience and cost savings earlier churn and customer disruption BY complex migrations through the re-
during migration engineering programme
More focus on each product, shortening innovation cycles and further
increasing our speed to market
Competitive inflexibility – less inclined to launch new product features to match competitor
activity and/or reduced customer demand due to reduced choice
More radical simplification – only 3 plans
Testing and learning with sample subset MITIGATED Responding to competitive offers through
BY
of customers first, before scaling to better use of the household data and
whole base precision marketing – right customer, right
Holistic business process simplification and automation, widening our response rather than blanket product/plan
operational efficiency gains Designing from the customer back by
changes
using customer insights to inform
product portfolio choices Agile ways of working and ability to pivot
and flex quickly
28OUR PURPOSE
TO HELP ALL OF NEW ZEALAND
WIN BIG IN A DIGITAL WORLD
Āwhinatia ngā tangata katoa o Aotearoa Kia matomato te tipu I te ao matihiko.
Our 3 year goals
Sustainable
Best cost free cash flow
+40 NPS on Lift digital
Brand ~31% EBITDAI growth and
every +70 eNPS equity
strength margin top decile
measure +25k
+10pp(1) TSR(2)
WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES A POSITIVE DIGITAL FUTURE FOR WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES
WORLD CLASS CAPABILITIES
AND CULTURE AND CULTURE ALL OF NEW ZEALAND AND CULTURE AND CULTURE
AND CULTURE
A POSITIVE DIGITAL FUTURE FOR GROW ESTABLISHED MARKETS
GROW ESTABLISHED MARKETS GROW ESTABLISHED MARKETS ALL OF NEW ZEALAND
ACCELERATE FUTURE MARKETS ACCELERATE FUTURE MARKETS
ACCELERATE FUTURE MARKETS
A POSITIVE DIGITAL FUTURE FOR A POSITIVE DIGITAL FUTURE FOR
ALL OF NEW ZEALAND ALL OF NEW ZEALAND
(1)Percentage points
(2)Total Shareholder Returns 29DEEP CUSTOMER INSIGHTS Tessa Tierney Product Director
WHAT IS IT? DEEP
CUSTOMER INSIGHTS
Next generation analytics capabilities that deliver an unrivalled ability to
understand and serve the needs of New Zealand consumers, households and
businesses.
31WHAT IS IT? DEEP
CUSTOMER INSIGHTS
Ability to understand and
anticipate the needs of
Marketing Channels Products
New Zealand consumers
and businesses in real- State of the art
time. customer experience
Infrastructure Tools Storage
A future facing technology
roadmap to support
growth of data, AI/ML(1) Data Governance Access Artefacts
Enabling technology
capability and use cases. architecture
Analytics capability built into Organisational Structure Privacy Enabled Operating Model
the organisation allowing it
to respond
to rapidly changing business Ways of working and partner Capabilities and Skillsets 3rd Party Collaborations
needs ecosystem
(1)Artificial Intelligence and Machine Learning
32NEW MEGATRENDS
ARE EMERGING
Democratisation of AI(1) and data Citizen AI/ML(2) platform & augmented BI(3) with actionable insights to rapidly scale across
visualisation is the next frontier business
Data platform will decide Need for collaboration and open ecosystems – emergence of data standards (IoT(4), open
the new leaders data initiative), crowd-sourced innovation
Privacy regulations (e.g. GDPR(5)) Balanced privacy approach will separate leaders & others; hyper-personalisation to
to inform data usage innovations continue (opt-in incentives, social connect, one-on-one channels)
Business decision making and processes predicated upon extensive decision analytics; new
Emergence of decision intelligence
role embedded in business tribes
Leaders are realising a data dividend Business models based on data: subscription pricing, shareable usage, bundled non-core
services
Augmented data hubs Self-tuning and automatic reconfiguration of data management (e.g. AWS & Azure)
allowing wider use cases, particularly on unstructured datasets
(1) Artificial Intelligence (3) Business Intelligence (5)GDPR: The General Data Protection Regulation is a European Union Law regulating data protection and privacy. GDPR regulation is more
(2) Artificial Intelligence and Machine Learning (4) Internet of Things strict than current regulation of data in New Zealand so is used as a relevant reference point for future data and privacy requirements.
