Hello Tomorrow Spark Annual Report 2022 KO TE PAE ANAMATA WHAKAMAUA Re-imagining a future that all New Zealanders can share. We’re on track to a re-imagined future that all New Zealanders can share. The challenges of the pandemic, and our urgent need to transition to a low-carbon economy, have brought into sharp focus the role technology must play in enabling this change. We’re continuing to simplify ourselves, and hone our understanding of New Zealanders through data, to serve Kiwis better. And we’re building the critical infrastructure and introducing new technologies that will enable and embolden New Zealanders to go after what inspires them, in life and in business. As Aotearoa rapidly digitises, we are acutely aware of the responsibility we hold to help all New Zealanders thrive in a digital world – no matter who they are or where they’re from. We are here to help New Zealanders build the tomorrow they want. Ko Te Pae Anamata, Whakamaua. Hello tomorrow. 1 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Highlights FY22 Highlights FY22 Creating significant shareholder value #2 for total shareholder returns Spark ranked #2 against international peers for Total Shareholder Returns (TSR), with a CAGR1 of ~12% for three years2 Guiding to FY23 dividend growth Total FY22 dividend of 25.0 cents per share, 100% imputed, and guiding to a total FY23 dividend of 27.0 cents per share, 100% imputed – funded through earnings and free cash flow growth TowerCo transaction to deliver net proceeds of ~$900 million4 Up to $350 million will be returned to shareholders through an on-market share buy-back3, and a further $350 million invested in future growth opportunities 1 CAGR – compound annual growth rate. 2 For the three year period 1 July 2019 to 30 June 2022. 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. 3 Subject to market conditions at the time. Spark may investigate alternative return options. 4 Completion is conditional on Overseas Investment Office approval, which is anticipated to occur in H1 FY23. 2 For running header don't deleteHello Tomorrow Strategy execution driving market momentum Mobile growth outperforming the market Mobile service revenue grew 5.5%, with Spark outperforming the market – supported by data-driven marketing and brand strength Future market growth accelerating Spark IoT revenues increased 22% as connections grew 75% to 832,000 and Spark Health grew revenues 46% Better customer experiences Strategic focus on simplification, deep customer insights, a smart, automated network, and a high- performance culture delivering improved customer outcomes – with iNPS1 up 9 points to +29 1 Customer interaction net promoter score. 3 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Contents Contents Ko Te Pae Anamata, Whakamaua – Hello Tomorrow About this report How we create value Spark’s operations Spark performance snapshot FY22 Chair and CEO review Our performance Creating value for our customers Creating value through our network and technology Creating value for our people Creating value for our environment Creating value for our communities Our Board Our Leadership Squad Our governance and risk management Our suppliers Leadership and Board remuneration 5 8 10 11 12 16 20 30 40 50 56 62 66 68 73 75 Financial statements Financial statements Notes to the financial statements Independent auditor's report Other information Corporate governance disclosures 78 83 124 129 Spark’s managing risk framework roles and responsibilities 138 Sustainability appendix Our Sustainability Framework Our Sustainability Governance Framework Materiality Stakeholder engagement Global Reporting Initiative (GRI) content index Glossary Contact details 140 141 142 144 145 147 148 4 Hello Tomorrow About this report • This is an integrated report to share our financial, social, environmental and economic performance. To inform our approach we’ve applied the InternationalFramework which considers the creation of value over the short, medium, and long term, thinking holistically about the resources and relationships the organisation uses or affects, and the dependencies and trade-offs between them as value is created. • At the heart of this approach is the value creation model (laid out on page 8), which details the ‘capitals’ we draw upon, our strategy and business model, and the outputs and outcomes we deliver. We have a section of the report dedicated to each of these capitals. Our detailed financial report is covered in pages 78 – 123. • In preparing the report we also use the Global Reporting Initiative (GRI) standards, the most widely used global sustainability reporting standard. This requires us to apply a materiality lens to identify and report against the sustainability issues most important to our business and our stakeholders. We have a dedicated sustainability appendix at the back of the report that includes our materiality matrix and our GRI index that directs to where we have covered specific sustainability topics in the report and elsewhere. See pages 139 – 146. • This Annual Report is published alongside our FY22 Corporate Governance Statement, our FY22 Modern Slavery Statement, and our FY22 Greenhouse Gas Inventory Report. For the full suite of FY22 disclosures please visit www.sparknz.co.nz/about/governance Hello Tomorrow Spark Annual Report 2022 KO TE PAE ANAMATA WHAKAMAUA Spark Modern Slavery Statement 2022 MODERN SLAVERY STATEMENT Spark Greenhouse Gas Inventory Report 2022 GREENHOUSE GAS INVENTORY Spark Annual Corporate Governance Statement 2022 GOVERNANCE CORPORATE This report covers the activities of Spark New Zealand Limited and its subsidiaries for the period 1 July 2021 to 30 June 2022. It is dated 24 August 2022 and is signed on behalf of the Board of Spark New Zealand Limited by Justine Smyth, Chair and Charles Sitch, Chair Audit and Risk Management Committee. Justine Smyth, CNZM Chair Charles Sitch Chair Audit and Risk Management Committee Key dates Annual Meeting 04 November 2022 FY23 half-year results announcement 22 February 2023 FY23 year-end results announcement 18 August 2023 5 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Ko Te Pae Anamata, Whakamaua Grasp the future horizon On the front page of this report you will see the words, Hello Tomorrow, and the accompanying Te Reo Māori kupu, Ko Te Pae Anamata, Whakamaua. Translated back into English, this means Grasp the future horizon. When considering Hello Tomorrow from a te ao Māori perspective, we started at whakapapa (lineage) – knowing who we are and where we come from. Our whakapapa allows us to see the past as mātauranga (wisdom) we have inherited as mokopuna (descendants) ourselves. With this understanding, the decisions we make in the present benefit from the ancestral knowledge of our past. Embraced by Te Korowai Tupu, we aspire for Spark to create a meaningful impact on Te Ao Kikokiko (the ever-changing world around us) so that future generations can continue to grow and thrive in a digital world. We know that pursuing future horizons was the motivation of our Tīpuna (ancestors) when they discovered Aotearoa. Grounded in this intergenerational aspiration, we welcome the opportunities of what is yet to be known, yet to be done, and yet to be learned. Ko te pae anamata, Whakamaua – grasp the future horizon. 7 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua How we create value How we create value WHAT WE RELY ON OUR BUSINESS MODEL Our customers Social capital Consumers and organisations that are enabled by our products and services Financial capital Financial capital Equity, debt and cash generated through our operations Our network and technology Manufactured + intellectual capital Our mobile sites, data networks, systems, processes and digital services capability Our people Human + intellectual capital Engaged, adaptive and inclusive teams that are the heart of our business Our environment Natural capital Energy, materials and impacts of our operations Our communities Social + human capital Our communities around New Zealand and the communities across our global supply chain 8 A culture that develops and empowers our people Investment in resilient, adaptable infrastructure for New Zealand’s future Innovation to create value for Spark and our customers Providing leading products and services that connect and enable New Zealanders G O VERNANCE B U S I N E SS STRATEGY O U R VALUES āia, We are B old M T ū h o n o , W e OUR PURPOSE TO HELP WIN BIG IN A DIGITAL WORLD C o n n e ct Matomato , W e S e e c c u W h a k a m a n a , W e E m p o w e r er d Togeth Create a Sustainable Spark Economic Recovery and Transformation Champion Digital Equity Te Korowai Tupu Including the elements of our Sustainability Framework and Te Korowai Tupu – see page 140 For running header don't deleteHello Tomorrow OUTPUTS FY22 OUTCOMES FY22 • 2.5 million mobile connections • 704,000 broadband connections • Consumer and small business interaction score (iNPS) +29 • Growth of technology solutions to solve real-world business problems • $3,720 million operating revenues and other gains • $410 million net earnings • 25 cents per share dividend • 200% increase in mobile network capacity over past three years • 12 additional 5G locations with 5G now live in 21 locations across New Zealand • Investment in mobile core and Optical Transport Network 2.0 to build adaptability, resilience and capacity • Employee Net Promoter Score (eNPS) +70 • 40:40:20 gender representation at Board, Leadership Squad, and senior leadership levels • ~50% of employees sharing ethnicity data • Mahi Tahi employee wellbeing strategy launched • Investment in learning and development • 18,299 tCO2e scope 1 and 2 emissions • 545 tonnes of e-waste recovered • 20,609 mobile phones collected for recycling • Efficiencies enabled across other sectors • Skinny Jump benefitting 23,323 households • 586 connections to the Digital Marae Connectivity Programme • Improved approach to supplier risk through Modern Slavery Framework • Community investment through Spark Foundation Connected customers Enabling our customers to realise the benefits of digital technology and enabling their own value creation See page 20 Capital for future investment Enabling future investment in our business and providing market returns to grow financial capital for our shareholders See page 16 Connected and resilient New Zealand Enabling a connected NZ and providing infrastructure to support innovation See page 30 Engaged and inclusive teams Enabling the success of our business and our people and growing New Zealand’s human capital See page 40 Reduced draw on natural capital Enabling efficient use of natural capital across all sectors See page 50 Connected and empowered communities Enabling all New Zealanders to benefit from the digital world and improving social outcomes across our value chain See page 56 9 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Spark’s operations Spark’s operations Spark is New Zealand’s largest telecommunications and digital services company. Our customers range from consumers and households to small businesses, not-for-profits, government, and large enterprise clients. Across all our services – mobile, broadband, cloud services, digital services, and entertainment – we have relevance for almost every New Zealander. 98% of New Zealanders reached by our 4G network 99% of the population reached by our Cat-M1 IoT network 67 retail stores 704k Broadband connections 24 regional business hubs 16 data centres ~1,500 mobile sites supporting more than 2.5 million mobile connections 5,1441 New Zealand employees A S n to U ctio e n n o C A S n t o U c ti o e n n o C C onnection to A ustralia Connections to Australia Fibre Transport Network Data Centres Southern Cross Cable Southern Cross Next Cable Earth Station Satellite Link Corporate Offices Tasman Global Access Cable We operate the following brands and businesses Consumer Business Community Growth markets Other brands 1 Total headcount including full-time, part-time and fixed-term employees. 10 For running header don't deleteHello Tomorrow Spark performance snapshot FY22 Operating revenues and other gains EBITDAI1 $3,720m 3.5% $1,150m 2.8%2 Net earnings Mobile revenue $410m 7.6%2 $1,351m 3.1% Broadband revenue Cloud security and service management revenue $639m 4.6% $446m 0.7% Voice revenue Capital expenditure1 $285m 7.5% $410m +17.5%2 Consumer and small business iNPS4 Free cash flows3 $296m 31.6% +29 9 points5 Employee NPS6 +70 6 points 1 Earnings before finance income and expense, income tax, depreciation, amortisation and net investment income (EBITDAI) and capital expenditure are non-Generally Accepted Accounting Practice (non-GAAP) measures. These measures are defined and reconciled in note 2.5 of the financial statements. 2 Prior year EBITDAI and net earnings have been restated due to implementation of the IFRS Interpretations Committee (IFRIC) agenda decision. This required configuration and customisation costs incurred in implementing Software-as-a-Service (SaaS) cloud computing arrangements to be expensed rather than capitalised as part of intangible assets. 3 Free cash flows is a non-GAAP measure and is calculated on page 9 of Spark's FY22 Detailed Financials. 4 Interaction Net Promoter Score, a measure of customer engagement. 5 FY21 iNPS has been restated to +20 as detailed on page 76. 6 Net Promoter Score, a measure of employee engagement. 11 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Chair & CEO review Chair & CEO review Justine Smyth, Chair and Jolie Hodson, CEO Ko Te Pae Anamata, Whakamaua Tēnā koutou 12 Hello Tomorrow Over the past year Spark has made significant progress against our three-year strategy, we achieved market-leading growth in mobile, and we were pleased to be ranked #2 against our international peers for total shareholder returns, with a compound annual growth rate of ~12% for three years. We have achieved this in a year of ongoing disruption. The first half saw prolonged Covid-19 lockdowns across the country, with Auckland in particular spending 107 days locked down. In the second half we have seen economic volatility stemming from the ongoing impacts of Covid-19 and the war in Ukraine, including high inflation, labour shortages, and supply chain constraints. For Spark the most material impact continued to be our lower levels of mobile roaming revenue, as travel remained restricted for much of the year. As border restrictions ease and travel recommences, we are optimistic that we will see roaming revenue return. Like all businesses we are operating in an incredibly tight labour market, and skills shortages in the technology sector are an ongoing challenge. We continue to work collaboratively across the sector to build a talent pipeline over the longer term, while increasing our focus on internal talent mobility in the short term. We also continue to tightly manage our supply chain, holding more stock on shore and working to longer lead times to mitigate the impact of delays. The rising cost of living has brought the issue of digital equity back into the spotlight and made the inclusivity of our purpose, to help all of New Zealand win big in a digital world, all the more relevant. We continue to invest in community-led solutions to bridge the digital divide through Spark Foundation, and in the last year, we have grown our not-for-profit broadband service, Skinny Jump, by ~33% – supporting 23,323 households that would otherwise be excluded from the digital world. While disruption remains the norm, we are optimistic about Aotearoa’s future, and well positioned for growth. We have seen a rapid acceleration in digitisation and technology convergence, with 5G, multi-access edge compute (MAEC)1, data and artificial intelligence (AI), internet of things (IoT), and cloud computing combining to deliver powerful solutions. Our significant investments in the digital infrastructure underpinning these technologies will allow us to lead the development of new commercialisation opportunities in the years ahead. Maximising value for our shareholders In these uncertain times, we know our shareholders are looking for consistent returns and to ensure that capital is deployed and used effectively. Following the infrastructure review we conducted during the last financial year, we established TowerCo as a subsidiary company to improve the performance, utilisation, and efficiency of our passive mobile infrastructure assets (such as the towers and poles that the active components or ‘smarts’ of our network sit on), and to explore the introduction of third-party capital. This culminated in the agreement to sell a 70% stake in TowerCo to the Ontario Teachers’ Pension Plan (OTPP) just after the close of FY22. OTPP is a high-calibre investor with a long-term partnering focus, net assets of C$241.6 billion, and significant experience managing a portfolio of infrastructure investments globally. The transaction is conditional only on Overseas Investment Office approval, which is anticipated to occur during the first half of FY23. It will deliver net proceeds of ~$900 million and values the business at $1.175 billion, representing an FY23 pro-forma EBITDA multiple of 33.8x2. As the anchor tenant, and by retaining a 30% stake, Spark remains a key strategic partner as the business grows. “ While disruption remains the norm, we are optimistic about Aotearoa’s future, and well positioned for growth.” The Board reviewed Spark’s Capital Management Policy and released a new Capital Management Framework, which is designed to grow long term shareholder value through disciplined investment, while returning excess capital to shareholders and maintaining financial strength and flexibility. As we look to FY23, we have confidence in our ability to grow free cash flow to ~$460 to $500 million, to fund our ordinary dividend. This growth reflects the changes we have made to evolve from a traditional telecommunications business to a more diversified and higher growth digital services provider. As a result, we are guiding to a total FY23 dividend of 27 cents, 100% imputed, funded through earnings and free cash flow growth. This is the first time the total dividend has increased since 2016 and reflects the confidence we have in Spark’s strategy and future growth potential. In addition, following completion of the TowerCo transaction, up to $350 million will be returned to our shareholders, which we intend to deliver through an on-market share buy-back. This is subject to market conditions at the time and we may investigate alternative return options. A further $350 million will be invested in future growth opportunities such as digital infrastructure, scaling Spark Health and Spark IoT, and accelerating the commercialisation of emerging technology, such as digital identity and verifiable data through our subsidiary MATTR. The remaining funds will be used to offset debt headroom requirements resulting from the increased lease liability of our long term agreement with TowerCo to secure access to existing and new towers. 1 MAEC – Multi-access Edge Computing (MAEC) extends the capabilities of cloud computing by bringing it to the edge of the network. While traditional cloud computing occurs on remote servers that are situated far from the customer and a device, MAEC allows this processing to take place much closer to the end customer – meaning data has to travel a shorter distance, decreasing latency and the amount of data sent across the network can be reduced, reducing congestion and delivering a better customer experience. 2 Assumes FY23 EBITDA of NZ$34.8 million as at 30 June 2023. 13 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Chair & CEO review Our FY22 performance We were pleased FY22 delivered a return to growth, with revenue increasing 3.5% to $3,720 million, driven by our out performance in mobile and Spark Health contract wins. We achieved mobile service revenue growth of 5.5%, with Spark outperforming the market as data-driven marketing supported a ~13% increase in customers on Endless plans, and pay-monthly, pre-paid, and business connections grew steadily. We redesigned our broadband plans to improve transparency, simplicity, and our competitiveness, stabilising our customer base at 704,000, in line with our strategy to maintain market leadership. While this drove a 4.6% revenue decline to $639 million, continued wireless broadband connection growth of 16,000, helped offset this impact through avoided input costs. We now have ~28% of our broadband base on wireless and are on track to meet our FY23 target of ~30%. Our cloud, security, and service management revenue grew modestly at 0.7% to $446 million, falling short of our 5-8% target. Our performance was impacted by the extended lockdowns in the first half, which restricted access to customer sites, delays to transformation projects, and supply chain disruption. We also experienced execution challenges in some areas of the business, and we are now focussed on lifting performance through refreshed products and pricing and further growing our cloud specialist skills. We continued to see strong momentum in our future growth markets. Spark Health delivered revenue growth of 46%, winning national health contracts, and launching its new cloud-based digital health platform, Kete Waiora. Spark IoT grew revenue 22% and connections 75% to 832,000 and took a significant stake in partner Adroit, to accelerate future growth in sustainable monitoring solutions. Combining our top-line growth with our long-term focus on disciplined cost reduction, we delivered EBITDAI growth of 2.8% to $1,150 million, towards the top end of our guidance range. NPAT increased by 7.6% to $410 million, driven by EBITDAI growth, with net financing, depreciation and amortisation, and tax stable. Free cash flows were lower than aspiration at $296 million, impacted by advanced purchasing of inventory and capital expenditure items to mitigate supply chain disruption risks and the related impact on working capital. We remain confident in achieving our FY23 free cash flow aspiration of ~$460-$500m. We were pleased to confirm a total FY22 dividend of 25 cents per share, 100% imputed, for our shareholders, completing a strong result, with all guidance metrics achieved. Clear progress against our strategy We continued to build the core capabilities that are differentiating Spark in a competitive market. We are a simpler organisation with more intuitive, digital channels for our customers. We retired 102 legacy mobile and broadband plans during the year, while increasing digital journeys for sales and service by 23% – delivering a 17.5% reduction in customer care calls, and 18% growth in online revenue. We successfully completed the implementation of a new enterprise resource planning system, which will improve the efficiency of our internal operations, supporting better customer outcomes. We continued to hone our data capability to better understand our customers’ needs. Our data and AI-driven marketing capability continues to mature, and we can now better predict the needs of ~90% of Spark customer households and make recommendations for more than half of our small-medium business customers – increasing marketing campaign conversion by 19% year on year. As we deliver simple, digital, and data- driven customer experiences, we are improving customer engagement – with our interaction net promoter score (iNPS) up 9 points from FY21 to +29. We are building a smart, automated network at pace, to underpin Aotearoa’s digital economy and our future growth. The Covid-19 lockdowns that occurred in the first half delayed our build program, with Alert Level restrictions preventing us from undertaking builds for several months. Despite this challenge we have made strong progress towards our goal of 90% population coverage by the end of calendar year 2023 – expanding or launching new coverage in 12 locations during the year. At the end of FY22 we had 5G live in 21 locations across the country. We were pleased to see the New Zealand Government and iwi come to an agreement on spectrum allocation, which recognises Māori interests. We believe this should pave the way for the C-band spectrum auction to proceed in a timely fashion. Any further delays to this process, or to the provision of 600 MHz spectrum, will impact our roll-out and ability to meet our coverage targets. As our economy digitises at pace, we are boosting capacity and resilience. Our Takanini Data Centre expansion is on track for delivery in 2023 and over 85% contracted, while our Mayoral Drive Exchange upgrade is complete. The build of our Optical Transport Network 2.01 – the fibre backbone of our network – is also 87% complete, and we were pleased to welcome customers onto the new Southern Cross NEXT cable, which has almost doubled international capacity for New Zealand. Investing in our people and culture is always a priority, and we were pleased to maintain high levels of people engagement despite Covid-19 disruptions, with our employee net promoter score (eNPS) at +70. 