33WHERE WE ARE
ON THE JOURNEY
Data analytics has started to deliver results at Spark
Spark customer households
accurately identified for Improved conversion rate Reduction in churn Accuracy of precision Improved customer
churn/propensity modelling of Endless mobile (prepaid) marketing models experience (NPS score)
by
70% 9 X IMPROVEMENT 13% 70-75% 5pp (2)
(Pioneering use case among (Telco average: 3-5x in first (Telco average: 5-8%)(1)
Telcos)(1) year after launch)(1)
(1) Source Kearney
(2) Percentage points
34BENCHMARKING INDICATES
A SOLID FOUNDATION
Enabling Ways of working/
Marketing Channels Products
Technology Partner Ecosystem
Pioneering 5 −
Spark
Leading 4 − Spark (Consumer) Spark
Spark
Emerging 3 −
Spark (Business)
Spark
Foundational 2 −
Spark
Nascent 1 −
Telcos
Digital natives (Avg)
Investment in tools and Agile ways of working create a solid foundation to build
on the successes we have seen in marketing to date
35FOCUS ON USE CASES:
CASE STUDY WIRELESS BROADBAND
Win in Wireless Broadband:
Data and Analytics to develop Precision targeting
new propositions, acquire new Lookalike modelling TARGET ML(1) powered targeting model
ML(1) model to identify non- identifies high-propensity
customers and migrate from Spark customers exhibiting customers, dramatically improving
similar traits to existing high-
copper/fibre usage base
retention outcomes
Migration engine
Product innovation Offer customers a better
AI(2) engine to propose plan for them and for Spark
tailored product based on analytics and cost
bundles and offers of usage
PROTECT GROW
Precision marketing
Algorithms help deploy hyper-personalised
ads and curated personal purchase
experience, executed through in-house
programmatic media desk
(1) Machine Learning
(2) Artificial Intelligence
36OUR 2023
AMBITION
Where Spark is today Ambition for FY23
Data Back-end architecture on premise Back-end architecture completely on the cloud
architecture Spark data siloed across platforms A single, scalable customer data repository
55% of customer base in household view(1) ~90% of customer base in household view(1)
Customer analytics 70% of customer base covered by propensity models ~90% of customer base covered by propensity
models
Campaign 95% of marketing ‘mass’ based on segments 40% of marketing personalised campaigns consistent across
channels
execution Manual campaign launches (~1-3 months)
Automated campaign launches (days not months)
Inconsistent Spark experience with limited ability to track One single Spark experience across all channels that can
Channel execution customers across channels be tracked end-to-end
(1) 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
37DELIVERING CLEAR CUSTOMER,
OPERATIONAL AND FINANCIAL BENEFITS
BUSINESS OBJECTIVE
1 1
Win in Wireless Target high potential existing and competitor
Broadband customers with tailored offers and incentives to Ambition for FY23(3)
encourage migration
2
Omnichannel 2 Financial Performance
Deep Insights Delight customers with a personalised, joined-up
experience whether they engage via digital ~$30m-$40m revenue contribution opportunity
channels, contact centres or in store
Opportunity over the next three years
Themes 3 3 Cost efficiencies over the next three years
SME(1)/Corporate: Develop unified 360 view of SME(1)/corporates to
Acquire, Protect, captured under simple intuitive customer
Grow boost conversions through sales funnel and grow
share of wallet through modular, tailored offerings experience and smart automated networks
capabilities
4 Launch data-analytics and AI(2)-enabled approach to
4
Next Horizon network planning, optimisation and service Operational Performance
Operations operations, to achieve next-generation efficiency
Efficiency and customer experience ~2% reduction in rate of household churn
5
Turbo charged
5 ~30% improvement in marketing effectiveness
Embed data-driven culture by democratising access
backbone
and deploying AI(2) in spend & supplier
management, finance and workforce planning
(1)Small and Medium sized enterprises
(2)Artificial
Intelligence
(3)Refer to financial aspiration section for overall summary of FY23 financial performance ambitions 38BALANCING OPPORTUNITIES
AND RISKS
Opportunities Risks
Increase ROI on Reduce time to market for Ensuring safeguards are MITIGATED Strong focus on data collections
marketing offers and shorten in place for appropriate BY and use policies
investment optimisation loops collection and use of data
Improve customer experiences Improved ability to lift Ability to develop and find the MITIGATED Collaboration with Qrious to
BY
through increased relevance average customer right talent to deliver the scale intern, recruitment and
lifetime value capability development approach
39OUR PURPOSE
TO HELP ALL OF NEW ZEALAND
WIN BIG IN A DIGITAL WORLD
Āwhinatia ngā tangata katoa o Aotearoa Kia matomato te tipu I te ao matihiko.
Our 3 year goals
Sustainable
Best cost free cash flow
+40 NPS on Lift digital
Brand ~31% EBITDAI growth and
every +70 eNPS equity
strength margin top decile
measure +25k
+10pp(1) TSR(2)
WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES A POSITIVE DIGITAL FUTURE FOR WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES
WORLD CLASS CAPABILITIES
AND CULTURE AND CULTURE ALL OF NEW ZEALAND AND CULTURE AND CULTURE
AND CULTURE
A POSITIVE DIGITAL FUTURE FOR GROW ESTABLISHED MARKETS
GROW ESTABLISHED MARKETS GROW ESTABLISHED MARKETS ALL OF NEW ZEALAND
ACCELERATE FUTURE MARKETS ACCELERATE FUTURE MARKETS
ACCELERATE FUTURE MARKETS
A POSITIVE DIGITAL FUTURE FOR A POSITIVE DIGITAL FUTURE FOR
ALL OF NEW ZEALAND ALL OF NEW ZEALAND
(1)Percentage points
(2)Total Shareholder Returns 40AUTOMATED SMART NETWORK Mark Beder Technology Director
WHAT IS IT? SMART
AUTOMATED NETWORK
5G rollout Standalone Highly resilient ‘super
nation-wide virtualised core data highway’
Automated PSTN(1) fully
Unconstrained
network decommissioned
capacity
management
Delivering unconstrained capacity across high quality and low latency networks
(1)Public Switch Telephone Network 42WHERE WE ARE
ON THE JOURNEY
Leading the market in mobile and IoT(1) network Significant progress towards wireless future with 22% of
investment to meet the needs of growing customer broadband base on wireless broadband with uncapped
demand for data services lunched(2)
Phasing out legacy systems. ~33% of Public Switch Spark 5G innovation including 5G lab and starter fund
Telephone Network (PSTN) exchanges now providing the platform for New Zealand businesses to
decommissioned, closing around 80 switches per year incubate and co-create future 5G applications
Network convergence and innovation delivered through Secured 60MHz of 3.5MHz spectrum to enable rollout of
the rollout of optical and core networks which has mobile and wireless broadband 5G services bridging the
enabled ongoing growth of wireless broadband services gap until full spectrum band is available late 2022
(1)Internet of Things
(2)Uncapped wireless broadband services launched in metro areas 43BELL LABS DATA
GROWTH PREDICTION
3rd Sharing and 1st Networked
1st Discovery Era 2nd Discovery Era 1st Sharing Era 1st Commerce Era 2nd Sharing Era
Pre-Internet Era 2nd Commerce Era Intelligence and
(Browsers) (Search) (Personal Content) (Video & eGoods) (Personal Context)
(Everything) Automation Era
80,000 15 ZB/Yr
PB/Mo Connected Everything +
60,000
Contextual
Automated Experiences
40,000
4th Industrial Revolution
22,400
PB/Mo 20,000
17,400 2010 2011 2012 2013 2014 2015 AirBnB
12,400
Uber
7,400
Apple Flipcart
2,580 PB/Mo 2,400
2005 2006 2007 2008 2009 2010
2,080 4K UltraHD Alibaba
1,580
1,080 Netflix
Instagram Amazon
100 580 7 ZB/Yr
PB/Mo YouTube Snapchat
80 80
2000 2001 2002 2003 2004 2005
60 Facebook
40 Napster 8K Video +
0.20 20 Amazon Cloud Hosting
PB/Mo 0 Ebay
0.15 1995 1996 1997 1998 1999 2000
User-Generated Content
Twitter
0.10 BitTorrent
Google
0.05
1.5 ZB/Yr (2017)
0.00
1990 1991 1992 1993 1994 1995
Mosaic
1970 1990 1995 2000 2005 2010 2015 2020 2025
Spark’s data growth has followed the same curve
445G WILL BE
5G provides opportunity beyond ‘connectivity’ and will enable
GAME CHANGING the delivery of smart solutions for enterprise and industry
Latency and Reliability Speed and Capacity
Bringing 5G to New Zealand by investing in immediate
use cases that create the most value
Cloud Autonomous Industrial Immersive 4K/8K Video Smart Stadium/
Gaming Vehicles automation experience Universities
Massive IoT
Wireless Massive 5G Partner
Broadband IoT(1) of Choice
In-vehicle Drones and Connected Connected Wearables mIoT Smart City/home
Introducing Innovative IoT(1) Co-creating smart connectivity connected robots Platform sensors
unconstrained solutions solutions and
capacity and providing network
enhanced speed to customers with customisation to Edge Computing Network Slicing
support customer’s real-time data meet customer Real-time data/video analytics Vertical / Private Networks
growing demand and benefits of needs on speed,
for more data digital latency and
monitoring number of devices
Security/video Tele-health Supply chain
Solutions efficiencies
(1)Internet of Things 45WIRELESS PERSPECTIVE WHAT DOES 5G BRING?