1 The Optical Transport Network (OTN) is the high speed backbone of Spark’s network, stretching from the Far North to the bottom of the South Island. The OTN uses light signals through optical fibre cables to carry all of Spark's data traffic up and down the country through diverse paths, ensuring resilient, fast connectivity for all users. 14 For running header don't deleteHello Tomorrow “ We are building a smart, automated network at pace, to underpin Aotearoa’s digital economy and our future growth.” We delivered comprehensive and widely-available learning experiences for our people and launched a new wellbeing strategy, Mahi Tahi, to support mind health, connection and sustained performance. Our FY23 40:40:20 gender diversity target has been achieved at the Board, Leadership Squad, and senior leadership levels, and we were pleased to see female representation increase from 42% to 47% in our senior leadership roles. We also made significant progress closing our median gender pay gap, which has reduced from 28% to 24%. We still have some work ahead of us to achieve our 40:40:20 target Spark-wide, with women comprising 34% of our total workforce. Covid-19 made it more challenging to create opportunities for change over a number of years, and as such, while our ambition does not change, we believe we are more likely to reach our representation target in 2024, and our median gender pay gap target in 2025. To drive further progress we have created integrated workforce plans that lift gender participation team-by-team across the business and expect to see further movement during FY23. We also improved our understanding of Spark’s ethnic diversity, which is a key enabler of targeted action to improve representation. At the start of FY22 only 19% of Spark people had shared their ethnicities with us, and by the conclusion this had increased to ~50%. Supporting our transition to a low carbon economy As we look to the future, we know the window to take meaningful action to prevent the worst impacts of climate change is closing fast and every business must act. We have continued to mature our sustainability practices, establishing an emissions reduction and energy efficiency programme to drive action against our science-based target of reducing scope 1 and 2 emissions 56% by 2030, from an FY20 baseline. Over the past year we saw a 15% emissions reduction, through a combination of grid decarbonisation and energy efficiency improvements within Spark. We are pleased our underlying performance is laying the foundations for future emissions reductions and we are heading in the right direction, however we acknowledge our FY22 emissions are still higher than our FY20 baseline. To meet our science-based target we are exploring how we can decouple our growth from emissions by linking our energy procurement to new sources of renewable electricity. We have linked our financing to our sustainability performance – with Spark Finance establishing three Sustainability- Linked Loans totalling NZ$425 million and New Zealand’s first Sustainability-Linked Bond of NZ$100 million. We signed up to the Climate Leaders Coalition's (CLC) higher statement of ambition – covering mitigation, adaptation, and transition – and Jolie stepped into the role of CLC Convenor, to work alongside CLC signatories and collectively raise the bar on what business leadership on climate action looks like. We believe technology has an important role to play on this journey, enabling businesses across a range of sectors to decarbonise and improve environmental performance. We are already seeing this come to life in some parts of our business, with over half of our Spark IoT FY22 revenue linked to environmental solutions – from more efficient use of water on farm to enabling the deployment of electric car charging stations to more areas across the country. As we harness the power of technology to digitise and adapt, we are acutely aware of the urgent need to address our digital divide. With 1 in 5 New Zealanders digitally excluded in some way, our long-term focus on lifting digital equity remains a strategic priority. Hello Tomorrow The theme of this year’s report is Ko Te Pae Anamata, Whakamaua – Hello Tomorrow. Over the coming months you will start to see us use these words in our marketing and across our business. But Hello Tomorrow is more than just words on an advertisement. It brings to life the role we believe Spark can play as an enabler of change that helps move New Zealand forward and speaks to the mindset we are taking into the years to come. A mindset of innovation and optimism about what is possible. Thank you We are both personally very proud of the results Spark has delivered, and the value created for shareholders in FY22. None of this would have been possible without the mahi of our Spark whānau and the ongoing support of our customers, suppliers, partners, and shareholders – and for this, we thank you. Noho ora mai [be well] Justine Smyth, CNZM Chair Jolie Hodson CEO 15 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Our performance Our performance Our performance Operating revenues and other gains • Mobile revenue growth of $40 million, or 3.1%, has been driven by a growth of service revenue of $47 million due to pre-paid, post-paid and business connections growth and existing customers transferring to our Endless plans³, and an increase in outbound roaming as travel restrictions eased. This was partially offset by a reduction in non-service revenue of $7 million, or 1.5%, due to a reduction in handset revenue as lower numbers of units were sold in FY22 resulting from Covid-19 related supply constraints. • Broadband revenues declined mainly due to customers migrating off legacy plans and being acquired on lower priced in-market plans. • Procurement revenues increased by $124 million, or 30.0%, mainly due to strong sales of both licensing software and procurement hardware, particularly in the health sector. Partner service sales also increased due to businesses investing in equipment for employees to work from home. • Cloud, security and service management revenue growth slowed to $3 million or 0.7% in FY22, with cloud growth reflecting a shift away from private cloud to lower-margin public cloud and lower annuity security revenues. Managed data and networks revenue growth of $1 million was driven by increased collaboration revenue, particularly in call centre line volumes, largely offset by lower volumes of network project work due to completion of large projects in the prior year. • Voice revenues declined due to a combination of continued connection losses as voice becomes a smaller part of the business and lower voice usage of existing customers. FY21 included non-recurring refunds of $16 million for historic wire maintenance charges. • Other operating revenues grew $15 million, or 10.9%, due to growth in the Sport, Qrious, Health and IoT businesses. • Other gains of $26 million, down $2 million from FY21, were mainly generated from the sale of mobile network equipment and gains on lease modifications and terminations. 16 EBITDAI1 $1,150m 2.8%2 $3,720m 3.5% year-on-year 1,400 1,200 1,000 N O I L L I M $ 800 600 400 200 0 FY22 FY21 E L I B O M D N A B D A O R B S R E N T R A P D N A T N E M E R U C O R P I E C O V D N A Y T R U C E S I , D U O L C T N E M E G A N A M E C V R E S I , A T A D D E G A N A M I S E C V R E S D N A S K R O W T E N I S N A G R E H T O D N A I S E U N E V E R G N T A R E P O R E H T O 1 EBITDAI is a non-Generally Accepted Accounting Practice (non-GAAP) measure and is not comparable to the New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) measures. This measure is defined in note 2.5 of the financial statements. 2 Prior year EBITDAI and net earnings have been restated due to implementation of the IFRIC agenda decision. This required configuration and customisation costs incurred in implementing SaaS cloud computing arrangements to be expensed rather than capitalised as part of intangible assets. 3 Endless plans are Spark’s mobile plans with unlimited calling minutes, unlimited SMS and an allowance of data to use at the maximum available speed, after which they are able to continue using mobile data but at a reduced speed. Hello Tomorrow Net earnings Earnings per share Dividends per share $410m 21.9 cents 25.0 cents 7.6%2 6.3%2 No change Operating expenses • Product costs increased by $101 million, or 6.3%, broadly in line with revenues with the major drivers being increased costs of $114 million in procurement that reflects the growth in revenue and sales, partially offset by a $28 million reduction in mobile handset costs. • Labour costs were broadly flat year on year with an increase of only $2 million, or 0.4%. • Other operating expenses decreased by $7 million, or 1.8%, due to a reduction in network support costs of $21 million, partially offset by an increase in bad debt expense of $11 million as expenditure returned to normal levels following the FY21 release of Covid-19 expected loss provisions not required. $2,570m 3.9% year-on-year 1,750 1,650 1,550 550 N O I L L I M $ 525 500 475 450 425 400 375 350 325 300 FY22 FY21 PRODUCT COSTS LABOUR OTHER Other • Total depreciation and amortisation was broadly flat. Depreciation and amortisation for property plant and equipment and intangibles was $5 million lower due to an increase in asset lives and ceasing depreciation on assets held for sale. This was partly offset by higher depreciation on right-of-use assets and leased customer equipment. • Net finance expense was relatively consistent, with both finance income and finance expense decreasing as a result of lower interest rates. • Tax expense increased by $2 million in line with the increased earnings before tax for the period, partly offset by an increase in non-taxable gains on the sale of mobile network equipment and lower foreign taxes. N O I L L I M $ 600 500 400 300 200 100 0 FY22 FY21 DEPRECIATION AND AMORTISATION NET FINANCE EXPENSE TAX EXPENSE 17 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Our performance Cash flows YEAR ENDED 30 JUNE Operating cash flows $841m 1.4%1 RESTATED1 2022 2021 $M $M Net cash flows from operating activities 841 Net cash flows from investing activities Net cash flows from financing activities (492) (350) 853 (376) (458) Net cash flows (1) 19 • Operating cash flows decreased by $12 million with increased earnings and lower tax payments being more than offset by increased working capital due to higher inventory levels to reduce supply chain risk and timing of customer invoicing. • Investing cash outflows were $116 million higher than the prior year with increased payments for property, plant and equipment, intangibles and capacity, due to early capital purchases to reduce supply chain risk, combined with increased long-term investments (largely for Southern Cross). There were no spectrum purchases in FY22. • Financing cash outflows decreased by $108 million primarily due to net proceeds from debt in FY22, partially offset by higher payments for dividends resulting from reduced uptake of the dividend reinvestment plan. YEAR ENDED 30 JUNE Free cash flows2 RESTATED1 2021 $M 433 2022 $M 296 • Free cash flows were down $137 million to $296 million in FY22, with the primary drivers being advanced inventory and capital purchases to mitigate supply chain risk and timing of payables and receivables which has mostly unwound subsequent to balance date. 18 N O I L L I M $ 870 820 770 720 670 620 1 2 Y F S E E Y O L P M E D N A S R E I L P P U S O T S T N E M Y A P T S E R E T N I M O R F S T P E C E R I 2 2 Y F X A T E M O C N I R O F S T N E M Y A P S R E M O T S U C M O R F S T P E C E R I T B E D N O T S E R E T N I R O F S T N E M Y A P I S T E S S A T N E M P U Q E R E M O T S U C D E S A E L N O T S E R E T N I R O F S T N E M Y A P S E S A E L N O T S E R E T N I R O F S T N E M Y A P 1 Prior year cash flows have been restated by $5 million due to implementation of the IFRIC agenda decision. This required configuration and customisation costs incurred in SaaS cloud computing arrangements to be expensed rather than capitalised as part of intangible assets. 2 Free cash flows is a non-GAAP measure and is calculated on page 9 of Spark’s FY22 Detailed Financials. Hello Tomorrow Capital expenditure3 $410m Capital expenditure to operating revenues 11.0% (FY21 9.7%) Key capital expenditure projects for the year included: • Continued investment in the converged communication network (CCN), advancing our exit strategy for the legacy PSTN network through ongoing fixed-line customer migration to IP-based voice services, and further investment in Spark’s wider, multi-year core lifecycle and expansion initiative, which will progressively increase greater resilience into our core network. • • Investment in international cable construction and capacity purchases as Spark continued to invest in Southern Cross and Tasman Global Access international cable capacity to meet upward trends in customer demand for data. IT systems investment included lifecycle investment and licencing for internal IT systems, enhancements to products and IT systems to improve the customer experience and the completion of the first phase to implement a replacement ERP system and integrate this into Spark systems. • Continued investment in Spark’s mobile core and radio access network (RAN) delivering greater network capacity and coverage, plus an uplift in Spark’s 5G investment to accelerate our roll out of this technology, creating the foundation for the emergence of new technology and experiences. • Data centre spend includes the modernisation of the Mayoral Drive exchange and the commencement of the data centre expansion project at Takanini. • Plant, fixed network and core sustain includes investment in the fibre build programme, new core network, fixed network broadband and carrier ethernet expansions to meet customer demand for services and traffic growth across the network. 3 Capital expenditure is a non-GAAP measure and is defined in note 2.5 of the financial statements. 19 CLOUD CONVERGED COMMUNICATION NETWORK (CCN)DATA CENTRES INTERNATIONAL CABLE AND CAPACITYIT SYSTEMSMOBILE NETWORKSPLANT, FIXED NETWORK AND CORE SUSTAIN OTHER $53M $7M $15M $22M $31M $7M $125M $150MSpark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our customers Creating value for our customers Creating value for our customers Supporting our customers’ own business models and their value creation for New Zealand Our customers range from consumers and households, to small businesses, not-for-profits, governments and enterprise clients. From mobile and broadband to cloud, IT, and managed services, as New Zealand’s largest telecommunications and digital services company, we have relevance for almost every New Zealander. As our country adapts to the realities of living with Covid-19, inflationary pressures, an uncertain global outlook, and the imperative of living more sustainably, we want to help our customers to win big in a digital world and become more productive and sustainable through technology. OUTCOMES FY22 Connected customers 20 Hello Tomorrow Customer experience We have an enduring focus on improving the experiences of our customers at Spark, by making their interactions with us simple and effective. This work is showing up in customer feedback, with our measure of customer satisfaction, our interaction net promoter score (iNPS), up 9 points from FY21 to +29. Transparency and simplicity As a business that’s been around for some time now, we have legacy (old) products and services that need to be retired as part of our efforts to simplify our systems and ensure our customers are getting the most of what we have to offer. We have a number of programmes under way to achieve this. The Spark App and MySpark web portal now provide our customers with a rolling 12-month view of their mobile and broadband usage and spend, allowing them to compare this against their current plan’s allowances and price at a glance. During the year we trialled a right-planning programme called Made for You (consumer) and Forward Report (SME), which prompts broadband customers to check they are on the best plan for their needs through an email with a personalised view of their current usage and a recommendation on the best plan available. We aim to use the insights gained through this trial to extend the programme in FY23. We are also removing legacy mobile and broadband plans from the market, with 102 plans removed during the year and 350,000 customers migrated onto modern plans. In October 2021 we launched a new broadband line-up, to offer greater transparency, simplicity, and more value for less. This change was made in response to feedback from our customers – providing them with one set price each month, clear descriptions about the suitability of each plan for individual household needs, even better value, and the ability to ‘pick and mix’ our world-class entertainment services at a discounted rate. This new line-up has resonated strongly, with our broadband connections returning to growth during FY22. Making it easier for our customers to interact with Spark This year we’ve continued to make it easier for our customers to interact with Spark. We’ve been further developing our ‘Unified Frontline’ model, which empowers our customer care and retail teams to move between different customer touchpoints (such as online chat, contact centres, or retail stores) depending on where the customer demand is at the time. This allows our customers to access skilled assistance through a channel that works best for them and builds the capabilities of our team members. The long running lockdowns in the first half of FY22 accelerated our progress in this space, allowing us to refocus retail team members into supporting customers via other channels, while we converted our stores into emergency distribution centres for contactless pick-up. Our alternative way of contacting Spark, asynchronous messaging, continued to be popular with customers who enjoy the flexibility it provides. This allows a customer to message Spark in our app or on tools like Facebook Messenger or WhatsApp – removing the need to call and wait for a conversation in real time, as the chat window stays ‘live’ and alerts customers when someone is available to assist them. Our customers have rated this option four times higher for customer experience than voice calls. We continued to build the functionality of the MySpark App with new tools such as App Shop and the ability to performance test and troubleshoot a broadband connection. The App now has around 1,400,000 unique users and in an average month sees over 800,000 interactions. In FY22 we saw a 23% increase in customer journeys taken digitally for sales and service, which resulted in a 17.5% decline in customer care interactions and delivered an estimated $4.5 million EBITDAI benefit, through reduced costs to serve and increased sales of core products and accessories. 21 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our customers Using data to personalise customer interactions Having a deep understanding of our customers and their needs allows us to create better experiences and more relevant offers. We have been developing our data capability for a number of years now and through the use of artificial intelligence and machine learning we are now able to better predict the needs of our customers and deliver them the right product or service at the right time. This has delivered an uplift in data driven marketing campaign conversion of 19% year-on-year, while maintaining a 16% increase in marketing efficiency. We have extended this capability into our Spark Business Hubs, that support our small to medium business (SME) customers. Our customer recommendation model now covers nearly 50% of our SME customers and helps our teams to better identify if our customers are on the right service and how Spark can best support their business. When utilising this capability, we are guided by our AI Principles, which are published on our website: www.sparknz.co.nz/about/governance Bringing New Zealanders the entertainment that moves them Spark is focussed on bringing New Zealanders the best of entertainment, offering access to a range of entertainment services including Netflix, Spotify, Xbox, Neon and Spark Sport. 22 Spark Sport Spark Sport has delivered an action-packed year of sporting entertainment to fans, despite Covid-19 continuing to impact a number of codes. Highlights of the year included a successful second season of cricket, with a brand-new commentary set-up that places the commentators in the thick of the action; elevating our cricket production and providing greater insights for fans; Spark Sport’s sponsorship of Kiwi F2 rising star Liam Lawson’s 2022 season; and significant improvements to platform functionality, including scheduling features, annual and six-month passes, and improved sign-up and payment journeys. Spark Sport continued to broaden the sports available to subscribers, acquiring a number of new rights during the financial year including, US Open Tennis Championship, International Basketball Federation (FIBA), UEFA European Football Championships 2024 and 2028, Netball Australia, United Rugby Championship, Crankworx World Tour, UCI Mountain Bike World Cup, FIA World Rally Championship, and the Pacific Four Women’s Rugby Series. We continue to focus on accelerating strategic partnership opportunities to drive improved returns. gender options that acknowledge gender diverse communities including non-binary and takatāpui as well as an open field for individuals to enter their own, or if they would rather not say. In addition, the code also helps businesses evaluate whether gender-related data needs to be captured at all, what to capture if it’s required, and how they might do this in a way that enables people of all genders to be seen and heard online. Alongside input from OutLine Aotearoa and non-binary communities, the recommendations generated by Beyond Binary Code are informed by Statistics New Zealand’s updated standards on how data related to gender, sex and variations of sex characteristics should be collected, and best practices from a range of reputable sources including the New Zealand Human Rights Commission and Te Ngākau Kahukura. The code provides businesses with a trusted source to improve their gender data collection practices and in turn helps them to build more inclusive, gender-friendly online experiences for their employees and customers. https://www.spark.co.nz/online/ beyondbinarycode/ Beyond Binary code: making the internet more gender inclusive Data can play a valuable role in helping businesses to better serve the needs of their customers. But for Kiwis who are beyond the gender binary of male and female, when that data isn’t collected or used correctly it can create deeply negative experiences on a daily basis. This year, Spark launched Beyond Binary Code, an initiative co-created with OutLine Aotearoa and non-binary communities, that aims to stop non-binary communities feeling invisible online. The Beyond Binary Code is a simple online tool that builds a ‘copy and paste’ HTML code, which amends online forms to include options specific to their use cases such as name and legal name, pronouns, prefixes, and a variety of For running header don't deleteHello Tomorrow Partnering with New Zealand businesses, big and small Spark supports businesses across the spectrum, from start-ups and local dairies, to New Zealand’s most complex and innovative enterprise businesses and government. Supporting small-medium kiwi businesses Spark supports over 110,000 small to medium businesses (SME) around New Zealand through our network of local Business Hubs. Our ‘local like you’ approach to supporting small, regionally based business is resonating, with a 20-point increase in our net promoter score over the last year. During the year we expanded our Business Hub offering for customers, through partnerships with local IT providers, as well as the Internet of Things. These new services are supporting our SME customers as they seek productivity, efficiency, and sustainability solutions. We continued to encourage small businesses more broadly to get their businesses online and adopt digital tools through our ongoing support of the Digital Boost Alliance, with our CEO Jolie Hodson taking on the role of Chair of the Governance Board for its first year. In support of the Alliance, Spark provides free Microsoft 365 or Google Workspace for a year with any small business phone/ broadband package. More than 30,000 small businesses have participated in Digital Boost training so far. Inspiring small to medium businesses through Spark Lab Spark Lab aims to inspire SME businesses with new perspectives, delivered through engaging virtual and in-person events. Over the past year, Spark Lab events have covered important topics such as emerging technology, designing healthy workplaces, being good custodians of data, and implementing financial and environmentally sustainable business practices. In May 2022 Spark Lab partnered with the Sustainable Business Network and other leading New Zealand businesses on the Climate Action Toolbox, which provides support to businesses looking to start their carbon emission reduction journeys. https://www.tools.business.govt.nz/ climate/spark Partnering with Māori businesses In partnership with the Whāriki Māori Business Network, we launched a series of four regional events in Tāmaki Makaurau, Whangārei, Te Whanganui-a- tara, and Ōtautahi, to upskill Pakihi Māori (Māori businesses) on digital tools and technology. We also continued our support of the Kōkiri Māori Business Start-up Accelerator, run by Te Wānanga o Aotearoa, to ensure Māori business received the support and investment they need to flourish as they pitch for seed funding. 