Evolution of throughput, reliability and latency network capabilities
eMBB(1) Fixed wireless access (FWA)
Throughput Latency
Ultra-high 15-200 ms(3)
Throughput
Virtual Reality
Throughput Latency
4.5G Upload: Ultra-high
4.9G 10-100 ms(3)
Mobile Tele-Operation (Vehicle 5G 5G
Download: High
and drone) phase1
phase2
Throughput Latency
Varies 50-100 ms(3) Massive number of devices
(IoT(4))
Throughput Latency
Low 10-100 ms(3)
Industry robotics and automation
Throughput Latency
Latency
VariesOUR 2023
AMBITION
Where Spark is today Ambition for FY23
Reliant on third party services for network backhaul Owning more of our backhaul ‘assets’
Resilience Modern core network infrastructure yet still requires some Automated ‘Super data highway’ for all traffic with high resiliency,
manual configuration and provision that can be reconfigured remotely
5G live in 5-7 locations by 30 June 2021
5G RAN(1) roll-out and Planning and deploying 5G - towers, core and edge architecture
5G rolled out nation-wide and cloud native 5G core operating
edge compute standalone
Unconstrained Capacity planning focussed on meeting the “9pm” Unconstrained capacity enabling uncapped wireless
Peak. Supporting ~22% broadband users on wireless broadband broadband
capacity already
~33% of PSTN(2) decommissioned PSTN(2) decommissioned
Legacy
~74% of broadband base on newer and more reliable fibre and ~90% of broadband base migrated off copper
decommissioning wireless inputs
A largely physical network with many points of manual Ability to seamlessly provision capacity
Automation intervention
A virtualised network that uses algorithms to self-heal
Network and IT managed as separate functions A fully congruent skill-set across mobile, fixed, and IT
Talent
(1)Radio Access Network
(2)Public Switch Telephone Network 47DELIVERING CLEAR CUSTOMER,
OPERATIONAL AND FINANCIAL BENEFITS
• Highly resilient wireless and fibre data networks providing
acquisition and retention benefits
•
Revenue Rollout of 5G generating new revenue opportunities over the
long-term Ambition for FY23(2)
• Unconstrained capacity through uncapped plans supporting
customer demand for data and reducing churn
Financial Performance
Revenue growth captured under deep customer
• Ongoing investment in wireless and fibre networks providing insights capability and key market strategic pillars
network advantage including 5G innovation and focus on
Investment unconstrained capacity ~$55m-$65m cost efficiencies over the next three
• Investment in future ready talent force certified in modern years
technologies
Operational Performance
• Lower access input costs as wireless broadband base grows ~30-40% of broadband base connected via wireless
• Investment in resilience and network automation driving broadband services
network support and maintenance efficiencies
Efficiencies • Rollout of 5G lowering cost per GB ~200% increase in network capacity over three years
• PSTN(1) decommissioning delivering property, network support
and maintenance and environmental efficiencies
(1)Public Switch Telephone Network
(2)Refer to financial aspiration section for overall summary of FY23 financial performance ambitions 48BALANCING OPPORTUNITIES
AND RISKS
Opportunities Risks
Accelerate PSTN(1) decommissioning to remove complexity of legacy Higher churn and faster MITIGATED Phased decommissioning
BY
systems and realise operational benefits faster revenue decline as programme to allow for
customers migrate to new customer communication
network or alternative managing commercial product
services changes and provisioning of
Accelerate 5G rollout to increase capacity at lower cost per GB to capacity
support further wireless broadband migration and new 5G products
and services
Rolling out 5G ahead of clear use MITIGATED Phased rollout in line with economic
BY
Open to collaborating with industry players to share infrastructure cases and monetisation benefits and optionality of a multi-
where it makes commercial sense and delivers better customer opportunities vendor structure to utilise
outcomes, improves network economics and results in societal technology aligned to customer
benefits demand for 5G products and
services
(1)Public Switch Telephone Network
49OUR PURPOSE
TO HELP ALL OF NEW ZEALAND
WIN BIG IN A DIGITAL WORLD
Āwhinatia ngā tangata katoa o Aotearoa Kia matomato te tipu I te ao matihiko.
Our 3 year goals
Sustainable
Best cost free cash flow
+40 NPS on Lift digital
Brand ~31% EBITDAI growth and
every +70 eNPS equity
strength margin top decile
measure +25k
+10pp(1) TSR(2)
WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES A POSITIVE DIGITAL FUTURE FOR WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES
WORLD CLASS CAPABILITIES
AND CULTURE AND CULTURE ALL OF NEW ZEALAND AND CULTURE AND CULTURE
AND CULTURE
A POSITIVE DIGITAL FUTURE FOR GROW ESTABLISHED MARKETS
GROW ESTABLISHED MARKETS GROW ESTABLISHED MARKETS ALL OF NEW ZEALAND
ACCELERATE FUTURE MARKETS ACCELERATE FUTURE MARKETS
ACCELERATE FUTURE MARKETS
A POSITIVE DIGITAL FUTURE FOR A POSITIVE DIGITAL FUTURE FOR
ALL OF NEW ZEALAND ALL OF NEW ZEALAND
(1)Percentage points
(2)Total Shareholder Returns 50ESTABLISHED AND FUTURE MARKETS Grant McBeath Customer Director
THESE FOUR CAPABILITIES WILL REINFORCE GROWTH
IN OUR ESTABLISHED MARKETS AND FUTURE MARKETS
Established Future
markets Simple, intuitive customer experience
markets
Wireless IoT(1)
Deep customer insights
Broadband Automated, smart network Digital
Health
Cloud Growth mindsets
Sport
(1)Internet of Things
52ESTABLISHED MARKETS
WHAT ARE THEY
Wireless Broadband Cloud
Always on connectivity anytime, anywhere Exponential growth in data demand Flexible ‘as a service’ solutions that utilise shared
infrastructure
Emphasis on wireless over fixed driven by Increasing pace of new entrants joining the Digital business transformation services
ownership economics market
Strong customer preference for digital delivery Consumers benefitting from Underpinned by best in class cyber security
and self-service and fast hassle free set-up 'more for less'
~75% of our customer relationships are Success predicated on service experience, value ‘Hybrid cloud’ capabilities delivering best of private
currently on wireless technology adding partnerships and increasing and public to meet customer needs
personalisation of key lifecycle moments
53WHERE WE ARE
ON THE JOURNEY
Market leader Market leader in Market leader Promising 5G rollout Clear channel
in pay monthly fixed and for onshore early results underway advantage in
mobile(1) wireless cloud services(1) from use of retail, SME(2)
broadband(1) data and and B2B(3)
analytics
driving growth
in key markets
(1)Market share estimates sourced from IDC
(2)Smalland Medium sized enterprises
(3)Business-to-Business
54OUR 2023
AMBITION
Wireless
To deliver amazing customer experiences wherever our customers are with great speeds, awesome
content and underpinned by our 5G rollout
Market insights How we will deliver
Investments in 5G rollout, edge computing and network
Demand for more data, at higher speeds with lower latency
slicing capability
Demand for connectivity anytime, anywhere Network densification and 4.5G expansion and rollout of 5G
Scale adoption of mobile apps and streaming services Endless mobile and uncapped wireless broadband services
Spark App – the remote control to your life, enabled through
Strong preference for digital self-service and fast hassle free set-up
simple intuitive customer journeys
Demand for value beyond connectivity Partnerships - Spotify, Netflix, Xbox, Xero, Spark Sport
55OUR 2023
AMBITION
Broadband
Sustain our market leading(1) position whilst growing profitability
Market insights How we will deliver
Highly mature market with high household penetration and UFB Multi-brand approach combined with data and analytics to
rollout ~91% complete increase relevance in all market segments
Highly competitive reseller market with 80+ internet service Differentiation through best in class value added services, connected
providers (low barriers to entry) home ecosystem and superior in-home customer experiences
Competitive acquisition offers and increased bundling Use wireless broadband to compete in more market segments to
reducing profitability and resulting in long payback periods expand product margin and profitability
Wireless can meet the needs of an increasingly broader Uncapped wireless broadband and investments in 5G create a
customer base competitive offer to fibre for many of our customers
(1)Market share estimates sourced from IDC 56OUR 2023
AMBITION
Cloud, Security and Service Management
Spark is well positioned to accelerate digital transformation
Market insights How we will deliver
COVID-19 increasing demand for cloud Providing end-to-end hybrid-cloud solutions and cloud
migration, security and remote working transformation support via our unique Leaven proposition
Continued local IaaS(1) growth, particularly in the Partnerships with hyperscalers to deliver full
context of hybrid and multi-cloud, albeit slowing suite of public cloud services
Supporting remote working and business
Strong and growing demand for (hyperscale) continuity through digital workplace solutions
public cloud services and securing customer environments
Continued investment in people, process and
Sustained demand for outsourced IT service management technology to deliver an exceptional end-to-end
managed service offering
(1)Infrastructure as a Service 57FOUR KEY CRITERIA HAVE INFORMED OUR
IDENTIFICATION OF FUTURE MARKETS
Builds from our Delivers a Reinforces Leverages our
enhanced core material prize the core local advantage
capabilities
• Enables a simple and intuitive • Has established and/or growing • Improves our network • Service and experience are
digital customer experience revenue pools • Improves our data or customer important
• Next generation customer • Material expected growth insights • Involves hardware or infrastructure
insights and analytics can be • Way of doing business will likely • Improves our range of • Spark has in-person or personal
leveraged change offers/products touchpoints
• An automated ‘smart network’ • Market players/share will likely • Reduces our costs
for the future with lowest change
cost/GB • Short disruption timeframe
• Leverages growth mindsets and • ROIC
Agile at scale operating model
58WHY WE PRIORITISED THESE
FUTURE MARKETS
Digital
IoT Sport
health
Spark Health will support the digital The ‘Internet of Things’ (IoT) will Spark Sport helps us ‘own
transformation of the New Zealand play a critical role improving entertainment in the home’ and
healthcare sector productivity in New Zealand differentiates Spark products
Est. revenue pool
for ~$1bn ~$1bn ~$0.5bn
New Zealand