23 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our customers Supporting New Zealand’s larger enterprise businesses We provide business-to-business services to our larger enterprise customers through Spark Business Group, which brings together best-in-class expertise and capabilities to connect, enable, and transform New Zealand businesses. Spark Business Group can provide end-to-end support to customers across the full spectrum of digital services including collaboration, connectivity, customer experience, data and AI, cloud, IT sourcing, IoT, modern workplace, security, transformation, and innovation. During the year Spark supported Total Property Group in its shift to a cloud- managed network service, guided Contact Energy as it adopted Genesys PureCloud for its contact centre, and helped the Department of Conservation shift to a cloud hosted, digital workspace platform. Spark was also re-appointed as a Managed Services outsource supplier for the Department of Corrections. organisations need to take a progressive approach to moving to and embracing the cloud. CCL is Spark’s hybrid cloud provider. Over the past year, CCL delivered a number of transformational projects, including a significant cloud migration for Dunedin City Council, and a computer vision and machine-learning solution for a leading infrastructure customer, enabling it to identify, locate, and classify road defects. CCL published the State of New Zealand Cloud Transformation report during the year, which surveyed more than 400 of New Zealand’s technology decision-makers and business leaders on their approaches to cloud adoption and transformation. The research highlights that there is no ‘one-size-fits-all’ approach to cloud adoption, with organisations embracing public, private, and hybrid cloud deployments – demonstrating that many Leaven is Spark’s cloud consulting business. It helped a number of organisations embrace public cloud during the year – including Metro Performance Glass’ move from on-premise infrastructure to the cloud, and the migration of the Southern District Health Board’s 100 servers to Microsoft Azure. Digital Island, Spark’s cloud communication and collaboration business, saw strong interest in cloud-based contact centre solutions as businesses continued to negotiate the challenges of remote and hybrid working. It supported a range of customers including Red Cross, LANtech, and CBG Health to implement and realise the benefits of Amazon Connect for their contact centres. 24 For running header don't deleteHello Tomorrow Qrious is Spark’s data analytics and artificial intelligence (AI) business. The past year saw businesses further embrace data and AI, a trend that was corroborated by the State of AI in New Zealand 2021 Report that Qrious released in October in partnership with Spark, the AI Forum, and the Ministry of Business, Innovation and Employment. Over the past year, Qrious helped Auckland DHB understand bed occupancy, patient care needs and staffing requirements and was selected as Oranga Tamariki’s enterprise data and analytics partner. While each of the businesses within Spark Business Group offer compelling services individually, we are excited about the opportunities to bring these capabilities together in end-to-end converged technology solutions that solve real-world business problems. During the year Spark Business Group was thrilled to be appointed prime supplier by the Ministry for Primary Industries (MPI) to manage the roll-out, training, and support for the installation of on-board cameras on New Zealand in-shore fishing vessels. This project combines on-board cameras with IoT, artificial intelligence and machine learning, cloud computing, and data and analytics to provide clearer, independent data to help inform policy decisions, scientific research, and fisheries management – and leverages expertise from across Spark, Spark IoT, Qrious, CCL, Leaven, and Entelar. Spark Business Group is also supporting KiwiRail with a fuel optimisation project to help the Interislander ferry service run more efficiently. By combining weather data and machine learning to predict fuel consumption, and adopting data-driven sailing techniques, the project aims to reduce fuel costs and carbon emissions. Spark Business Group is supporting the initiative with connectivity, IoT devices, dashboards, modelling, analytics, and reporting, bringing together capability from across Spark, Spark IoT, and Qrious. Supporting the digitisation of the health sector The health sector is preparing for a period of significant change as it shifts away from regional District Health Boards to three national health services: Te Whatu Ora (Health New Zealand), Te Aka Whai Ora (Māori Health Authority) and the Public Health Agency. This change is occurring during a time of unprecedented challenge as the sector supports New Zealanders through Covid-19. Developing data and digital capability has been identified within the health system review as a critical enabler of its transformation, requiring partners with deep sector experience, who can create solutions that deliver improved health outcomes. Digital health is a future growth market in Spark’s three-year strategy and Spark Health grew strongly during the year, winning national contracts for digital services under the newly established Te Whatu Ora. Under these contracts Spark Health will provide Microsoft, Non-Microsoft, and Azure Software and IT services to the Ministry of Health, Te Whatu Ora, Te Aka Whai Ora, the Public Health Agency, and other health entities like ACC and Pharmac. Spark Health also delivered a cloud-based digital health platform, that aims to support a digital health ecosystem. Kete Waiora (the basket of health and wellness) is powered by Spark Health partner Get Real Health and enables healthcare and disability providers to create digital customer experiences via a personal health record, while also helping to provide a unified view of their patients. Wholesale Spark Wholesale supports New Zealand and international services providers with Mobile Virtual Network Operator (MVNO), data transport national backhaul, international connectivity, cloud, internet and satellite services. In the past year, the Wholesale business continued to grow Spark’s data centre and connectivity portfolios locally and supported Content Delivery Networks (CDNs) and global cloud partners with their growth plans within New Zealand. When the devastating volcano and tsunami in Tonga affected connectivity to the region in early 2022, Spark Wholesale worked with local telecommunications provider, Digicel Tonga, and other Tongan-based organisations, to procure emergency satellite equipment to connect Tonga to Fiji and provide voice and data connectivity. This equipment was delivered to Tonga by New Zealand Defence Force aircraft and provided temporary connectivity until full services could be restored. Connect 8 In January Spark took full ownership of Connect 8 – an infrastructure and civil engineering provider to the telecommunications, water, and power sectors. Prior to this, Spark owned 50% of the business, but decided to bring Connect 8 back into the Spark group to support the acceleration of its 5G roll-out. 25 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our customers Developing new services for our customers with emerging technology MATTR Spark subsidiary MATTR contributes to the development of technology standards and creates software that allows data to be verified in a digital environment, safely and securely. This helps to remove the challenges of digital security, privacy, and data verification, supporting trusted online interactions – a critical enabler of an increasingly digital economy. MATTR’s flagship platform product, MATTR VII, provides general-purpose building blocks and products that are simple, accessible, and easy to use, with pre-built extensions that make it possible to plug the platform into a customer’s existing applications. MATTR reached the stage of commercialisation during the year, working in partnership with early adopters in New Zealand and overseas – with MATTR solutions now available in Australia, the United States, Canada and shortly in Europe. In New Zealand MATTR supported the creation of the New Zealand Ministry of Health’s international and domestic vaccination certificates as part of its Covid-19 response. An example of MATTR’s work offshore includes its pilot of privacy-respecting micro-credentials for Canadian learners created for the Association of Registrars of the Universities and Colleges of Canada (ARUCC). This solution allows students to hold and share their verifiable credentials when seeking employment or signing up for new learning journeys. MATTR also continues to engage in the US Department of Homeland Security’s Silicon Valley Innovation Program and received an award from the US National Science Foundation Convergence Accelerator in a collaboration with Washington University and iProov (a UK based genuine presence testing company). 26 Cyber security, customer safety and privacy Spark puts cyber security, customer safety, and privacy at the forefront of everything we do. We work hard to ensure the security of our own networks and also support our corporate and enterprise customers with their security needs. We offer customers a breadth of capability to monitor and detect attacks across their networks and information architecture, reduce business security risk, and improve their security profile. Cyber security The annual National Cyber Security Centre (NCSC) Cyber Threat Report shows that serious cyber threats targeting Aotearoa continue to grow, with an increase in the frequency and sophistication of incidents recorded in the past year. Spark takes this threat seriously and works hard to ensure the safety and security of both our own and our customers’ networks. Our Chief Information Security Officer (CISO) has responsibility for Spark’s cyber security, while all members of the Spark Board’s Audit and Risk Management Committee have governance responsibility. We govern our security programme using the industry’s best practice frameworks, including ISO27001 and NIST CSF (National Institute of Standards and Technology Cyber Security Framework). All Spark services and networks are built with multiple checks in place during the ‘design’, ‘build’ and ‘operate’ phases, to ensure that they are deployed with industry leading levels of security. We work to ensure we operate at an incredibly high standard using continuous assessment and measurement of our cyber security maturity level. Our security roadmap includes initiatives that will enhance our wider cyber security capabilities. People play a critical role in helping to detect and defend against potential cyber security threats. For that reason, everyone at Spark is required to undertake a cyber security training module, to equip them in identifying and preventing any attacks. We have one of the largest security operation centres in the country with over 100 security subject matter experts. We have processes in place to ensure that appropriate ownership, oversight, and ongoing risk management is applied to our customers’ and Spark’s IT systems and data, with our cyber security subject matter experts providing oversight. Our processes are independently assured by our risk and internal audit functions and are often externally validated by qualified cyber security consultants or auditors. In FY22, our CISO, Josh Bahlman was awarded the ‘Best Security Leader Award’ at New Zealand’s Annual Information Security Awards. We have a Spark cyber security incident response plan which governs how we respond to any cyber security threats. We have invested heavily in building our For running header don't deleteHello Tomorrow threat intelligence platform and adopting industry best practice frameworks, such as MITRE ATT&CK (a curated knowledge base and model for cyber adversary behaviour), to ensure we continue to evolve our ability to protect and detect potential threats. We have also invested in security automation, orchestration, and machine learning, to stay ahead of ever evolving security threats. Customer safety Spark has an important role to play in helping prevent New Zealanders falling victim to increasingly sophisticated scams, both by blocking scams when possible, and raising awareness with our customers. In the last twelve months, we saw a significant increase in text message scams with the arrival of the ‘Flubot’ malware in New Zealand. The sophisticated malware disguised itself as an application or update, which if downloaded on an Android mobile, would gain access to functions such as online banking and contact lists. Once the malware was downloaded on someone's device, they became an 'infector', sending bulk scam texts from the phone number without the customer’s knowledge, including to international numbers which meant customers incurred charges. To help mitigate the impact of this scam, Spark worked with the Department of Internal Affairs to identify infected mobile phones and send communications to impacted customers, urging them to perform a factory reset and remove the malware. Where unusually high levels of international messages were being sent, we removed the charges and temporarily blocked the ability to send text messages until a factory reset was performed. The Flubot malware infrastructure has since been disrupted by the Dutch Police, rendering it inactive. As in previous years, we work to limit the number of scam calls our customers receive by monitoring unusual calling activity and blocking offending numbers. We work closely with the broader New Zealand telecommunications industry via the NZ Telecommunications Forum (TCF) to share information so that numbers can then be blocked across all networks. We also block access to URLs featured in scam texts to prevent customers inadvertently clicking on the links. Where possible, our security and fraud teams work with law enforcement to identify and shut down scamming operations, but this is challenging when they are located offshore. Because we cannot stop scamming from occurring, we are focussed on empowering our customers to be vigilant when it comes to scams to help prevent them falling victim. We regularly educate and alert customers on fraudulent activity, including through direct customer communications, regular updates on our scam alert website, sharing alerts about widespread scams on our social media channels, partnering with Netsafe on its educational scam call brochure, and ensuing our customer service teams are equipped to assist with scam call inquiries. We also sell a landline product called Call Screen, which contains technology that can effectively help users protect themselves from scam calls. 27 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua • Transparency: Spark reports on government requests for personal information in our Spark transparency reports (www.spark.co.nz/help/other/ about-your-privacy-with-spark). • Data breach reporting: we work hard to foster a culture where Spark people feel safe reporting any possible privacy issues or data breaches. We have a dedicated Data Breach reporting tool, enabling breaches to be reported and managed in a customer focussed way, in compliance with the New Zealand Privacy Act 2020. We also have an Honesty Box where any privacy issues can be reported anonymously. Training Spark people: all Spark people must complete privacy training when they join Spark and annually thereafter. This ensures everyone understands Spark’s legal obligations under the Privacy Act 2020, our Privacy Policy, and the privacy values underpinning the decisions we make. Spark’s internal website, Privacy at Spark, is a central online space where our people can access key information, such as our privacy values and privacy behaviours. They can also access guidance and training, report data breaches and request privacy assessments. Spark’s Policy Playbook includes a section dedicated to data and privacy, showing how to apply privacy considerations to everyday activities. Supporting Spark customers: we offer a range of tools and services to help customers stay safe and manage their privacy and security. These are available on our website at www.spark.co.nz/privacy and include security tools, resources to help customers protect their information online, and ways for customers to contact us with privacy-related questions or concerns. Privacy compliance and reporting In FY22 Spark people reported 123 potential data breaches for investigation, using the internal data breach reporting tool. Most data breaches were caused by human error. As a result, we were able to focus internal training and resources on preventing and managing these breaches. For example, in FY22 we launched a series of mini-learning modules for our people, which are mandatory for teams who manage customer data. We also made process changes to support our people in withstanding phishing attempts. In FY22 there were five incidents that met the criteria for data breach notification under the Privacy Act 2020. Spark notified impacted customers and the Office of the Creating value for our customers Customer privacy Protecting our customers’ personal information is a responsibility we take seriously. We’re committed to keeping customers’ personal information safe and managing it in ways that align with customer expectations and applicable laws, including the Privacy Act 2020 and the Telecommunications Information Privacy Code 2020. In FY22 we launched a set of actionable privacy values. Protection, transparency and autonomy, fairness, innovation, empathy, and tikanga represent what Spark believes to be at the heart of customer privacy. These guide and underpin the decisions Spark people make. In FY22 we piloted a new distributed Privacy Ambassador programme, which empowers trained Spark people to conduct privacy risk assessments. The framework leverages the business, technology, and product expertise of our people, combining it with privacy knowledge and the support of an automated decision-making tool. New data ideas are assessed by a privacy ambassador and, if required, passed to Spark’s Digital Trust (privacy) and Legal teams for more advice. This model was piloted successfully within three areas of the business and will be rolled out across Spark in FY23. Our broader privacy programme Spark’s Digital Trust team runs Spark’s privacy programme and supports Spark people with tools and training to help ensure everyone follows our Privacy Policy. Spark’s privacy programme includes: Processes and controls: to safeguard customer information throughout business activities. For example: • Privacy in products and services: new products and services are assessed with a privacy lens to highlight any key risks and design requirements. New cloud vendors are screened to ensure privacy will be managed appropriately. 28 For running header don't deleteHello Tomorrow Privacy Commissioner (OPC) of these incidents. We also notified impacted customers and the Office of the Privacy Commissioner of unauthorised access to some MySpark and Xtra Mail accounts, which occurred because Spark customers had used their Spark or Xtra Mail login credentials (email and password combination) on other platforms – and when these other platforms were compromised, their credentials were harvested. Unfortunately, these credential harvesting attacks are commonplace on digital platforms but we continue to educate our customers around best practice password management to help protect against this scenario. In FY22 Spark received 22 substantiated privacy complaints from customers (some of these complaints related to the data breaches reported above) and one substantiated privacy complaint via the OPC. Marketing and legal compliance Under our Code of Ethics all Spark people are responsible for ensuring we behave ethically and comply fully with all applicable laws and regulations. Spark’s Legal and Compliance Policy sets out the specific accountabilities that our people have for complying with the law. Spark’s people leaders make sure their teams have the information and training necessary to meet these standards, and our Legal and Digital Trust teams support our people with comprehensive frameworks, tools, training, and advice. Every employee is required to complete online training modules on the Code of Ethics and how to apply it, and we reinforce this training through regular one-on-one and broader internal communication across the business. See: www.sparknz.co.nz/about/governance During FY22, there were no Advertising Standards Authority decisions upheld against Spark Group. Spark continues to engage constructively with the Commerce Commission as appropriate, both proactively and reactively, on a case-by-case basis to ensure we are complying with all applicable laws and regulations. Spark did not receive any formal sanction by the Commerce Commission in FY22. To date approximately 95% of eligible former customers have claimed their refund. We also identified a small number of wireless broadband customers who were charged for the wire maintenance service as a result of separate historical system errors. We have communicated to, and processed refunds for, all wireless customers who were charged in error. We recognise this falls short of the high standards of product management our fibre and wireless customers both expect and deserve, and we have apologised to anyone impacted. We are committed to improving our systems and processes to ensure this does not happen again. In early August 2022 the Commerce Commission issued a warning letter to Spark concerning the historic sale of Spark’s wire maintenance service to wireless and fibre customers. Wire maintenance is a service available to customers with in-home wiring – it was created when customers were predominately using copper-based services, which require maintenance at times. When we introduced fibre products they were originally bundled with landlines, which also used copper wiring, and so the service was extended to fibre customers as well. While some fibre customers benefited from the service, it was not applicable for the majority. So, in 2020 we stopped offering wire maintenance on fibre connections and began proactively removing the service on current fibre connections. We’ve since refunded all eligible existing Spark customers and have worked hard to contact eligible former customers advising them of their available refund to claim. 29 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value through our network & technology Creating value through our network & technology Creating value through our network and technology Manufactured + intellectual capital Our extensive networks and valuable portfolio of digital infrastructure assets underpin Aotearoa’s digital economy and support New Zealanders to work, learn, and connect in the digital world. Our portfolio includes: • ~1,500 mobile cell sites throughout New Zealand • A 1,320km national fibre backhaul network • Partnerships with local fibre networks and Chorus to access the UFB and national copper networks • 16 data centres and 35 major network sites (exchanges) • A purpose-built Satellite Earth Station (SES) in Warkworth • ~41% shareholding in Southern Cross Cable Network, which owns the Southern Cross and the Southern Cross Next international submarine cables. OUTCOMES FY22 Connected and resilient New Zealand 30 Hello Tomorrow Creating value through our network & technology Creating value from our infrastructure assets Following the infrastructure review we conducted during the last financial year, in FY22 we established TowerCo as a subsidiary company to improve the performance, utilisation, and efficiency of our passive mobile infrastructure assets, and to explore the introduction of third-party capital. Our passive mobile assets include the towers and light-poles that house our active assets, such as our radio equipment and spectrum. Now that mobile operators have largely homogenous network coverage, our passive mobile assets are no longer a point of competitive advantage – it is our active assets, or the ‘smarts’ of our network, that drive our differentiation in the market. As such, it made sense to explore how we could better realise the value of our passive mobile assets, to maximise value for shareholders and enable us to invest in future growth opportunities. TowerCo will also enable us to deliver better outcomes and service experience for our customers and Aotearoa through faster, more efficient deployment of digital infrastructure. The infrastructure build programmes needed to support New Zealand’s increasing data needs and new technologies like 5G, and potentially 6G in the future, will be very different from the build programmes of today – requiring many more, smaller sites, closer to the end customer, and greater overall densification. A specialist towers business will be better place to deliver build programmes of this scale and complexity, while improving co-location rates, reducing costs, and increasing speed to market. TowerCo became operational on 1 July 2022, and on 12 July 2022 we confirmed we had reached agreement for the Ontario Teachers’ Pension Plan Board to acquire a 70% stake in the TowerCo business. The transaction is conditional only on Overseas Investment Office approval, which is anticipated to occur during the first half of FY23. The transaction will deliver net proceeds of ~$900 million and values the business at $1.175 billion, representing a FY23 pro-forma EBITDA multiple of 33.8x1. Under the terms of the deal, we have entered into a long term agreement with TowerCo (plus rights of renewal) to secure access to existing and new towers, with a build commitment of 670 sites over the next 10 years. Spark is the anchor tenant and retains a 30% stake in TowerCo, ensuring we are a key strategic partner as the business grows. Smart, automated networks Building a smart, automated network is one of the core capabilities we identified in our three-year strategy to FY23. Our ambition is to deliver unconstrained core network capacity that allows us to deliver the products and services our customers need, when they need them, with 5G and IoT deployed nationwide. We continue to make significant investments in resilience, building a virtualised core with automated management, while retiring legacy technologies that are reaching end-of-life. SPARK / TOWERCO ASSET SPLIT ON A TYPICAL MACRO TOWER Asset / Equipment Ownership 1 Active radio-transmission equipment 2 Backhaul router 3 Backhaul fibre 4 Transmission masts and towers Spark / third parties 5 Fencing / gates 6 Access facilities 7 Huts (incl. rack space and cabinets) 8 Rooftop walkways / ladders 9 Fire suppression and security systems 10 DC power, back-up generators and batteries 11 Airconditioning units 12 Mobile only freehold sites 13 Other passive equipment 1 TowerCo 4 9 6 8 12 5 7 13 9 2 11 10 3 31 1 Assumes FY23 EBITDA of NZ$34.8 million as at 30 June 2023. Standard configuration of a Macro tower Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value through our network & technology Networks of the future Building 5G for New Zealand at pace A year ago we announced an acceleration of our 5G roll-out, investing $125 million in mobile connectivity during FY22 with the aim of delivering 5G coverage to approximately 85% of Spark’s sites and 90% of the New Zealand population by the end of calendar year 2023 (assuming the necessary spectrum is made available by the Government). The Covid-19 lockdowns that occurred in the first half of FY22 delayed our build program, with Alert Level restrictions preventing us from undertaking builds for several months. Despite this challenge we have made strong progress towards our goal, with coverage expanded or launched in 12 additional locations. By the end of FY22 we had 5G live in 21 locations in total, including Auckland, Hamilton, New Plymouth, Palmerston North, Gisborne, Whangarei, Christchurch, Wellington, Dunedin, and Invercargill. We continue to be reliant on the allocation of spectrum by the New Zealand Government to meet our coverage targets. We were pleased to see the Government and Iwi come to an agreement on spectrum allocation during the year, which recognises Māori interests in radio spectrum. Our hope is that this paves the way for the C-band spectrum auction to proceed in a timely fashion. The provision of 600 MHz spectrum is also critical to our ability to deliver 5G coverage far and wide. As we’ve deployed 5G we have also been able to upgrade 4G capacity at the same time. This has created significant additional capacity for customers using our mobile networks, with a ~200% increase in network capacity over the last three years. In recent months, as 5G technology has matured, Spark has started developing its ‘standalone’ 5G capability, which will unlock even more benefits such as multi access edge compute (MAEC) and network slicing1. We have also conducted trials using mmWave2 spectrum to test long- range, high-speed coverage. 32 Hira Bhana mixes generational knowledge with tech solutions to safeguard family business Spark worked with Adroit to support specialist market gardener, Hira Bhana, to install highly accurate sensors at multiple locations around his family’s market gardens to measure soil temperature, moisture, and electrical conductivity. Data from these sensors is transmitted in real-time to a visual dashboard for employees to make decisions on watering, fertilising, and harvesting. The solution provides workers with easily accessible real-time data through an app which shows reporting and analytics to improve decision making on the farm. This solution allows the Bhana team to set parameters that enable automation of farming processes, resulting in consistent, high-quality decision making, and ultimately delicious, high-quality produce. 1 Network slicing allows the operator to ‘slice’ its network to support different types of services through each ‘slice’. Multiple slices can be tuned independently to meet different quality of service parameters. For example, one slice may simply need a standard speed connection to enable office email, another might be tuned to support very low data IoT devices, while another slice may need high reliability and ultra-low latency to support robotics. 2 Millimetre waves, also known as extremely high frequency (EHF), is a band of radio frequencies that has wavelengths between 1 mm and 10 mm. These frequencies can carry massive amounts of data at very high speeds. That makes them ideal for accommodating the massive increase in data demanded from new 5G use cases such as augmented/virtual reality, cloud gaming, video analytics and other cloud-compute capabilities. For running header don't deleteHello Tomorrow 5G experimentation Spark’s first 5G Multi Access Edge Compute (MEC) pilot with EnviroNZ Spark and Qrious have developed an AI-powered computer vision pilot for EnviroNZ and enhanced it with 5G connectivity and local AWS edge computing. The computer vision system helps solve a key business issue for EnviroNZ – identifying health and safety risks at its waste transfer station. The solution is a hazard detection system that uses AI to detect if people are too close to excavators working in the waste disposal area. Using computer vision and IoT (Internet of Things) video cameras, it identifies and tracks people and excavators within a specified detection zone and calculates distances between them. The Qrious system can trigger alerts when a person is identified as being too close to an excavator. To help explore the potential of Mobile Edge Compute within this pilot, the EnviroNZ video feed has been transitioned from a fibre connection to a 5G connection and is demonstrating the benefits of lower latency and faster processing that 5G brings. Developing standalone 5G with AWS and Mavenir Telecommunication companies in New Zealand are currently implementing ‘non-standalone’ 5G – which means that while networks have been updated to 5G, data centres and network cores are still running on legacy, non-5G systems, which are dependent on 4G infrastructure. To lay the groundwork for Spark to roll out standalone 5G at scale in future, and validate the anticipated benefits of 5G, Spark has created and run two proof-of- concepts for standalone 5G with technology partners Nokia (cell site infrastructure), OPPO (5G devices), Mavenir (5G standalone cloud-native core solution) and AWS (multi access edge computing and 5G optimised cloud solutions). A standalone 5G network enables low-latency access to multi access edge compute solutions, allowing customers to deploy solutions that can compute capacity from the network core right to the customer’s office, factory or workplace. To test these benefits Spark has deployed a Mavenir 5G cloud-native core solution on AWS Snowball Edge, a physically rugged device that provides edge computing and data transfer services. This is Mavenir’s first global edge deployment on AWS Snowball Edge. Using an AWS Snowball Edge device allowed Spark to create a highly portable edge solution (that is literally contained in a suitcase) to process and store data close to where it’s generated, enabling low-latency and real time responsiveness. Since Spark launched 5G, our initial use case has been to increase both speed and capacity in Spark’s wireless broadband and mobile products. But we were curious to see how our wireless broadband service would further benefit from operating on a 5G standalone network. As a test, Spark has deployed a Mavenir 5G standalone cloud-native core solution on AWS Outpost, a fully managed service delivering AWS infrastructure and services to virtually any on- premise or edge location. This is the first New Zealand mobile network deployment on AWS Outposts. Testing a wireless broadband service on this proof-of-concept showed faster download speeds and reduced latency when compared to pre- deployment results. For customers, this provides a better experience and supports applications such as instant video streaming, cloud hosted gaming, and the reaction times required for driverless vehicles. The 5G standalone network opens the door on capacity and low latency to help accelerate IoT trends, such as connected cars, smart cities, and IoT in the home and office. Spark explores future connectivity options using 5G mmWave Spark has conducted New Zealand’s first rural trial of 5G millimetre wave (mmWave) technology, achieving a peak speed of 2.4 Gbps at a range of 3 km and 1.4 Gbps at extended range of 7 km. Spark is exploring 5G technology operating in mmWave spectrum to showcase the potential benefits of fibre-like data speeds using 5G connectivity. A 5G mmWave test site has been set up in Mouse Point, North Canterbury by Spark and its technology partner Nokia, with spectrum loaned from the Ministry of Business, Innovation & Employment (MBIE). Agricultural supply business PGG Wrightson has a store in nearby Culverden, 6km south from the test site. They are participating in the trial of the 5G mmWave service, which will allow them to run their rural operations over 5G, fibre-like connectivity. 33 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value through our network & technology Hawke's Bay District Health Board (DHB) keep vaccines and medications at the right temperature The traditional way of monitoring refrigerated medication is manual and time intensive, and if a fridge door isn’t fully shut, all the medication in the fridge may be rendered unusable. Spark and the DHB team devised a much smarter, end-to-end solution. Temperature, humidity, and open/ close sensors were installed around the hospital’s fridges that send information to the Spark IoT Bridge platform. Because the DHB’s concrete-dense buildings aren’t conducive to good network coverage, technical difficulties were overcome thanks to the installation of LoRaWAN indoor gateways. Live temperature information is now transmitted to the Spark IoT Bridge dashboard and users around the hospital know immediately if a threshold is breached and can take timely action. The power of the Internet of Things The Internet of Things (IoT) is a future growth market in Spark’s three-year strategy. We see significant opportunities for us to support New Zealand businesses across all sectors as they transition to future ways of working and pursue productivity, efficiency, and sustainability improvements. To realise the benefit of an IoT solution, three components are required: a network to connect devices to; the connected devices themselves (the hardware); and a platform to collate and analyse the data you are collecting (the software). IoT networks The range of ways that IoT devices are now being used means that different networks are required, depending on where the devices are located, how much data they are transmitting, and their level of power consumption. Spark currently provides IoT over a range of different network types on common infrastructure: 1. Our 3G, 4G and 5G mobile networks: suitable for IoT devices that need to transmit greater quantities of data at high speeds – for example security video monitoring. As 5G rolls out, it will unlock many more advanced use cases for IoT in the future. 2. Our Cat-M1 network: suitable for lower-powered, energy efficient devices, that need to operate for a long time without being replaced, for example smart building monitors or fleet trackers. The Spark Cat-M1 network is activated on all Spark 4G cell sites and on all Rural Connectivity Group (RCG) sites, reaching over 99% of the population. 3. NB-IoT network: suitable for cost- effective devices that need to send small amounts of data over multi-year time periods, for example water metering and gas metering. Spark has now rolled out NB-IoT coverage to nearly 60% of Spark 4G towers and all RCG towers, providing connectivity to 75% to 832,000. 4. Our LoRaWAN network: similar to NB-IoT, suitable for cost-effective devices that need to send small amounts of data over multi-year time periods. LoRaWAN is particularly effective in locations where coverage or cost of cellular applications are not feasible – for example water or soil sensors. The Spark LoRaWAN network is deployed to 185 sites providing approximately 70% population coverage. Spark also deploys low-cost coverage in a box (CIAB) solutions where coverage is not available. 34 For running header don't deleteHello Tomorrow Network resilience Our customers rely on us to provide networks and technology that is highly reliable and available in the face of unpredictable events – from unexpectedly high levels of usage during lockdowns, to extreme weather events. To deliver on these expectations, we are focussed on building highly resilient, ‘self-healing’ networks, that have built-in and automated redundancy options when things go wrong. We are also playing our part to ensure that our industry is contributing towards planning for the climate change risks of the future. This year we provided feedback on the draft National Adaptation Plan, which brings together the Government’s efforts to plan and prepare to deal with climate change risks. The plan prioritises managing risk to lifeline utilities including telecommunications and digital services. We have also analysed potential risk from future climate impacts on our infrastructure as part of our TCFD-aligned climate risk report. See page 72 for more information. Additional third core network for mobile In FY22 we added a third core network to our existing 3G mobile network core. This adds operational flexibility to our mobile networks and creates additional resilience for the South Island. With increasing migration of services towards 4G/5G mobile, and away from PSTN towards new IP voice communications, the addition of this third core network will be extended to IP voice services to provide the stability and diversity needed for New Zealand’s future connectivity needs. Spark NZ takes significant shareholding in Adroit Spark has partnered with leading environmental IoT provider Adroit to support customers with innovative IoT solutions, taking a significant holding in the environmental IoT technology business. Adroit has developed solutions for key sectors including aquaculture, agriculture, construction, manufacturing, and environmental compliance. There is significant demand from New Zealand businesses for IoT environmental monitoring and this investment strengthens our already successful partnership and helps us accelerate the adoption of sustainable monitoring solutions to enable healthier, more environmentally friendly communities through the power of IoT. Spark and Adroit have already implemented IoT solutions for a range of customers, including a real-time water quality monitoring solution for Mercury New Zealand’s New Zealand's Waikato River catchment. Investing in our Data Centres At the start of the year, we announced that we would upgrade our Mayoral Drive Exchange to host significantly more wholesale and cloud data centre services and invest in a significant expansion of our Takanini Data Centre campus. We have made significant progress in both these programmes of work and despite significant inflationary and supply chain challenges, the build cost has been well managed. The first stage of the Mayoral Exchange upgrade was completed in August, and will give Spark a modern, centralised network and cloud hub with capability and resilience that is attractive to international wholesale customers. The first stage of expansion at the Takanini Data Centre Campus – an 8MW data hall – is on track for delivery in 2023, with foundations complete and groundwork now underway. Over 85% of capacity has now been contracted. 35 IoT devices A specialist IoT device is required to record and capture the data you want to track. Spark partners to offer our customers a wide range of devices that work across a wide range of use cases. In the past year, Spark grew the number of IoT devices connected to the Spark network by 75% to 832,000. IoT platforms To make sense of the data collected, an IoT platform is required to collate and analyse the data and, in some cases, create recommendations or automate responses to certain events. This creates business value by ensuring the business can act on what they are measuring. In the past year, Spark has worked with Qrious to develop the Spark IoT Bridge Platform. Built in Microsoft Azure, it amalgamates a variety of IoT monitoring solutions into one central dashboard, providing customers timely access to the data they need for informed decision-making, wherever they are. Napier Port are using Spark IoT Bridge to create a centralised operational view of temperature and energy use monitoring of their substations as well as open/close detection of their Tsunami gates, helping to manage and reduce their organisational risk. Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value through our network & technology Optical Transport Network 2.0 In FY22, we made significant progress in the build of our next generation Optical Transport Network or OTN2.0, which is now 87% complete and which will strengthen our network resilience and capacity. The OTN is the existing fibre backbone of our network, providing core connectivity between the main cities in New Zealand, transporting all our customers’ mobile, broadband, landline, and business traffic, and connecting Spark’s network with other service providers and with international cable networks. The new OTN2.0, which is an addition to the existing transport network and will replace the OTN over time, has ’self- healing’ capabilities. This allows the light signals that carry the data to automatically change their path after a fibre cut, automatically restoring services where it is possible to do so. OTN2.0 has five times the data capacity of the OTN, which will support Spark’s 5G roll-out and give our fixed and mobile networks enough capacity to meet ongoing growth in data consumption. The OTN2.0 roll-out is a two-year project, which started in Auckland, and expanded towards Hamilton, Wellington, and Christchurch – with completion expected in FY23. OTN2.0 is now complete across the North Island from Auckland heading south through the centre, east, and west coasts of the North Island and across existing and one new Cook Strait cable crossing. The roll-out of OTN2.0 across the South Island is progressing quickly, with two routes to Christchurch completed and a third route via the Kaikoura coast currently under construction. Customers are already using the completed parts of OTN2.0. Initially the new OTN2.0 equipment will overlay the existing transport network, however it will be gradually replaced over time. 36 KERIKERI DARGAVILLE AUCKLAND - Glenfield - Mayoral Drive - Papakura - Mount Albert - Takanini DC - Southern Cross Whenuapai - Southern Cross Takapuna WHANGAREI WARKWORTH Paeroa Morrinsville HAMILTON TAURANGA ROTORUA Tokoroa TAUPO NEW PLYMOUTH NAPIER WANGANUI LEVIN PALMERSTON NORTH Pahiatua PORIRUA MASTERTON NELSON St Arnaud BLENHEIM Greymouth Kaikoura WELLINGTON - Wellington - Porirua - Trentham DC RICCARTON Geraldine ASHBURTON CHRISTCHURCH - Spark DC Christchurch Airport OMARAMA TIMARU WANAKA QUEENSTOWN CROMWELL OAMARU OTN 2.0 nodes Other OTN nodes OTN 2.0 network DUNEDIN OTN 2.0 network under construction INVERCARGILL Mobile access and aggregation As we move towards our ambition of a wireless future, enabled by unconstrained capacity in our core network, Spark is upgrading its Access and Aggregation (A&A) network to support our future 5G ambitions with fit-for-purpose backhaul with significant capacity uplift, network automation and improved resilience. The three-year Access and Aggregation programme will allow Spark to establish its own national fibre backhaul network for its mobile networks and managed data customers. Over the past year, Spark has completed design and commenced roll-out, successfully commissioning its first set of A&A nodes through an automation- first approach and migrating its first cluster of 10 cell sites to this next generation network. During FY23, Spark will build out the A&A network across New Zealand. For running header don't deleteHello Tomorrow Connecting rural New Zealand While our mobile and broadband networks serve the vast majority of New Zealanders, the geography of New Zealand and the economics of connecting dispersed rural communities mean that it is challenging to reach those people who are not connected today. To help address this challenge, the Rural Connectivity Group (RCG) – a joint venture between Spark, Vodafone, and 2degrees – has been contracted by Crown Infrastructure Partners to deliver the Government’s Rural Broadband Initiative Phase 2 (RBI2) and Mobile Blackspot Fund programmes. This partnership helps bridge the digital divide for rural communities, ensuring the rural sector can remain competitive internationally. During the financial year RCG has built more than 120 sites, bringing the total build to more than 360 sites across Aotearoa. The programme delivers 4G wireless broadband coverage to ~30,200 homes and businesses and provides mobile coverage to over 830 kilometres of state highways. The RCG model has attracted global interest and is believed to be one of the first in the world where three mobile operators share spectrum, radio, and backhaul. It uses a 4G Multi Operator Core Network to deliver broadband and mobile services, which helps make the most efficient use of the radio spectrum available, and lower network integration costs. Outside our participation in RCG, we continued to expand our own mobile network into smaller towns and provincial areas, building new sites in the Coromandel and Hastings during the year, while upgrading our existing 4G network to ensure we can continue to provide the capacity our customers need. These capacity investments in our rural mobile sites have enabled us to extend the availability of our unlimited broadband plans to an additional 30,000 rural households during the year, reducing costs for customers in certain areas by up to $71 a month. Customers in eligible areas can move to our Everyday Wireless plan which is $60 per month for unlimited data. Marae Digital Connectivity Programme The Marae Digital Connectivity Programme aims to improve digital access in provincial and rural Aotearoa by connecting marae to reliable internet and providing iwi, hapū and whānau with access to technology including cloud storage, digital security networks and state of the art hardware. Spark is the key delivery partner alongside the Ministry of Business, Innovation and Employment and Te Puni Kōkiri. One of the immediate benefits has been enabling whānau who lived elsewhere to stay connected to their hapū and join hui or wānanga virtually. The technology will also help marae to work with their young people to support new skills development, while supporting local communities to innovate and create new business opportunities – such as hosting wānanga or conferences and collaborating virtually. Comprehensive training on how to use the technology was rolled out around the country by Te Wānanga o Aotearoa as part of the initiative and a total of 586 marae have been connected through the programme at the end of FY22. 