Why Spark? • Large space (>$20B) growing fast • Sizable value pool (~$3.5B by 2024) • Supports our strategy to offer best in class paid
(~5% YoY) • New technology will bring significant disruption VAS(2) in the home
• Sector is ripe for digital disruption in established growing profit pools • Leverages existing strong customer base
• Spark has relationships and insights, via • Spark has a strong presence in B2B(1) • Technology has disrupted the market and Spark
Spark Health • Further enabled by 5G introduced sports streaming to New Zealand
• Experience in working with Government • Spark’s network, products and field services • Sports customers are looking for innovative
and the public sector support growth in high value IoT management viewing solutions
and support • Spark has exclusive and attractive content for both
Spark and non-Spark customers
(1)Business-to-Business
(2)Value added services 59OUR 2023
AMBITION
Where Spark is today Ambition for FY23
Creating awareness of Spark’s IoT(1) offerings. Already in Become the New Zealand IoT(1) platform
market with asset tracking and smart metering solutions partner of choice
Grow end-to-end offering beyond IoT(1) by leveraging
Growing pipeline of strategic industry plays through proof
IoT(1) of concepts, supported by industry expertise
strength of existing assets
Focussed on increasing sales of current offering to the health An open, modern cloud based Digital Health Platform offering
vertical (e.g. hospitals, GPs, aged care, etc.) a full range of Telco and IT services to the New Zealand health
ecosystem
Digital Preparing to launch Digital Health Platform to better connect
Health New Zealand health providers Value added services e.g. electronic medical records, health
analytics
Launched Spark Sport platform and established brand New Zealand’s premier sports streaming business that meets
and offering the evolving needs of New Zealand sports viewers
Acquired key content rights Partnering for success to delivery wider reach, capability and
content
Sport Successfully delivered Rugby World Cup 2019 Growing business with targeted content investments focussed
Preparing to launch New Zealand Cricket on customer demand and delivery of commercial returns
(1)Internet of Things 60DELIVERING CLEAR CUSTOMER,
OPERATIONAL AND FINANCIAL BENEFITS
• Acquisition and retention benefits driven by further growth in
adoption of wireless technologies and ongoing digital services
Revenue and cloud transformation
• Entry into future markets IoT(1), health and sport providing new Ambition for FY23(2)
revenue opportunities
Financial Performance
~$140m-$160m revenue growth opportunity from established
• Ongoing network investment supporting growth in wireless and markets over the next three years
IoT(1)
• Cloud growth supported by investment in digital transformation ~$80m-$90m revenue growth opportunity from future
Investment support costs markets over the next three years
• Platform development costs associated with enhancing Spark Sport
offering and entry into health market Innovating for growth in new business while delivering cost
• Targeted investments in sports content that will deliver value efficiencies in the core over the next three years captured
under simple intuitive customer experience and smart
automated networks capabilities
• Ongoing transition to a wireless future and digital business Operational Performance
transformation delivering customer care efficiencies
• Tight focus on product costs improving product profitability ~30-40% of broadband base connected via wireless
Efficiencies • Cost efficiencies provide optionality to reinvest in broadband services
new future markets
~1m IoT(1)connected devices
(1)Internet of Things
(2)Refer to financial aspiration section for overall summary of FY23 financial performance ambitions 61BALANCING OPPORTUNITIES
AND RISKS ESTABLISHED MARKETS
Opportunities Risks
Rollout of 5G supporting significant increase in Ability to scale and monetise MITIGATED Investing in line with demand and
BY
capacity to meet customer demand for more data significant investment in 5G use cases that can be scaled and
and unconstrained capacity spectrum and infrastructure commercialised
Wireless
Growing need for super simple in-home Competitive market place MITIGATED Investing in wireless capacity and vertical
BY
experiences with intuitive, digital automations with pressure integration of digital experience layers that
'out of the box' across a growing range of on profitability simplify and automate customer
connected hardware experiences
Broadband
Growing data consumption and computing power increasing Organic growth pipeline and MITIGATED Strategic partnerships with hyperscalers
BY
demand for cloud solutions demand attracting global and ongoing focus on complete cloud
Enabling data, AI and ML(1) to drive enhanced customer hyperscalers to New Zealand custodianship and hybrid approach
experiences and operational effectiveness market
Cloud
(1)Artificial intelligence and Machine Learning
62BALANCING OPPORTUNITIES
AND RISKS FUTURE MARKETS
Opportunities Risks
Explosion of connected devices Inability to get leverage across use MITIGATED Proof of concepts with select
cases resulting in having to build BY partners and regular market
Rapid market growth forecasted across the IoT(1) bespoke solutions scanning and forward focussed
value chain beyond just connectivity IoT(1) Arrival of large scale international partnering
players
Significant government investment to accelerate digitisation Heavily fractured health MITIGATED Clear focus on connecting with key
of health market BY stakeholders and cross sell of current
Slow moving partners and IT solutions
Increasing trust of tele-health services by medical Digital key stakeholders Specialist team with deep
understanding of sector and
professionals and consumers post COVID-19
Health relationships
Limited additional sports content MITIGATED Leveraging existing content and
for next 18-24 months BY value of Spark group and targeted
Increasing momentum in customers adopting online
viewing over traditional viewing solutions of a wide Increasing content acquisition strategic partnerships
range of entertainment offerings costs
Sport
(1)Internet of Things
63OUR PURPOSE
TO HELP ALL OF NEW ZEALAND
WIN BIG IN A DIGITAL WORLD
Āwhinatia ngā tangata katoa o Aotearoa Kia matomato te tipu I te ao matihiko.