37 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value through our network & technology Landline and/or broadband over copper C H O R Landline and/or broadband over copper U S C O P P E R L I N E S E S R LI N E P P O S C U R O H C PSTN PSTN LOCATED INSIDE ~700 TELEPHONE EXCHANGES THROUGHOUT NZ Migrating customers off legacy technology onto future-proof alternatives We continue to migrate customers off end-of-life technology, and onto modern alternatives already used by the majority of Kiwis across the country – including our retirement of the Public Switched Telephone Network (PSTN). The Spark operated PSTN – the traditional way of providing landline services – was built in the 1980s and is rapidly reaching end-of-life. The network’s components have not been manufactured since 2003 and the people with the skills needed to maintain it are getting harder to find. The majority of New Zealanders have already made the switch to fibre or wireless proactively. In 2017 we had over a million customers on the PSTN – by the end of June 2022 we had 186,000 with around 7,000 customers on average migrating off this technology every month. As customers move off the PSTN, Spark is also able to decommission legacy PSTN equipment. In the last year, we have removed 49 NEAX switches which has resulted in a significant decrease in Spark’s power usage over the last year. In a separate programme to Spark’s PSTN shutdown, Chorus is gradually withdrawing its copper network as it also reaches end-of-life. The copper network includes the physical lines carrying calls and data. Spark is taking an area-by-area approach to our PSTN shut down programme, focusing on areas where the vast majority of customers have access to alternative technologies. In cases where customers have no alternative, we are working with them on a case-by-case basis to ensure they stay connected. We have a dedicated customer service team for customers going through either a PSTN or copper migration and offer free in-home visits where required. Evolving New Zealand’s public phone booth network The gradual retirement of the copper and PSTN networks has also prompted Spark to evolve its approach to managing New Zealand’s network of public phone booths, as these are reliant on both legacy technologies. In May, Spark announced it was exploring options to invest in more modern technology and capability for phone booths in high foot traffic areas, while 38 For running header don't deleteHello Tomorrow A L N S S I G S E L E W I R Landline and/or broadband over wireless Landline and/or broadband over fibre F I B R E L I N E gradually withdrawing poorly utilised booths as their hardware reaches end-of- life over a number of years. Call volumes on the fixed-line phone booth network have declined by nearly 70% over the last four years, and approximately 90% of them are being used for an average of less than 3 minutes per day. The use of our WiFi hot spotting has followed a similar downward trajectory. The withdrawal of low-use phone booths started with a small number in Auckland’s North Shore, East Auckland, and Wellington South in June – in line with the gradual retirement of Spark’s PSTN and Chorus’s copper network. Connecting New Zealand with the world Southern Cross NEXT cable Southern Cross Cable Limited (SCCL) has celebrated the completion of the Southern Cross NEXT cable between Australia, New Zealand, the United States and Pacific Islands Fiji, Tokelau, and Kiribati. The new cable expands New Zealand’s global connectivity by an additional 72 terabits per second – almost doubling total international capacity. The Southern Cross submarine cable was already the shortest routes between Auckland and Los Angeles, and Auckland and Sydney and now also has the shortest route between Sydney and Los Angeles, providing diversity in the Southern Pacific (all other existing cables pass through Hawaii). The launch of the Southern Cross NEXT cable provides long term certainty and capacity for Spark and its wholesale customers for decades to come. Tasman Global Access Network (TGA) cable The third upgrade of the TGA cable system was undertaken in FY22. Capacity on the cable has increased to over 5.1 terabytes across the three system owners, more than four times the original cable system capacity. 39 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our people Creating value for our people Creating value for our people Human + intellectual capital Our success relies on our talented and diverse team of people and our culture of inclusion and high performance. We want to create a culture where our people lean into challenges, champion the customer, continuously grow, and adapt at pace. We want our people to feel they can bring their whole selves to work, that they have opportunities to grow and develop, and that they are connected to our purpose – to help all of New Zealand win big in a digital world. OUTCOMES FY22 Engaged and inclusive teams 40 Hello Tomorrow Feedback from our people during FY22 has been strong – with our Employee Net Promoter score (eNPS), a key measure of engagement, tracking at +70. This matches our FY23 target of +70, however is down 6 points from our FY21 score of +76. We know that connection is key to maintaining our culture of belonging and inclusion, which wasn’t as easy to achieve during FY22, due to the prolonged Covid-19 lockdowns during the first half of the year. We use our eNPS insights to continuously improve our employee experience and maintain high levels of engagement over time. Spark has continued to grow its employment brand reputation in the external market, being recognised as a great place to work through a number of awards in FY22, including the ‘D&I Champion Award’ at the Reseller Women in Tech ICT Awards, the ‘5-Star Employer of Choice Award’ from HRD New Zealand, and by being named as one of the top 5 places to work in New Zealand by LinkedIn. Our agile maturity Lifting our agile maturity and continuing to integrate agile best practice throughout the business remains a key focus. We evaluate this using a measure called the ’Agile Maturity Assessment’, or AMA, which rates the maturity of best practice on a scale of one to five. We have seen further uplift in our maturity during FY22 and now have 66% of squads (teams) with an AMA of greater than 3.75 out of 5 (compared with 33% in FY21). Spark also delivers certified agile programmes to further embed relevant agile practices into our own business and externally for customers or partners. These courses have been adapted for online facilitation and over the past year, 125 people completed and were certified for these courses. Future of work The last few years of border closures, combined with the accelerated pace of digital transformation within New Zealand businesses, has meant that demand for highly skilled technology talent far exceeds availability. The technology sector is set for exponential growth over the next few years which will further exacerbate this skills shortage. This has reinforced the need to widen the talent pool by creating pathways for New Zealanders of all backgrounds into the technology sector, and we want to actively play our part in this change. We have established several partnerships with tertiary institutions designed to help identify, upskill, and recruit future talent with the skills we need, while also building diversity in our teams. We also continued to establish and maintain our partnerships with organisations focussed on encouraging more young women, Māori, and Pasifika into the industry. In FY22, we worked with: • AWS re/Start, which focuses on developing cloud computing skills and offering on the job training to program graduates with a specific focus on Māori and Pasifika • Girl Boss NZ, which encourages more young Kiwi women to study and consider STEM (through which we offer internships and mentorship) • Pūhoro STEMM Academy, a kaupapa Māori programme that supports rangatahi transition from secondary school to tertiary education, internships, industry opportunities, and employment in the technology sector • P-Tech, a three-way partnership that brings the tech industry, high school and tertiary organisations together to help students transition from getting an education to starting a career through mentoring, worksite visits, and paid internships. Investing in continuous learning and development We are focussed on the growth of our people and developing the skills and cultural conditions needed for creative confidence and experimentation, which drive innovation. Our Learning and Development Strategy is focussed on providing opportunities for progression through broad access to learning environments and experiences that align to our strategy. We pride ourselves on offering great ’on the job’ learning experiences, which we know make up over two-thirds of skill and career development. We delivered our Gold Standard Leader Programme to 55 potential and new leaders in FY22, with a specific focus on continuing to mature our agility. We have used this experience to build our new Leadership Development programme for entry to mid-level leaders. We continued to deliver our flagship Agile Leaders Programme, which aims to create the conditions for innovation and adaptivity across Spark. The programme is a significant investment in the capability of our people in key leadership roles and those identified for development and progression. It runs over six months with a focus on building environments for people to thrive, leading innovation through design thinking, using leadership empathy for connection and belonging, and coaching for sustainable high performance. 41 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our people In FY22, 6 cohorts, and a total of 85 leaders, have either started or completed the programme, which will continue to be delivered throughout FY23. Over the course of the year Spark has also improved the accessibility of learning enterprise-wide, with an additional 383 people taking part in targeted learning experiences, and more than 1,500 gaining access to learning modules. These learning experiences included our Accelerated Leaders Programme, Thought Leadership training with Gabrielle Dolan, Communications Grit training, Presenting with Impact, and our Beyond Binary training module. Compliance and mandatory training There is a requirement for all Spark employees and contractors, to complete mandatory modules when they commence working at Spark, to ensure proficiency in core foundational areas such as health and safety, legal and privacy, policy, reporting and security. People within Spark can make use of Spark Gigs' skills-matching AI technology to locate people with specific skills, or those wanting to learn those new skills, and get them to help with a project or initiative. Likewise, those who want to guide and support others can put themselves forward as mentors, and Spark Gigs locates potential mentees. Spark Gigs gives all our people a chance to learn new skills to help them to make a move into a different part of the business, and at the same time creates an internal ‘ready’ talent pipeline of people who can move to where the need is within Spark. In the future this platform will allow us to link our learning and development frameworks with gigs and career areas of interest for our people. Completion of these modules is monitored by people leaders and reported more formally on a quarterly basis. Spark’s Wellbeing Strategy – Mahi Tahi Covid-19 provided a moment in time for us to review our wellbeing strategy, and to understand what really matters to our people to support their life and work experiences. Spark undertook a wellbeing survey, and through this data we could see that 10% of our workforce needed more support for mental health challenges, while 70% were seeking tools and information to support their overall wellbeing. So, we took the time to reconsider our approach and created a new strategy known as Mahi Tahi. Mahi Tahi (partnership) recognises that we work in partnership with our people to support how their holistic goals at work and in life are sustainably achieved which is a key part of building an inclusive work environment for everyone. With four pillars of wellbeing, this framework is closely aligned with Te Whare Tapa Wha (the four cornerstones of Māori health). As part of our ISO27001 accreditation there are additional modules required for completion prior to gaining access to systems and sensitive information, to maintain high quality standards when dealing with information, customer data, and security. These are closely monitored and audited to ensure compliance and the necessary governance. We have recently been recertified for this ISO standard in July 2022. Spark Gigs In May we launched Spark Gigs – an online platform that allows Spark employees to build a profile of their skills, experience, passions and aspirations, and then using AI, matches these existing skills and future ambitions with available opportunities within the business. Those opportunities could be in the shape of an informal opportunity to put their skills to use to help achieve something outside of their day-today role, or it could be in the form of a mentoring opportunity, helping them to learn from someone else. 42 1. Healthy work environment – providing our people with a place to work that looks after more than just physical safety but also mental and social wellbeing. 2. Connection, collaboration, and community – ensuring we have meaningful activities in place so our people can foster strong connections with those they work with and care about. 3. Mind health – supporting strong mental health capacity and confidence and fostering growth mindset muscle. 4. Energy – building a culture where we help our people keep their batteries charged, so they can perform at their best. We launched Mahi Tahi in September 2021 and went on to establish an online Wellbeing Hub for all our people to connect with our expert partners, including Sarah Laurie, Founder of Take a Breath, (a science-based breathing app and learning platform) and our two resident Spark specialist mental health experts, Mandy Maoate and Tiare Tolks. We have since onboarded our Pride partners, OutLine, to further support our whānau with specialist counselling support and reviewed our overall EAP services approach. The Mahi Tahi Wellbeing Hub was designed to increase access for our people at Spark to the tools and support available, while allowing those experiencing acute distress to book timely one-on-one sessions with one of our experts. The access to these tools and specialist support is actively complemented by virtual and in person wellbeing upskilling forums. We also knew that while external specialist support and channels are critical to great wellbeing experiences at work the research also showed us that having credible, trained, and trusted people embedded within a business is one of the top ways to support employees’ wellbeing needs. For running header don't deleteHello Tomorrow To achieve this we selected, educated, and ‘Spark certified’ 25 of our own people to become what we call Mahi-Tahi Coaches. This network of trusted and credible peers were trained, and continuously supervised, by our partner psychologists to offer frontline support and guidance to our people. These coaches have three hours dedicated time each week to support our wellbeing culture through coaching or promoting wellbeing practices. Over FY23 these coaches will continue to embed their proactive and reactive services through our teams and people. Health and Safety Spark has a well-established health and safety management system, focussed on continuous improvement. Our Health, Safety and Wellbeing Strategy is built around the four pillars of our Gold Standard: • a strong health and safety management framework • a proactive ‘owners’ approach to health and safety and the management of critical hazards and associated risks • a culture of empowerment at every level • a commitment by the business to ensuring the resources and capabilities are in place to deliver the health and safety strategy No Spark employees or contractors suffered serious injury or death over the year, and our TRIFR (Total Recordable Incident Frequency Rate) was 2.15 for FY22, compared to 3.69 in FY21. The reasons for this decline in our TRIFR year-on-year were due to extended Covid-19 lockdowns in the first half of FY22, and an increase in uptake of our hybrid ways of working post-covid, with many of our people working from home a few days each week. Our target for FY22 was to reduce our TRIFR to 3.0. No notifiable events were reported under current NZ Health and Safety legislation, or health and safety prosecutions or notices issued to Spark by WorkSafe (NZ Regulator) during the same period. In FY22 we continued to work with our Wider Leadership Group to further foster health and safety employee empowerment and participation as part of our Tribe, Unit, and Centre of Excellence (CoE) meetings and routine events. We continued our work with our wholly owned subsidiaries to identify the areas of greatest priority to support the development, application, and monitoring of a health and safety continuous improvement framework. Spark’s health and safety system and injury management programme was reviewed by the Accident Compensation Commission (ACC) under the Employers Accredited Programme (AEP) in June 2021. The audit outcome was positive with Spark retaining its tertiary status and remaining accredited in the same programme for another 12 months. Covid-19 Managing our health and safety risks in relation to preventing and limiting the transmission of Covid-19 within our sites remained a key priority in FY22. Through our dedicated Covid-19 Response Squad, we maintained our enhanced health and safety protocols including encouraging our people to get vaccinated and stay home when sick, the use of masks in high transit areas, Rapid Antigen Testing, social distancing, robust cleaning practices across sites, and of course the application of our Mahi Tahi wellbeing services. In October, following the Government announcement on Covid-19 vaccination mandates for employees in certain businesses, Spark undertook a Health and Safety Risk Assessment (HSRA) to identify and assess Covid related risks within our work environments. Spark committed to its people to continuously review and adapt its HSRA in line with changes in the external environment and within our business to ensure the safety and wellbeing of our people, customers, and stakeholders. This identified the need for Spark employees and suppliers working in high-risk roles to be fully vaccinated. We later widened this requirement so that all people working at a Spark site needed proof-of-vaccination to enter the building. This was consistent with advice from the Government and Ministry of Health at the time. In March, when the vaccination requirements from Government were lifted, we reviewed our HRSA, and the My Vaccine Pass requirement for access to our corporate buildings and key sites was removed. Our HSRA was subsequently reviewed again in May, which saw the removal of My Vaccine Pass requirements for roles previously identified as high-risk that were not covered under the Government’s Public Health Vaccination Order. Roles that remain covered under that Order continue to operate with this vaccination requirement in place. Our priority has always been to protect the health, safety and wellbeing of our people, partners, and customers, while fulfilling our role as an essential services provider. Our focus on upholding our Gold Standards and the ongoing review of both our HSRA and our business risks, ensures we are equipped to manage Covid-19 and any future pandemic or epidemic conditions effectively across our teams and sites and in line with the latest advice from the Ministry of Health. 43 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our people Diversity, Equity, and Inclusion Our ambition is for diversity, equity and inclusion to be part of “how things are done at Spark” – embedded into our day-to-day activities, standards, and business practices. We want to create a world class, purpose- fuelled employee experience, enabled by an inclusive culture that fosters authentic belonging for our people. Our focus on diversity, equity and inclusion, symbolised by our Blue Heart, has helped us create an environment where all our people can feel comfortable bringing their whole selves to work, regardless of gender, ethnicity, orientation, age, experience, neurodivergence or ability. Spark’s Blue Heart Kaupapa in action Our Blue Heart Kaupapa sets the standards of behaviour and the values we stand for, creating a culture of belonging. It is a visible icon of our heart-led approach to diversity and inclusion. Cultural celebrations and mental health awareness events remain an important part of bringing our people together. With the extended Covid-19 lockdowns across the country, many of our Blue Heart celebrations had to be shifted online, however, we continued to celebrate the wide range of cultures and communities that make up the Spark whānau over the course of FY22. This included key moments such as International Women’s Day (IWD) – when we ran a number of events and workshops focussed on this year’s theme, “break the bias” – Lunar New Year, Diwali, and Eid celebrations, and Matariki events celebrated at our offices throughout the country. 44 Whole Hearted In order to create meaningful movement and change around ethnic diversity we need access to quality data to provide us with a benchmark of what our organisation currently looks like, and greater insight into the changes that we need to make to improve representation. However, at the start of FY22, only 19% of Spark employees had shared their ethnicities with us. To encourage a greater level of ethnicity and cultural sharing across the business we created an internal campaign called ‘Whole Hearted’ to encourage our people to feel comfortable in sharing the ethnicities they most identify with. We were open and transparent with our people in explaining how this data would be used and how it would enable Spark to create change – giving us greater clarity on our ethnic make-up, providing insights on how best to serve our people from different backgrounds, and allowing us to co-create bespoke experiences and solutions with our diverse communities. Our goal was to increase the number of Spark people who have let us know their ethnic identity to 50% by the end of FY22 and 80% by the end of FY23. At the end of FY22, ~50% of our people (excluding employees in wholly-owned subsidiaries) have shared their ethnicity data with us, and this remains a focus for the year ahead. Our focus in FY23 is to reach out to our people armed with a greater understanding of who we are, to create experiences, support and initiatives that reflect our increased cultural intelligence across our business. We hope this will flow into the attraction of new talent, progression of diverse talent through the business, and further our people’s sense of connection and belonging. Te Korowai Tupu Our Māori business strategy, Te Korowai Tupu (the cloak of growth), continues to be weaved through the business to give our people a wider understanding of te ao Māori and to ensure our business is reflective of Aotearoa today –a multi-cultural society that respects the indigenous people of the land. In FY22 we continued to promote our people’s understanding of te ao Māori by delivering cultural responsiveness modules, and Te Ara Reo, our Māori language pathway strategy which currently has over 150 of our people learning te reo Māori at beginner and intermediate levels. We continued to work in partnership to bring our strategy to life, and over the last 12 months we have added to our existing stable of key partners of Te Wānanga o Aotearoa, Whāriki, Kōkiri, Arataki Systems, Kiwa Digital, Te Taura Whiri and Te Ipukarea and welcomed Education Perfect and Te Pūtahitanga o te Waipounamu. Through our new partnership with Hapai Tūhono we committed to building our future Māori leadership talent by supporting their development pathways. In June we also celebrated Matariki across our corporate offices with a range of activities including performances, demonstrations, lots of kai, and a waiata sing-off challenge. For running header don't deleteHello Tomorrow Pride Spark has been a long-time supporter of the Rainbow Community, and in March we once again engaged in the Auckland Pride and Spark Empowerment Initiative. In June we supported International Pride Month through a series of events at our corporate offices across the country. We are committed to our continued support of OUTLine NZ, a national charity that offers a free support line for members of the LGBTQIA+ community and family and friends. In FY22, this included the co-creation and launch of the Beyond Binary Code (see page 22 for more information) and our ongoing support with equipment, software and tech support to keep OUTLine’s support line and online chat support service running. Alongside the Beyond Binary Code launch, we launched a training module to help our people to understand key concepts of diversity, equity, and inclusion with a focus on gender, sexuality, and gender fluidity. The training module includes general definitions and distinctions as well as basic information on how to support an inclusive workplace that respects and values those from diverse gender backgrounds. OUTLine NZ has also been included in our Mahi Tahi suite of specialist support offerings, providing our people with specialist rainbow affirming counselling. 