Our 3 year goals
Sustainable
Best cost free cash flow
+40 NPS on Lift digital
Brand ~31% EBITDAI growth and
every +70 eNPS equity
strength margin top decile
measure +25k
+10pp(1) TSR(2)
WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES A POSITIVE DIGITAL FUTURE FOR WORLD CLASS CAPABILITIES WORLD CLASS CAPABILITIES
WORLD CLASS CAPABILITIES
AND CULTURE AND CULTURE ALL OF NEW ZEALAND AND CULTURE AND CULTURE
AND CULTURE
A POSITIVE DIGITAL FUTURE FOR GROW ESTABLISHED MARKETS
GROW ESTABLISHED MARKETS GROW ESTABLISHED MARKETS ALL OF NEW ZEALAND
ACCELERATE FUTURE MARKETS ACCELERATE FUTURE MARKETS
ACCELERATE FUTURE MARKETS
A POSITIVE DIGITAL FUTURE FOR A POSITIVE DIGITAL FUTURE FOR
ALL OF NEW ZEALAND ALL OF NEW ZEALAND
(1)Percentage points
(2)Total Shareholder Returns 64FINANCIAL ASPIRATION Stefan Knight Finance Director
WHERE WE ASPIRE
TO BE BY 2023
Primarily Digitally Leading Cloud 5G Future
Wireless Native Custodian Everywhere
. Workforce
~80% of relationships Digital channels are the Bringing the best of 5G and IoT(1) deployed Skills rebalanced
on wireless predominant choice private and public cloud nationwide Top decile culture, defined
technology Experience consistently together with our Unconstrained by inclusivity and growth
replicated across all service expertise mobile capacity Best-in-class adaptive
channels leadership
Delivery of these aspirations will result in highly engaged customers and people, growth and top decile returns
(1)Internet of Things
66OUR PLAN TO DELIVER
LONG-TERM VALUE FOCUS AREAS
SPARK’S MODEL FOR
• Grow established markets mobile, broadband and cloud
LONG-TERM VALUE Consistent REVENUE GROWTH • Enter future markets – digital health, sport, IoT(1)
earnings
MARGIN EXPANSION • Primarily wireless
growth
• Ongoing cost reduction programmes
• Improved effectiveness of labour
Evidenced by Total Shareholder Returns
• Simple intuitive customer experience
• Deep customer insights
Long-term value
COMPETITIVE ADVANTAGE • Automated smart network
• Growth mindsets
Sustainable ENVIRONMENTAL AND
business SOCIAL SUSTAINABILITY
• Create a sustainable Spark
performance • Economic recovery and transformation
• Champion digital equity
STRONG GOVERNANCE
• Proactive risk management policies
• Diverse Board composition and skills
• Capex maintained at 10%-11% of revenues
TIGHT CAPITAL EXPENDITURE
• Improved cash conversion
MANAGEMENT DRIVING
Sustainable FREE CASH FLOW GROWTH • Investment focussed on future revenue streams and
building capabilities
dividend
profile • Ambition to pay growing and sustainable dividends, funded
PRUDENT CAPITAL
STRUCTURE through sustainable free cash flow
(1)Internet of Things
67COVID-19 HAS RESULTED IN
NEW BUSINESS IMPACTS
Current
assumptions/initiatives What’s changed?