45 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua guidance on the starter and leaver gender mix that we would need to see to achieve these. In FY22 females represented only 33% of our starters, but 35% of our leavers. diversity ambitions. We were pleased to see the proportion of females in our Wider Leadership Group increase from 42% to 47%. Our People & Culture Partners have been upskilled further with tools to close the gender pay gap and recruit for diversity. We have also educated our senior leaders across the Group with these tools. Each area now has an action plan to achieve its representation goals in addition to maintaining recruitment standards such as 40:40:20 shortlists. We therefore expect to see further progress towards our ambition in FY23. Within our Board, Leadership Squad (LS) and Wider Leadership Group (senior roles outside Board and LS) we continue to maintain a 40:40:20 representation, which is fundamental to reaching our broader Our Board is 43% female and 57% male, with three female directors (including our CEO) and four male directors. One new female and one new male director joined our Board with effect from 1 August 2022 and one male director has signalled that he will retire from our Board at the Annual General Meeting in November 2022. If the composition of our Board remains unchanged at that date, at the conclusion of the Annual General Meeting our Board will be 50% female and 50% male. Over the past year our Leadership Squad has added a new female leader, increasing the female to male ratio to a 60% female and 40% male split. Creating value for our people Our diversity performance Over the past year we have continued to focus on improving female representation across the group and reducing our gender pay gap. We set a FY23 ambition two years ago to achieve 40:40:20 representation Spark-wide, which refers to 40% men, 40% women, and 20% of any gender (as well as gender diverse representatives), and to reduce our median gender pay gap by 10 percentage points to 18%. Although we have remained focussed on this commitment throughout the last two years and worked with all areas of our business to bring about the change we want to see, as we close out FY22, we know that we will need longer to reach these goals. Covid-19 made it more challenging for us to create opportunities for change, and wow that improving gender diversity in the technology industry, which is predominantly male, is challenging to start with. Within this new context, we’ve decided to reset our timelines to reach our goals. We’re not planning on resetting our ambition, only our timeline to get there. We believe that working towards 2024 for our 40% female representation target and 2025 for our 18% pay gap reduction target best reflects our market context and will continue our momentum, while also ensuring that this ambition is prioritised across the business. And we will continue to set ambitious goals on diversity and inclusion in our next strategy, which will be outlined next year. Overall, across the group we saw female representation remain broadly flat at 34% compared to 35% in FY21. Within the core Spark business the figure is higher at 36%, while in our wholly-owned subsidiaries representation is currently significantly lower at 23%. After a challenging period of lockdowns and managing Covid-19, our in-year tracking identified a lack of movement in the first half of FY22, so we initiated new activity to get greater traction heading into FY23. This involved reviewing and resetting targets for each business area – including overall representation targets and 46 For running header don't deleteHello Tomorrow Spark implemented Contribution Models when it flipped to agile, which are designed to ensure equal pay for work of equal value within each chapter of the business and pay gaps within each ‘step’ of the model are reviewed annually as part of our salary review process. Our ambition is to reduce our overall median gender pay gap – which is a measure that compares the pay of all female employees to that of all male employees, and therefore reflects differences in the occupations that men and women do within Spark. It is not to be confused with a measure of equal pay for equal work. Committing to reducing our median gender pay gap means we must focus not only on getting more women into our business, but also ensuring that they are proportionately represented in higher paid roles. Our median gender pay gap, which presents the difference between the median pay of our female and male employees as a percentage of male pay, has reduced from 28% in FY21 to 24%. While our FY23 target is focussed on the gap between median rates of pay, we also monitor the difference in mean (average) pay, which fell from 16% to 13%. Achieving our pay gap ambitions is closely linked to our approach to improving representation and it is essential that we continue to support a New Zealand-wide pipeline of females in technology careers given industry wide challenges – including through Women in Technology scholarships, collaboration with influencers such as our work with GirlBoss, and partnerships with external technology educators. Our Diversity and Inclusion Policy sets out our framework in this area: www.sparknz.co.nz/about/governance Gender pay ratio Category Number of employees in category Pay Ratio: Mean1 (Year-on-year change) Pay Ratio: Median2 (Year-on-year change) Leadership: Spark’s wider leadership group, including the Leadership Squad FY22: 70 FY22: -1% (-6%) FY22: -12% (-8%) FY21: 69 FY21: 5% FY21: -4% Network, Infrastructure & Security: Employees that work in technology focussed areas of the business FY22: 2,338 FY22: -9% (+6%) FY22: -20% (+1%) FY21: 2,256 FY21: -15% FY21: -21% Customer Channels: People primarily employed within our contact centres and retail operations FY22: 971 FY22: -1% (+1%) FY22: 0% FY21: 1,137 FY21: -2% (No change) FY21: 0% Rest of Spark: including corporate, product, data, automation, marketing and customer units FY22: 1,765 FY22: -15% (+2%) FY22: -17% (+8%) FY21: 1,621 FY21: -17% FY21: -25% Total 5,144 FY22: -13% (+3%) FY22: -24% (+3%) FY21: -16% FY21: -28% 1 Pay Ratio = (mean female salary – mean male salary) / mean male salary 2 Pay Ratio = (median female salary – median male salary) / median male salary Calculated using hourly On Target Earnings or Total Base Remuneration plus Short Term Incentive Target values as at 30 June 2022. Negative pay gap values indicate that women earn less on average than men. Note the median pay ratio shifted by 3.4 percentage points from 27.8% in FY21 (rounded 28%) to 24.4% in FY22 (rounded 24%). 47 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our people Parental leave Spark provides a parental leave policy for eligible employees, regardless of gender, sexuality, age or whether the employee is giving birth or adopting a child. If an employee has been employed by Spark for a minimum of 12 months, then Spark will top up the Government’s parental leave payments, so the employee receives 80% of their salary for 26 weeks. As a guaranteed minimum Spark ensures that the total amount someone receives, less any Government paid primary carer's payments, will not be less than the equivalent of six weeks of ordinary salary. Eligibility for Parental Leave is in accordance with Government legislation. FY22 Parental leave numbers Employees who took parental leave Employees who returned to work after taking parental leave Employees who returned to work after taking parental leave that remain employed 12 months after their return to work Return to work rate2 Retention rate3 Female Male1 73 62 48 1 1 0 87% 100% 74% NA 1 Males that took fewer than 30 days paternity leave have been excluded. 2 Return to work rate = Total number of employees who returned to work after parental leave, divided by the total number of employees due to return to work after taking parental leave. 3 Retention rate = Total number of employees retained 12 months after returning to work following a period of parental leave, divided by the total number of employees returning from parental leave in the prior reporting period. Demographics of our workforce Including permanent and fixed-term employees of Spark and its directors, as at 30 June 2022. Directors Leadership Squad2 Other leadership roles3 Permanent starters Permanent leavers Total4 Number of people 7 No change 10 +1 60 +1 1255 540 1361 +362 5,151 +55 Gender1 Age Female % Male % Female # Male # 43% -14% 60% +5% 47% +5% 33% -6% 35% +4% 34% -1% 57% FY22: 3 +14% FY21: 4 40% FY22: 6 -5% FY21: 5 FY22: 4 FY21: 3 FY22: 4 FY21: 4 53% FY22: 28 FY22 32 -5% FY21: 25 FY21: 34 67% FY21: 413 FY21: 840 +6% FY20: 281 FY20: 434 65% FY21: 472 FY21: 888 -4% FY20: 325 FY20: 674 66% FY22: 1,729 FY22: 3,413 +1% FY21: 1,770 FY21: 3,319 Under 30 years old 30 – 50 years old Over 50 years old 0% 14% 86% No change No change No change 0% 100% 0% No change No change No change 2% -1% 39% +9% 28% -3% 20% +4% 77% +2% 53% -7% 60% -7% 58% +2% 22% +1% 8% +2% 12% -3% 22% +2% 1 For the purposes of NZX Listing Rule 3.8.1(c) no Directors or members of the Leadership Squad self-identify as gender diverse. 2 Includes the CEO who is also included as a Director in the line above – the FY21 figure has been restated as it excluded the CEO. The Leadership Squad is considered ‘senior managers’ for the purposes of the Financial Markets Conduct Act 2013 and ’senior executives’ for the purposes of the ASX Corporate Governance Council’s Principles and Recommendations. 3 Substantive roles that report directly to members of the Leadership Squad. 4 Includes non-executive directors. Spark’s employee headcount, including our CEO, is reported as 5,144. Total reflects addition of Connect 8 headcount which are not recorded as starters for the purposes of this table. 48 For running header don't deleteHello Tomorrow Ethnicity As a result of our Whole Hearted campaign (see page 44) we are reporting on the ethnic composition of Spark employees for the first time in this Annual Report. As at 30 June 2022, the available data on our people shows that 52% come from NZ European or European ethnic backgrounds with 35% reporting a diverse range of Asian ethnicities, with the largest groups being Indian (14% overall), Chinese (6%) and Filipino (5%). Just over 4% of our people are Māori and 5% report Pacific ethnicities, most commonly Samoan. Our senior levels have a higher proportion of people from NZ European / European ethnicities with 82% of our people in leadership roles (Leadership Squad and Wider Leadership Group) included in this grouping. We will continue to improve our data collection in FY23 to cover a higher proportion of the organisation and use this information to gain insights on how we can attract, retain, and progress a diverse range of people across our organisation. Percentages based on permanent and fixed-term employees at Spark employees as at 30 June 2022 that had provided ethnicity data (n=1869). NZ European / European includes all European ethnicities (e.g. British, German) and Australian European. Excludes employees in Spark’s wholly-owned subsidiaries. Spark collects information on main and other ethnicity where an individual identifies with more than one ethnicity. Consistent with the Champions for Change methodology, where an individual reports two ethnicities, each is counted as 0.5. Total Board Leadership Squad Wider Leadership Group Rest of Spark 0 10 20 30 40 50 60 70 80 90 100 NZ European/ European Asian Pacific Peoples Middle East, Latin America and Africa Māori Other 49 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our environment Creating value for our environment Natural capital With a network distributed across New Zealand, and technology sourced from materials around the world, we are reliant on natural capital to make our business run. We are also conscious of our own impact on the environment, and the opportunity to use our technology and expertise to support others to use natural capital efficiently and responsibly. We are committed to playing our part in reducing our direct environmental impacts and engaging with our suppliers to address impacts in our supply chain. OUTCOMES FY22 Reduced draw on natural capital 50 Hello TomorrowFor running header don't delete A key pillar of our sustainability framework is to help New Zealand transform to a high productivity, low carbon economy. We contribute to this through our investment in infrastructure and innovation. But we recognise we also have a role to play to build awareness of the opportunities to use digital technology to overcome sustainability challenges. As New Zealand’s largest telecommunications and digital services company, it’s important that we show leadership in realising the potential benefits of technology. Our approach to environmental management Spark has long-standing processes to manage many of our environmental impacts. However, these processes were not aligned under a common policy or governance framework. Over the past two years we have been focussed on maturing our approach to environmental management. Our Environmental Policy, which is available at: www.sparknz.co.nz/about/governance, sets out our expectations for our people to consider environmental impacts when making decisions at work, including examining our business practices, understanding their impacts, and taking reasonable steps to reduce Spark’s environmental footprint. The policy was introduced in FY21, alongside our roll-out of the Future Fit programme to engage our employees around environmental choices. For the year ahead we are rolling out a sustainability training module for all employees, which includes education on the Environmental Policy and what it means for our people when making decisions. Over the past year our focus has been on embedding our science-based emissions reduction target into the business through an emissions reduction and energy efficiency programme. This is supported by strengthened internal reporting capabilities to provide a quarterly view of our emissions and broader sustainability performance. We have established quarterly reporting to our Leadership Squad, who act as a steering committee for Sustainability across Spark through a standing quarterly agenda item at Leadership Squad meetings. We have decided that sustainability is relevant to all areas of the business, so key updates and decisions are participated in by all members of our leadership team. We have also established a quarterly dashboard of performance against key KPIs, including our emissions, which is included in quarterly updates to our Board, and shared with all employees. Our Leadership Squad and Board have also been engaged in our evaluation of climate-related risks. We report these risks using the TCFD (Taskforce on Climate- related Financial Disclosure) framework. Please see pages 71-72. Spark’s SBTi-verified science-based emissions reduction target The Science Based Targets initiative (SBTi) is established as the global standard for corporate emissions reduction targets. Over 1400 organisations have set verified emissions reduction targets since it launched in 2015. In New Zealand 14 companies have set targets, with a further six committed to set targets within two years. SPARK’S SBTi-VERIFIED EMISSIONS REDUCTION TARGET 56% Spark New Zealand commits to reduce absolute Scope 1 and 2 GHG emissions 56% by 2030 from a FY2020 base year. 70% Spark New Zealand commits that 70% of its suppliers by spend covering purchased goods and services and capital goods, will have SBTi-aligned targets in place by 2026. All SBTi targets must have a strict absolute reduction target for scope 1 and 2 emissions, and also include a separate scope 3 target if these emissions are greater than 40% of the total footprint. • Scope 1: Direct emissions from sources owned or controlled by Spark • Scope 2: Indirect emissions from purchased electricity • Scope 3: Indirect emissions from other sources in the value chain – e.g., production of purchased materials, transportation, business travel and use of sold products SBTi targets are set against sector-specific emissions trajectories. The ICT sector pathways were developed with the International Telecommunications Union (ITU) based on projected growth and efficiency gains, giving Spark a reduction target of 56% over the next decade. The SBTi also sets rules for recalculating targets for organisations that have significant changes to their structure or operations to ensure targets maintain a consistent level of ambition. Changes related to the planned sale of 70% of TowerCo and the investment to take full ownership of Connect 8 will mean that we will assess any need to adjust or re-baseline our emissions target in FY23. Linking our financing to our sustainability goals In November 2021, Spark Finance established three Sustainability- Linked Loans totalling $NZ425 million tied to our environmental and diversity performance. In March 2022, Spark Finance issued a NZ$100m Sustainability-Linked Bond and established a Sustainable Finance Framework, which outlines Spark’s sustainable financing focus areas and is aligned to our Sustainability Framework. 51 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our environment Our emissions Greenhouse gas emissions ) e 2 O C t ( s n o i s s i m e G H G 25,000 20,000 15,000 10,000 5,000 0 Baseline year Reduction pathway required to meet FY30 target FY20 FY21 FY22 Data centre Fixed Network Mobile Network Corporate/Retail Natural gas combustion Stationary combustion - Diesel generators Mobile combustion - Vehicle fleet Fugitive emissions In FY21 we saw a significant increase in emissions against our FY20 baseline. This was due to dry hydrological conditions increasing the emissions intensity of the electricity we consumed off the grid. In FY22 this trend was reversed, with a cleaner electricity mix and underlying reductions in energy use delivering a 15.2% emissions reduction. Despite this our FY22 emissions are still above our FY20 baseline, and we are not yet reducing our emissions against a pathway aligned to our science-based target of a 56% reduction by FY30. Positively, over a third of the emissions reduction we delivered in FY22 was driven by reduced fuel and electricity consumption, factors within our direct control. Over the past year we formed a new squad that has established an emissions reduction and energy efficiency programme to maintain this momentum. The main source of our emissions, and the focus of the programme, is our network infrastructure, which includes our exchange sites, mobile towers, and data centres. The programme also addresses emissions from offices, retail, and fleet and business travel. We are tracking emissions for each part of the business against our SBTi reduction pathway, with a target to reduce emissions 5.6% each year in line with our 10-year 56% reduction target. We have also established efficiency targets to ensure we are focussed on improving underlying efficiency. Greenhouse Gas Inventory Report We publish a stand-alone Greenhouse Gas Inventory Report alongside our Annual Report. The report is independently assured and is prepared in accordance with The Greenhouse Gas Protocol. It includes detailed reporting on our emissions and energy use. See https:// www.sparknz.co.nz/sustainability/ environment/ for more information. Hello Tomorrow Spark Annual Report 2022 KO TE PAE ANAMATA WHAKAMAUA Spark Modern Slavery Statement 2022 MODERN SLAVERY STATEMENT Spark Greenhouse Gas Inventory Report 2022 GREENHOUSE GAS INVENTORY Spark Annual Corporate Governance Statement 2022 GOVERNANCE CORPORATE 52 For running header don't deleteHello Tomorrow Electricity consumption d e m u s n o c h W G 180 160 140 120 100 80 60 40 20 0 124.69 99.28 110.77 h W G / e 2 O C t 180 160 140 120 100 80 60 40 20 0 FY20 FY21 FY22 Data centre Fixed network Mobile network Corporate/Retail Residual Supply Factor Electricity accounts for over 80% of our scope 1 and 2 emissions. Over the past year our electricity use reduced by 3.9%. This was driven by our programme of network simplification, including the decommissioning of legacy equipment such as the public switched telephone network (PSTN). Although we can continue to reduce electricity consumption through a focus on energy efficiency and removing old, inefficient equipment, we are also investing in new infrastructure as traffic grows across our network. This is important to support innovation to drive emissions reductions and productivity across all sectors. This includes the roll-out of 5G, and investment to expand our data centres. Although energy efficiency is a focus in our rollout of new infrastructure and in the construction of new data centre space, we expect our electricity usage to slowly increase over time. In New Zealand we benefit from a high share of renewable generation on the national grid. This means our emissions from the electricity we use is relatively low compared to organisations operating in other markets. However, to achieve our SBTi target, we need to further reduce the emissions intensity of our electricity. It is projected that the New Zealand grid will continue to decarbonise over the next decade, aligned with New Zealand’s national emissions reduction budgets and plans. In addition to expected national improvements, Spark is actively pursuing options to link our electricity purchasing to new renewable electricity generation capacity. In FY22 we reviewed our electricity supply contracts, with sustainability a key selection criterion in this process and a deciding factor in our purchasing decision. Our new energy partnership includes a commitment from our energy provider to work with Spark to achieve its SBTi target, through partnership in creating an emissions reduction plan, and through endeavours to link Spark’s electricity use to new renewable energy generation assets. Business travel We saw a 12% decrease in emissions from business travel in the past year. This reduction was expected due to Covid-19 restrictions on air travel. We want to maintain some of the discipline and practices imposed by these restrictions to limit future flying where it makes sense and ensure we do not return to previous levels. Compared to FY20 our business travel emissions are down 81%, saving around 2,600 tonnes CO2e of scope 3 emissions against previous levels. 