COVID-19 BUSINESS IMPACTS
Financial Mobile market growth Likely to be slower, particularly roaming and handset sales
Cloud growth IaaS and SaaS(1) likely to benefit, but potentially some offset in other IT outsourcing
programmes
New opportunities emerging due to demand for remote working solutions
Grow wireless broadband Removal of overage charges during lockdown creates greater confidence to increase caps,
Current and drive uptake of unconstrained capacity
Initiatives Prepare for 5G Increasingly important to support New Zealand's return to growth and innovation
Strategic Build world class capabilities Increasingly important simple digital experiences need to be accelerated
Choices Accelerate future markets New opportunities will exist, those already identified (e.g. health) even more relevant
Negative EBITDAI impact for COVID-19 expected to be ~$75m in FY21
(1)Infrastructure as a Service and Software as a Service 68MODEST REVENUE GROWTH THROUGH STRONG EXECUTION
IN ESTABLISHED MARKETS AND ENTRY INTO FUTURE MARKETS
FY20(1) FY17-FY20
FY21 to FY23 Aspiration
$m CAGR
Mobile Service Revenue $848 3.2%
Moderated growth in FY21, lifting thereafter, as COVID-19 situation improves
• COVID-19 will impact roaming and handset sales in FY21
Mobile Non-service revenue $440 3.7%
• Demand for data continues, supported by wireless network investment, driving ARPU(2) growth
• Connection growth in pay-monthly and SME(3)
Total Mobile $1288 3.3%
Moderated growth in FY21, lifting thereafter, as COVID-19 situation improves
• IaaS and SaaS(4) will continue to grow, but potentially some short term offset in other IT outsourcing programmes
Cloud, Security and Service $443 11.9% due to COVID-19
Management • Organic growth opportunities with strong pipeline for cloud and security services
• Partially offset by price erosion as market matures
Broadly flat, with focus on holding connection share
• Lower growth in overall market
Broadband $680 0.3%
• Competitive market place with 80+ players, low barriers to entry
• Increasing data caps on wireless broadband to increase the addressable market
Consistent decline
• Ongoing declines in legacy voice
Fixed Voice $391 (13.4%) • Ongoing fixed to mobile substitution
• A much smaller part of our business by FY23 i.e. likely to be less than 7% of total revenues, compared to 11% in
FY20
Higher growth
Other Revenues(5) $130 10.6% • New revenues from future markets such as IoT(6) and Digital Health
• Growing subscriber base in Sport
(1)FY20 Total revenue was $3,623m which also includes Managed Data, Network and Services (3)Small and Medium sized enterprises (5)Other Revenues include Spark Sport, Qrious, IoT (Internet of Things)
($248m), Procurement and partners ($408m), and Other gains ($35m) (4)Infrastructure as a Service and Software as a Service (6)Internet of Things
(2)Average Revenue Per User 69REVENUE WILL CONTINUE
TO REBALANCE
WITH MOBILE AND CLOUD EXPECTED TO DELIVER ~50% OF REVENUES AS VOICE Modest revenue growth comes from
BECOMES A MUCH SMALLER PART OF THE BUSINESS Established Markets
Wireless
Via 5G and unconstrained capacity
Cloud
Mobile Via hybrid cloud solutions and digital
transformation
Cloud, security
& service
management And entry into Future Markets
Other IT Services IoT(2)
Via growth in connected devices to
Other grow to ~1m
Broadband
Digital Health
Via new revenue opportunities
Voice
supported by the introduction of Digital
Health Platform
FY17 FY23
~$75m impact on gross margin from Impact on gross margin from fixed voice expected to Sport
fixed voice decline be substantially lower as revenues and costs reduce as
customers shift away from copper and PSTN(1) Via growth in subscriber base
(1)Public Switch Telephone Network
(2)Internet of Things 70FOCUS ON EFFICIENCY AND WIRELESS
DRIVING MARGIN EXPANSION
FY20(1) FY17-FY20
FY21 to FY23 Aspiration
$m CAGR
Broadly flat
Total mobile $459 (0.3%) • Lower service revenue growth and slower handset renewals
COST OF SALES
Cloud, security and service Moderation
$90 27.9%(2)
management • In line with revenue growth and reduced near term IT project activity
Continued declines
• Growth in wireless broadband; partially offset by
Broadband $339 (3.3%) • Ongoing competitive intensity in market
• Migration to more expensive fibre inputs, and local fibre company price increases
Similar declines
Fixed Voice $146 (9.7%) • Connection loss and substitution to alternative wireless and fibre alternatives
Declining
• Ongoing simplification, automation and digitisation
Labour $511 (2.4%) • Agile maturity supporting further productivity and efficiency gains which offset inflationary pressures and
pay rises
Targeted declines
Opex $402 1.4% • Continue to target cost efficiencies to offset inflationary pressures and cost in
• Some cost reductions being consciously reinvested in support of revenue growth
(1)FY20 Total costs were $2,510m which also includes Procurement & Partners ($362m), Managed data, network and services ($119m), Other product costs ($82m)
(2)Increase reflects changing mix of revenue with increases in public cloud which incur higher cost of sales but lower labour to support
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