53 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our environment Spark’s Corporate Fleet Journey Since 2019, we have been actively changing how our Fleet looks, by choosing vehicles that reflect the Spark sustainability story. We've moved away from a hybrid model of part owned/part leased, to a full leased and managed fleet, with a mix of pool (shared) and assigned vehicles. FY19 Spark commitment to 30% of Fleet being Electric by end of 2019, met with Mini PHEVs. FY20 FY21 Converted 98% of the fleet to Hybrid as a minimum, with the rollout of the Toyota RAV4 Hybrid. Introduced full EV Pool Vehicles in Spark City with the rollout of 5 Nissan Leaf EVs. Performance against our scope 3 supplier engagement target Over the past year the percentage of our spend with suppliers with SBTi-aligned targets in place has increased 5% to around 30%, the majority of which have been verified by the SBTi. Two of our key local suppliers have formally committed to setting an SBTi-verified target in the next two years, including our largest supplier by spend. Around 35% of our FY22 spend is with suppliers formally committed to setting a science-based target via the SBTi, up around 10% year-on-year. We will investigate options for a combined local industry approach to share learnings on the SBTi process. Our fleet Spark’s fleet is responsible for around 4% of our reported emissions. As the electricity powering our networks becomes cleaner its impact will grow in importance as we work towards our SBTi target. In previous years we transitioned much of our fleet to Plug-in Hybrid Electric Vehicles (PHEVs). PHEVs should be regularly plugged-in and charged to achieve the best efficiency. Usage data from our fleet shows these vehicles haven’t achieved their potential efficiency due to a combination of available infrastructure and driver behaviour. Over the past two years the majority of the PHEVs in our fleet have been replaced by newer non-plugin hybrids, such as the Toyota RAV4, which are achieving better real-world efficiency. We are in the process of transitioning all shared pool vehicles to EVs (fully Electric Vehicles), including installing dedicated charging infrastructure. This work has been completed at our Auckland Spark City office and will be completed at our Hamilton, Wellington, and Christchurch offices in FY23. In FY23 we will pilot an ‘Electric First’ policy for the broader Spark Corporate Fleet, including individually-assigned vehicles, with the intent for all vehicles due for renewal (approximately 20 cars) to be EV. We will use the results of the pilot to inform a full transition of our fleet to EVs from FY24 onwards. We will also engage with our subsidiaries and Spark Business Hubs to share our findings and support change in the broader fleet. In the year ahead we are also participating in a hydrogen car-sharing scheme with Toyota New Zealand and seven other Auckland-based companies. We believe emerging technologies will play an important role in helping to solve Aotearoa’s environmental challenges, and working in partnership with other businesses to explore these opportunities is one of the ways we can support progress. At the end of FY22 we had only eight pure petrol or diesel vehicles remaining in our core fleet of 236 vehicles. We had 11 full electric vehicles, 36 PHEVs and 181 hybrids. We have a further 69 vehicles assigned to our subsidiaries CCL and Digital Island, the majority of which were petrol powered. 54 For running header don't deleteHello Tomorrow Mobile phone recycling In FY22 Spark received 20,609 mobile devices for recycling, down from 28,715 in FY21. As mobile devices are becoming more advanced and robust their lifecycles have extended, meaning customers are replacing their devices less frequently and we are experiencing a lower volume of recycling as a result. Spark is a member of the Telecommunication Forum’s (TCF) RE:MOBILE product stewardship scheme. The scheme takes unused mobile phones, and either refurbishes and on-sells them in overseas markets or recycles them. Profit from the scheme is donated to the charity Sustainable Coastlines. Electrical and electronic products have been designated as Priority Products under the Waste Minimisation Act 2008. Designation as a priority product means that an accredited Product Stewardship Scheme must be implemented to manage waste streams associated with the product categories. The RE:MOBILE scheme was one of the first industry schemes voluntarily accredited by the Ministry for the Environment (MfE) under the provisions of the Act. Since the Priority Product designation, the Product Stewardship Scheme accreditation lapsed in April 2021. The TCF is working closely with MfE to work through the new accreditation process. In the meantime, MfE has confirmed that it will continue to support and recognise the scheme whilst reaccreditation is being worked through. We are working with our industry partners and the TCF to boost the awareness of the scheme and to overcome the barriers consumers experience in recycling their devices. Alongside the Spark Foundation, we also support the Recycle A Device (RAD) scheme to collect and refurbish used laptops for students and others in need of a device. See page 58 for more information. 55 FY22 Spark City pool went 100% electric with the incorporation of 3 Kia Niro EVs. FY23+ Spark Corporate Fleet to move to “EV first” model. We have a strategy to engage our suppliers to encourage them to set science-based emissions reduction targets. Our new SAP Ariba supplier management platform has provided an opportunity to gather more data on supplier environmental commitments, including emissions reduction targets and alignment and validation against SBTi methodology. For local suppliers, membership of the New Zealand Climate Leaders Coalition is a step we may encourage, which as a membership requirement stipulates businesses work towards implementing a science-based target. For global suppliers, our new membership of the global industry group, the Joint Audit Cooperation (JAC), offers a chance to engage suppliers alongside other telecommunications companies with similar SBTi-verified supplier engagement targets. For more information on JAC and how we are developing our approach to engaging suppliers on sustainability and ESG matters, please see the Our Suppliers section on page 73. E-waste and network recycling Spark has a comprehensive programme for managing end-of-life network equipment and technology. This is separated into different waste streams – such as mobile phones, printed circuit boards, copper cables, lead batteries, and all types of metals. The different items are sorted, processed by our recycling partners and then some components are sent overseas for recycling, reselling, or reusing. In FY22 we recovered a total of 545 tonnes of e-waste, down from 638 tonnes or 15% on FY21. Of this, 151 tonnes was network e-waste (up 14% on FY21), and 394 tonnes was metals, cables, and batteries (down 22%). We continue to improve our recycling collections focusing on education within Spark and working with some of our larger customers to support them to responsibly recycle their surplus equipment. In the past year this included partnering with KiwiRail, which consumes close to 1400 items of computer hardware each year. Spark Business Group partnered with KiwiRail to establish a nationwide programme of e-waste recycling starting in Wellington, Auckland, and Christchurch. Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our communities Creating value for our communities Creating value for our communities Social + human capital We work alongside New Zealand communities to harness the power of technology and create a positive digital future for all. Our products and services help our communities to stay connected and enable the provision of community services. Beyond the direct impacts of our products, we want to play a bigger role in building healthy, connected, and equitable communities. OUTCOMES FY22 Connected and empowered communities 56 Hello Tomorrow Digital Equity It is estimated that 1 in 5 people in New Zealand currently experience some form of digital exclusion1. We want to create a positive digital future where everyone in Aotearoa has an opportunity to participate in the digital world. Our commitment to digital equity is clearly outlined in our three-year strategy with a bold target to connect 35,000 households in need by the end of FY23. Our efforts to bridge the digital divide extend beyond affordable access and are guided by the Government’s Digital Inclusion Blueprint, which identified four elements of digital inclusion: motivation, access, skills, and trust. Skinny Jump Skinny Jump is Spark’s not-for-profit wireless broadband service for people who find cost a barrier to having an internet connection at home. The service is entirely prepaid, so there are no long-term contracts or credit checks needed, and all it takes to get set up is registering through a community partner and plugging in the modem. Jump is delivered by a dedicated squad of Spark people alongside a community partner network, which is overseen by Digital Inclusion Alliance Aotearoa (DIAA) and includes over 300 local organisations nationwide, spanning community libraries and community hubs amongst others. Since its relaunch in March 2020, when the eligibility criteria were extended just as Aotearoa was entering its first Covid-19 lockdown, the number of households benefiting from Jump has increased from around 5,000 to 23,323. In June, Jump announced a boost to its data allocation for customers, to keep digitally excluded households across Aotearoa connected as data usage and cost-of-living pressures continue to rise. Skinny Jump now provides 35GB of data for just $5, with the first 15GB of data each month free. Additionally, customers have the option to purchase up to six top-ups a month. All together this means Jump customers can access 225GB for just $30 a month. In FY22 Skinny Jump continued its key partnerships – the ‘Ciena Jump for Students Fund’, which gives eligible students in low decile schools a free Skinny Jump connection until the end of the school year; and ‘Awhi Matihiko: Red Cross Digital Settlement Package,’ a collaboration with New Zealand Red Cross, Internet NZ, and Digital Inclusion Alliance Aotearoa that gives new refugees a free Skinny Jump connection (for 12 months), a laptop, and digital skills training. There are now over 210 students using the Ciena Jump for Students Fund and 45 households using the Awhi Matihiko: Red Cross Digital Settlement Package. To ensure we continue to improve our service and make it accessible to as many people in need as possible, in FY22 the Skinny Jump squad worked with Digital Inclusion Alliance Aotearoa (DIAA) to survey existing customers and learn more about their experiences. This research reinforced that access is only a first step, and for many families other barriers such as a lack of digital skills and trust in technology can also reinforce the digital divide. These insights led to the implementation of a number of new initiatives such as an online safety brochure with all new Jump modems, internal training modules for the Skinny Care team (who are often the first port-of-call for Jump customers who are having issues with their connections), Jump sign-up and help videos in multiple languages, including te reo Māori, and an update of the Skinny Jump app, to make it more user friendly and easier for customers who are unfamiliar with digital technology. 1 https://www.digital.govt.nz/dmsdocument/174~digital-inclusion-action-plan-20202021/html 57 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Spark Foundation Spark Foundation leads Spark’s work in the community. The Foundation has a single-minded focus on digital equity, and its vision is that no New Zealander is left behind in a digital world. It has focussed its strategy on the areas it can make the biggest difference – digital access, digital skills and pathways, and digital wellbeing. Spark Foundation allocates funding for programmes through a strategic partnership approach, working with organisations whose objectives are aligned to improving digital equity for Aotearoa. Most partnerships focus on empowering and equipping the next generation, especially Māori, Pasifika, and women. Some of the Foundation’s key partnerships include: Digital Access Recycle A Device Recycle A Device (RAD) is a Spark Foundation funded programme that takes second-hand laptops donated by businesses and households; teaches local high school students to refurbish them; and then gets them into the hands of those who need them the most. The result is an end-to-end process of device collection, refurbishment, distribution, and disposal that enhances digital equity at every level – providing highly sought-after tools, access, and skills to high school students, while also offering the added environmental benefit of diverting e-waste from landfill by giving these laptops a second life. Once devices have been refurbished, they are transferred to students within the school community itself, or to other community organisations for distribution to people in need. As well as Spark Foundation funding, Entelar – Spark’s ICT and logistics business – has partnered with RAD providing all logistics support. During FY22 RAD was awarded the ‘Sustainability Through Technology’ Award at the NZ CIO Awards, and through the programme 976 laptops were refurbished and 696 were redistributed to those in need. In addition, RAD now has 16 high schools training students, and three Pasifika community groups training their local communities across Aotearoa as part of its refurbishment training programme. Creating value for our communities Spark’s investment into the community Spark invests in the community through financial donations, subsidised broadband services, and the volunteering time of its people. Spark invests $1.7 million in the Spark Foundation annually, with $1.2 million of this being distributed to community partners, and the remaining funding operating costs. This includes the Spark Give and Spark Volunteer programmes, which match employee charitable donations (up to a total pool of $250,000 per annual year) and provides all Spark people with one day leave a year to commit to volunteering. Spark’s subsidised broadband service Skinny Jump has been designed to operate on a not-for- profit basis – with the revenue generated covering the costs of the free modems, community partner network, product development, and customer care and education. The commercial value of the data provided to households in need through Skinny Jump totalled over $4.5 million in FY22. 58 For running header don't deleteHello Tomorrow Digital Skills and Pathways • P-Tech: A public education model designed by educators and the technology sector to address New Zealand’s STEM skills gap. Participating schools collaborate with private companies that provide students with mentorships, worksite visits, and paid internships. On completing the programme, students will have both their NCEA qualifications, and a New Zealand Diploma aligned to industry needs. In addition, successful graduates typically earn first-in-line consideration at affiliated industry partners when applying for jobs. In FY22, 59 Spark people provided mentoring as part of this programme. • Pūhoro: Spark Foundation and Auckland Unlimited have collaborated with Pūhoro to co-fund ‘Te Au Hangarau – Accelerating Māori Participation in tech’ research that explores the barriers and contributing factors that limit Māori participation and success in New Zealand’s tech industry. The research will be launched in FY23, and will inform further action across the community, education, and industry sectors. Hihiko Te Rawa Auahau: Delivered by Toi Kai Rawa, the Bay of Plenty’s Māori economic development agency, innovation hubs will be embedded into 30 Māori communities across the wider Bay of Plenty over the next few years. • Digital Future Aotearoa: Digital Future delivers a range of programmes including Code Club (a nationwide network of over 400 coding clubs for tamariki), alongside Professional Learning Development (PLD) for teachers of the digital technology curriculum, and Recycle A Device (RAD). In FY22 Foundation funding supported Digital Future to explore a governance and delivery model that better serves and supports Māori aspirations. • Take2: A programme that aims to break the cycle of crime through technology. Take2 teaches incarcerated individuals to code, enabling meaningful employment opportunities once they are released. During FY22 Spark supported the Take2 team by providing training through our Agile Academy, and a design thinking workshop with our People & Culture team. Our team are working with Take2 to explore future internship opportunities within Spark. We want to ensure that we can design a programme with appropriate wrap-around services in place to support graduates as they transition into a working environment. • Ngā Rauhanga ā Maui scholarships: To recognise and support Rangatahi Māori who are undertaking study, training or are passionate about the future of technology and innovation in Aotearoa, Spark Foundation and Spark’s Māori Strategy team have funded two Ngā Rauhanga ā Maui scholarships. These will be drawn in October following the final summit in Hamilton, and Spark Foundation and Spark will host the scholarship recipients in Auckland. Digital Wellbeing Te Iwi Matihiko: Designed and delivered by Digital Natives Academy, Te Iwi Matihiko is a values-based approach to digital wellbeing that draws from the Te Whare Tapa Whā model of health but designed for today’s youth. The programme aims to introduce tamariki (9-11yrs), rangatahi (12yrs+), and pakeke (adults) to the key tools they will need to safely navigate social media and online gaming. • The Light Project: This is a pilot project that aims to help youth, their whānau, schools and wider communities to navigate the challenges presented by online pornography. It addresses one of the biggest barriers to digital equity amongst some New Zealand families – a fear that the internet might cause harm to tamariki and rangatahi. • Digital Discipline: A new partnership in FY22, Digital Discipline is a programme that offers support to young people dealing with social media addiction through education, awareness, and strategies to balance the online world with the real world. Digital Discipline is currently focussed on South and West Auckland communities with collaborations in Rotorua, Porirua and Ōtautahi / Christchurch. 59 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Creating value for our communities Digital Equity Coalition Aotearoa Spark Foundation is an establishment funder of the Digital Equity Coalition Aotearoa (DECA), which brings together over 100 community organisations who have a focus on digital inclusion and equity. DECA shines a light on digital inclusion initiatives, identifies gaps, advocates, and offers space for innovation and cross-sector collaboration. In addition to these multi-year partnerships, Spark Foundation made smaller, one-off grants to a range of digital equity initiatives including 3BagsFull, Digital Warriors, Te Matarau – The Māori Tech Association, Tech Voyagers, House of Science, and Ko Māui Hangarau. Connecting our people to our communities Spark encourages our people to give back to the community through our Spark Give and Spark Volunteer programmes. Unfortunately, participation in Spark Give and Spark Volunteer has been steadily declining. There are many reasons for this, including Covid-19, which has made it a lot harder for charities to fundraise or run volunteering events over the last couple of years. To reinvigorate both programmes, Spark Foundation conducted a review, gathering feedback from our people, the community sector, and experts like Volunteering New Zealand. What we learned is that our approach to payroll matching was spread too thinly across a large number of charities and focussing on a smaller group of charities would create a bigger impact and contribute to more meaningful social progress across Aotearoa To identify a smaller group of key partners for our Spark Give and Spark Volunteer programmes, in FY22 we engaged our people to vote for their top charities under four pre-selected categories – Digital Equity, Environment, Tamariki (children), and Humanitarian. As part of this, our people chose the following charities as our official partners: • Digital Equity – Skinny Jump (Ciena Jump for Students Fund) • Environment – Sustainable Coastlines • Tamariki (children) – Starship Foundation • Humanitarian – St John From FY23, Spark will match donations towards these partners through Spark Give dollar-for-dollar (up to a cap of $200,000 per year), and work with our four charity partners to present more volunteering and fundraising opportunities for our people throughout the year. In addition, our people also have the option to donate to their personal causes, and Spark will continue to match most registered charities dollar for dollar (up to $500 per person per year, up to a maximum cap of $50,000 per year). 60 For running header don't deleteHello Tomorrow Spark Give Our payroll giving programme, Spark Give, enables our people to donate to schools and charities via their pay. In FY22, Spark Foundation matched the amount employees donate dollar-for-dollar up to $500 per employee per annual year. Spark Give results for the year Employee Donations: Spark’s Matching: $433,433 (FY21: $466,022) $157,775 (FY21: $179,486) Number of employees participating: 452 (FY21: 486) Spark Volunteer Spark employees can take one volunteer day each year, and Spark Foundation encourages skills and mission-based volunteering. Skill-based volunteering means our people focus on opportunities that take advantage of their specialised skills and talents to assist not-for-profits. Mission-based volunteering means volunteering with organisations whose work aligns with the purpose of Spark – to help all of New Zealand win big in a digital world. Spark Foundation works with our people to help them find an appropriate skill or mission-based volunteering opportunities. Some of the organisations that our people volunteered for over the year include Lifeline, Summer of Tech, Shadow Tech, Hatch, GirlBoss NZ, P-Tech, Trees that Count and Take2. Volunteer leave days used in FY22 Total staff eligible for Volunteering: 4,220 (2021: 4,358) Total employee participation: % of Employee participation: 246.5 (2021: 440 days) 6% (2021: 10%) 61 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Our Board Our Board Our Board 1. 4. 7. 2. 5. 8. 3. 6. 9. 1. Justine Smyth, CNZM Chair Justine joined the Board of Spark New Zealand in December 2011 and became Chair in 2017. She has extensive experience in governance, mergers and acquisitions, taxation, and the financial performance of large corporate enterprises as well as small and medium enterprises (SMEs). Her background is in finance and business management, having been a Partner with Deloitte and Group Finance Director at Lion Nathan. Justine is currently Chair of The Breast Cancer Foundation New Zealand and a former director of Auckland International Airport Limited. Justine has a Bachelor of Commerce from the University of Auckland and is a Fellow of Chartered Accountants of Australia and New Zealand and a Chartered Fellow of the Institute of Directors. In 2020 Justine was appointed a Companion of the New Zealand Order of Merit for services to governance and women. 2. Alison Barrass Non-executive Director Alison joined the Board in September 2016. She brings a broad range of skills, including knowledge and expertise in the fast-moving consumer goods (FMCG) sector and in governance, leadership and marketing-led innovation. Her background includes 30 years experience at major international FMCG companies, including PepsiCo, Kimberley-Clark, Goodman Fielder and Griffins Foods. She is currently a director with GWA Group, Rockit Global, Zespri and is Chair of Tom & Luke and Babich Wines. Alison has a Bachelor of Science from the University of Southampton and a Business Diploma in Marketing from the University of Auckland. 3. Paul Berriman Non-executive Director Paul joined the Board in December 2011, bringing over 35 years of international experience in telecommunications, media and convergence. Until January 2021 he was Group Chief Technology Officer of the HKT Trust, where he was responsible for leading the group’s product and technology roadmap and strategic 62 Hello Tomorrow development. Prior to this he was Managing Director of management consultancy Arthur D. Little in Hong Kong and he has held roles in Reuters and several major Hong Kong service providers. In 2009 Paul was recognised by the IPTV World Forum with its Special Merit Award for Outstanding Industry Contribution and in 2008 he was listed as one of the Global Telecoms Business Magazine’s top 100 “most influential persons in telecoms”. He is a Chartered Engineer who holds a Bachelor of Science in electro-acoustics from the University of Salford (UK) and a Masters in Business Administration from the University of Hong Kong. Paul is a director of Rain Networks in South Africa, and a former director of the global Next Generation Mobile Networks Alliance of mobile network operators. 5. Sheridan Broadbent* Non-executive Director Sheridan joined the Spark Board in August 2022 with an executive and governance career spanning telecommunications, ICT, infrastructure, and energy. Her governance experience includes her roles as Independent Director for Manawa Energy, Cloudsource Holding (Safer Me), Chair- elect of Pipeline and Civil Group, and member of the Government’s Cyber Security Advisory Committee. Previous governance experience includes her roles as Chair of Kordia and Director of Transpower. Sheridan holds a Bachelor of Commerce from the University of Auckland, is a Chartered Member of the Institute of Directors, and is a graduate member of the Australian Institute of Company Directors. 4. Warwick Bray Non-executive Director 6. David Havercroft Non-executive Director Warwick joined the Board in September 2019. He brings over four decades of experience in the international telecommunications, technology and media sectors, most recently in senior executive roles at Telstra. During his nine years at Telstra up until 2018, Warwick's executive roles comprised Chief Financial Officer, Group Managing Director Product, Executive Director Mobile and Head of Corporate Strategy. Earlier in his career, he was a managing director at JP Morgan (London) and Dresdner Kleinwort Wasserstein (London) in telecommunications equity research. He also worked at McKinsey & Company in Europe, advising telecommunications companies on strategy, regulation and operational improvement, and as a network systems engineer at Hewlett Packard. Warwick has served on the GSMA strategy committee, the boards of Hong Kong mobile business CSL and Australian pay TV operator Foxtel and as Chairman of the Australian Mobile Telecommunications Association. He holds a Bachelor of Science (Hons) and a Masters in Business Administration from the University of Melbourne. David joined the Board in October 2021, bringing skills and experience from a career in the technology industry that has spanned more than 35 years. He held a number of leadership roles at Spark New Zealand from 2009-2017, including Chief Operating Officer and Chief Technology Officer. Prior to this he held executive and management positions in IBM Asia Pacific, Cable & Wireless, and BT. David is currently a director of Westpac and Kiwi Wealth, and was formerly a director of Kordia, Connect 8 and Southern Cross Cable Network. 7. Jolie Hodson Chief Executive and Executive Director Jolie joined the Board in September 2019. As Chief Executive Officer Jolie is responsible for ensuring Spark has a sound strategy and applies her leadership to delivering on that strategy, while building a leadership team around her and a business that is able to adapt to the fast-changing world of digital services. Jolie joined Spark in 2013 as CFO and held the roles of CEO Spark Digital and Customer Director before being appointed CEO on 1 July 2019. Since joining the company, Jolie has played a pivotal role in transforming Spark from a legacy telco to a growing digital services company. Prior to joining Spark Jolie worked for 20 years in a range of senior roles for the Lion Group and Deloitte. She has a Bachelor of Commerce from the University of Auckland and is a Fellow of Chartered Accountants of Australia and New Zealand. 8. Gordon MacLeod* Non-executive Director Gordon joined the Board in August 2022. He is a highly credentialed business leader, who held a range of senior executive roles over a 15-year tenure at Ryman Healthcare Group, where he most recently served as CEO. Prior to this Gordon was a Corporate Finance and Advisory Partner with PwC and was also the Finance Director of a Hi-Tech UK listed company based on the Cambridge Science Park in England. Gordon is an independent Director of NZX listed Delegat Group and is also a trustee of Breast Cancer Foundation NZ. He holds a Bachelor of Commerce from the University of Canterbury, is a Chartered Accountant Fellow, and a Member of the Institute of Directors. 9. Charles Sitch Non-executive Director Charles joined the Board in December 2011. He has more than 20 years’ experience in driving business strategy, having worked for McKinsey & Company from 1987, where he became senior director in 2010, primarily working with CEOs and boards on strategy and operations turnarounds, before retiring in 2010. Since 2006 he has been involved in various new business ventures. Charles was previously Chairman of the Board of Trinity College at the University of Melbourne. He holds a Masters in Business Administration from Columbia Business School and a Bachelor of Laws and a Bachelor of Commerce from Melbourne University. He is also a Graduate of the Australian Institute of Company Directors. *Joined the Board after FY22. 63 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua In June 2022, Paul Berriman announced that he will retire at the next Annual General Meeting in November 2022. The Board thanks Paul for his huge contribution during his tenure of over ten years, including playing a key role from the time of the demerger of Chorus and throughout Spark’s transformation from a legacy telco to New Zealand’s largest telecommunications and digital services provider. Future Director Spark supports the Future Directors programme and appointed its third Future Director, Sylvia Ding, effective 1 February 2022 for an initial period of 12 months. The appointment has been extended until 31 May 2023. Ms Ding replaced outgoing Future Director, Ana Wight, whose term came to an end on 31 December 2021. The Spark Board thanks Ana for her valuable contribution during her time as a Future Director. Board succession Spark’s Board has an appropriate mix of tenure, skills, diversity, and experience. The Board skills matrix on the following page outlines the qualifications, capabilities, geographical location, tenure and gender of each member of the Board. In line with our company-wide focus on improving our understanding of the ethnic diversity of our people, this is the first year that we are providing information about the ethnicity of our Board at an aggregate level. This information is available on page 49 of this report. There is an ongoing Board succession programme, which is focussed on finding new directors with relevant skills and experience that complement the diverse perspectives already represented around the table. As Spark continues to transition to a digital services future, the recent appointment of Gordon MacLeod and Sheridan Broadbent broadens the existing skills and capabilities of the Board. Our Board Strategic role of the Board Spark’s Board plays a critical role in helping to guide and test company strategy, by engaging in an ongoing conversation with the Leadership Squad around key strategic decisions. These decisions are in relation to the long-term strategic planning and direction of the business, including non-financial performance and our ability to create value in the medium and long term. This includes customer experience, governance and sustainability measures, with the Board approving the business strategy and sustainability framework and reviewing climate change and modern slavery risks. As the body elected by shareholders to protect and enhance the value of Spark’s assets, the Board has oversight of Spark’s financials and the annual and three-year planning processes. Board members engage in robust discussions with management around the strategic direction of the business to test and ensure investment is going towards the things that will deliver the best outcomes for the company and shareholders. This flows through to Spark’s remuneration policies where there is Board involvement in setting targets and hurdles for short-term and long-term incentives. Board changes Pip Greenwood resigned as a non- executive director with effect from 5 November 2021. The Board thanks Pip for the valuable contribution she made during her tenure. In FY22, the Spark Board also announced the appointment of David Havercroft (effective 1 October 2021) as a non-independent, non-executive director, and Gordon MacLeod and Sheridan Broadbent (both effective 1 August 2022) as independent, non-executive directors. 64 For running header don't deleteHello Tomorrow Board skills matrix Qualifications Capability Strategic knowledge for scale telco/ technology businesses Financial / commercial Risk management / regulatory and/or sustainability Customer insight / retail / brand People leadership and culture Listed company governance Capital markets / capital structure Digital / data / media / new markets Geographical location Tenure (years) Gender Justine Smyth Alison Barrass Paul Berriman BCOM, FCA, CFINSD BSC, DIP BUS, MARKETING MBA, BSC, CENG Warwick Bray BSC, MBA David Havercroft Charles Sitch Jolie Hodson Sheridan Broadbent Gordon MacLeod BA MBA, LLB, BCOM BCOM, FCA BCOM BCOM, FCA NZ 10.7 F NZ Hong Kong Australia 5.9 F 10.7 M 2.9 M NZ 0.9 M Australia 10.7 M NZ 2.9 F NZ NZ Appointment effective 1 August 2022 Appointment effective 1 August 2022 F M The Board skills matrix identifies the predominant skills of each Director. The Board has specifically limited high capability and medium capability to both having a maximum of two areas for each Director. KEY: High capability Medium capability Digital / data / new markets: experience as a senior executive in, or as a professional advisor to, digital and/or data business, or businesses in emerging new markets. Experience in the use of digital channels and the latest innovative and digital technologies. Definitions of categories of capability: Strategic knowledge for scale telco/ technology businesses: experience as a senior executive in, or as a strategy professional advisor to, large telco/ technology businesses Financial / commercial: a strong accounting and finance background, most likely being a chartered accountant, having held the position of CFO in a significant publicly listed company, or leadership position in professional services/advisory firm Risk management / regulatory and/or sustainability: experience in identifying and mitigating both financial and non- financial risks / experience with influencing public and regulatory policy decisions and outcomes / experience in the design and application of sustainability frameworks Customer insight / retail / brand: experience as a senior executive responsible for driving customer experience including by effectively using insights, optimising customer journeys and building brand experience for customers People leadership and culture: experience as a CEO of a significant publicly listed company or large private stand-alone company. Leadership skills including the ability to set appropriate organisation culture. Listed company governance: listed company Board experience other than Spark. Experience with sophisticated governance structures Capital markets / capital structure: strong knowledge of debt and equity capital markets, and experience with mergers and acquisitions / experience dealing with a range of funding sources and capital structuring models. 65 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Our Leadership Squad Our Leadership Squad Our Leadership Squad 1. 4. 7. 2. 5. 8. 3. 6. 9. 1. Melissa Anastasiou General Counsel As General Counsel, Melissa leads Spark’s legal and compliance functions, providing Spark with strategic legal and commercial guidance, ensuring the business acts lawfully and with the utmost integrity. She has also played a pivotal role in leading out Spark’s diversity and inclusion programme. Melissa joined Spark in 2009 and undertook a range of legal roles across the organisation before being appointed as Group General Counsel in 2012. Prior to joining Spark Melissa spent a number of years as a Senior Legal Counsel for UK mobile provider Telefonica O2. She also has extensive experience working for leading corporate law firms in Auckland and the UK. Melissa has a Bachelor of Laws from Victoria University of Wellington. 2. Matt Bain Marketing Director As Marketing Director Matt brings his outstanding digital marketing and customer experience skills to place the customer right at the centre of Spark’s thinking and actions. Matt joined Spark in 2018 and was previously based in Amsterdam as European Managing Director for agency AKQA – one of the world’s leading innovation and brand experience agencies, with responsibility for 500+ employees across five countries. Over a 20-year career Matt has built an impeccable international reputation with some of the world’s greatest brands – Nike, Heineken, Mini, Rolls Royce, Siemens, EA Sports, Audi, Phillips, Tommy Hilfiger and KLM amongst others. He has extensive experience using data and technologies like Artificial intelligence (AI) to enable organisations to better understand and predict their customers’ needs more accurately. Matt holds a Master of Commerce from the University of Auckland. 66 Hello Tomorrow 3. Aliza Beckett Strategy Director Aliza joined Spark in June 2022 and brings more than 20 years’ experience in strategy and corporate development, with a career spanning multiple international markets and a track record for delivering growth. As Strategy Director, Aliza is responsible for driving Spark’s growth strategies to accelerate the transition from traditional telecommunications services to a broader range of digital services that capitalise on the significant investments the business is making in emerging technologies. She was most recently Vice President of Strategy and Corporate Development at Liberty Global, a telecommunications company based in the UK. Prior to this she has held a variety of senior roles at Amazon (Prime Video), Google (YouTube), and McKinsey. Aliza holds a Bachelor of Arts degree in History and Political Science from the University of California, Berkeley. 5. Leela Gantman Corporate Relations and Sustainability Director Leela joined Spark as Corporate Relations and Sustainability Director in January 2020, bringing with her close to 20 years’ experience in corporate and agency roles in New Zealand and Australia. Prior to joining Spark Leela was Head of Communications at Fletcher Building, and before this External Relations Director at beverages group Lion in Australia. As Spark’s Corporate Relations and Sustainability Director Leela is responsible for reputation management, internal communications, government, industry, and community engagement, the Company’s sustainability strategy, and the charitable activities of the Spark Foundation. She also serves as a Trustee on the Spark Foundation Board. Leela holds a Bachelor of Arts in Communications from the University of Technology Sydney. 4. Mark Beder Chief Operating Officer 6. Stefan Knight Finance Director As Chief Operating Officer Mark leads the significant investments Spark makes in digital infrastructure that underpins Aotearoa’s digital economy and ensures Spark offers customers the best data connectivity experience possible. This includes Spark’s fixed and mobile networks, data centre investments, IT infrastructure, and the development of emerging technologies such as the Internet of Things, 5G, and Edge compute. Mark joined Spark in 2003 and held several senior technology roles across the business, before joining the leadership team in 2016. In 2022 his title was changed from Technology Director to Chief Operating Officer, recognising the breadth and depth of his role in leading Spark’s operations and assets. Mark has successfully led major technology change programmes and digital innovation, including Spark’s mobile network evolution, the decommissioning of legacy technology, and the demerger from Chorus. Before joining Spark Mark worked as a Senior Manager for Ernst & Young Consulting in Auckland. He has a Bachelor of Commerce from the University of Auckland. Stefan was appointed Finance Director in December 2019. Stefan has been with Spark since 2003 and has worked across a range of finance and business performance related roles. He played a key role over recent years in important Spark initiatives, including the Turnaround and Quantum business improvement programmes and, more recently, was part of the leadership group that helped shape the organisation’s move to an Agile way of working. Stefan is a Chartered Accountant and began his career at Deloitte working across both Audit and Corporate Finance. Stefan has a Bachelor of Commerce in Accounting and Finance from the University of Auckland. 7. Grant McBeath Customer Director As Customer Director at Spark New Zealand, Grant leads the customer facing teams and is focussed on developing clear insight into what customers value and helping the teams deliver it. Grant joined Spark in 2013 as General Manager of Sales for the Spark Consumer and SMB business. The role grew and he picked up the Consumer and SME Sales, Service and Operations teams, and he had a period of six months as acting CEO for Spark Home, Mobile and Business in 2018 prior to Spark transitioning to Agile ways of working. Prior to working for Spark, Grant held a number of global roles at Nokia throughout Asia, and other global roles with Chevron Texaco, Coca-Cola and Cadbury in NZ. Grant completed a BCom at the University of Auckland, and also completed his MBA from the Helsinki School of Economics. 8. Heather Polglase People and Culture Director Heather was appointed People and Culture Director in September 2019. She joined Spark in 2013 and has over 20 years international experience as an HR professional, with a proven track record for business transformation, talent management, leadership development, and succession planning across a range of industries including FMCG, retail, hospitality, technology, and telecommunications. At Spark, Heather has held various senior HR positions and delivered a number of critical initiatives, including being a key architect of Spark’s leadership and development programme to build high-performing teams and leaders. Prior to joining Spark, Heather was a senior HR leader for almost a decade within Progressive Enterprises then spent two years in Australia leading HR, Strategy & Change Management at Dan Murphy’s. She has a Bachelor of Business Studies Degree (Hospitality Management) from Auckland University of Technology. 9. Tessa Tierney Product Director As Product Director Tessa is responsible for designing and delivering products and service experiences that customers value. Tessa is also responsible for shaping Spark’s investments and maturing capability in digital, IT, data, and experience design to deliver on future business needs. Tessa joined Spark in November 2015 as the Manager of Brand, Communications and Events for Spark Digital before moving on to become Business Manager. In 2017, Tessa joined the team that was responsible for successfully transitioning Spark into an Agile organisation and is regarded as one of New Zealand’s leading Agile and product development practitioners. Tessa brings to the role more than 16 years of experience in information and communication technologies, having previously held a variety of roles at Vodafone New Zealand. She has a Diploma in Communications Studies from Manukau Institute of Technology. 67 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Our governance and risk management Our governance and risk management Our governance and risk management To achieve our purpose, Spark must successfully execute our business strategy while maintaining high standards of operational performance and corporate governance. Maintaining high standards of corporate governance The Board regularly reviews and assesses Spark’s governance structures and processes to ensure that they are consistent with international best practice, in both form and substance. Spark has complied with the recommendations of the NZX Corporate Governance Code and substantially complied with the principles and recommendations of the ASX Corporate Governance Councils Principles and Recommendations (4th Edition) for the FY22 reporting period. You can read about how we have complied with these recommendations and principles in Spark’s Annual Corporate Governance Statement 2022 at www.sparknz.co.nz/about/ governance Copies of, and details about, Spark’s corporate governance policies, practices and processes can be found on our website at: www.sparknz.co.nz/about/ governance ESG governance and reporting Spark is committed to the continuous improvement of our environmental, social, and governance (ESG) performance. We seek to present a clear and transparent assessment of our ESG performance by considering the GRI Standards and Integrated Reporting International Framework in our annual reporting. Over the past year we have strengthened our governance of ESG and sustainability. Rather than establish a stand-alone steering committee, our sustainability governance structure helps us ensure sustainability is overseen at the highest levels of our organisation and embedded throughout our everyday operations. Our Board and Leadership Squad (LS) have 68 oversight of our sustainability performance. Sustainability and ESG are standing items at regular Leadership Squad meetings, with quarterly updates on performance against key KPIs, discussion of material topics and updates on external context, and decisions on key issues. The Board has overall governance responsibility for sustainability and is updated on sustainability performance against key KPIs on a quarterly basis. The Board also approves the sustainability framework, and reviews and approves all policies related to ESG. For day-to-day management our ESG Squad is a cross-functional group accountable for ESG performance, reporting, and risk management. The Squad is led by Spark’s Sustainability Lead, and includes representatives from Spark’s financial, risk, legal, investor relations, supply chain, regulatory affairs, and corporate relations functions. Our Sustainability Governance Framework can be found on page 141. In the past year we have continued to embed ESG best-practice across the organisation and benchmark our performance using a number of international frameworks. These include the Corporate Sustainability Assessment (CSA). The CSA is a comprehensive benchmark of our ESG maturity against our peers, with good coverage against our material sustainability issues. The CSA is now a part of S&P Global and is the assessment framework behind inclusion in the Dow Jones Sustainability Index (DJSI) global series. We also participate in the Carbon Disclosure Project (CDP), and the Benchmarking Alliance’s Digital Inclusion Benchmark. We publish a summary of our approach to sustainability at Spark on our website: www.sparknz.co.nz/sustainability Spark Human Rights Policy Spark has a number of existing policies and processes to protect and uphold human rights. For example, our Supplier Code of Conduct sets clear requirements for our suppliers, and our Privacy Policy and principles outline clear expectations around the protection of our customers’ rights around their personal data. In the past year we established a dedicated Human Rights Policy, making an explicit commitment to respect all internationally recognised human rights and setting clear expectations on how we will address human rights issues across our value chain. In developing the policy we engaged internal and external stakeholders and reviewed our approach against our global peers. We identified a number of human rights topics that were relevant to our broader value chain, many of which were already addressed through existing policies and processes. This policy can be found on our website: www.sparknz.co.nz/about/governance The impact of emerging technologies was identified as a material topic. Although we had a set of internal guidelines for the ethical use of AI (Artificial Intelligence) technologies, we did not have a public commitment or policy. As a result, we have recently published a set of external AI Principles. For more information see www.sparknz.co.nz/about/governance Our approach to tax We take a responsible and transparent approach to tax. We recognise that the digital economy is an important and growing sector in New Zealand, and the taxes we pay are an important source of government revenue. The Spark Group Tax Strategy follows the spirit of the law in addition to the pure interpretation of the law. We believe that it is important that those in the sector pay the right amount of tax to support the ongoing investment required for New Zealand’s long-term success. This includes the provision of infrastructure, education, social and environmental services we rely on as a New Zealand-based company. In FY22 Spark’s effective tax rate was 29.4%, which is higher than the New Zealand domestic tax rate of 28%, primarily due to tax payable on Spark’s share of Southern Cross underlying earnings. As a large business, Spark makes a significant contribution to New Zealand’s tax base. Spark contributed $159m of New Zealand income taxes during FY22 (before any tax credits were applied). Hello Tomorrow Breakdown of income tax payments FY22 200 $160m ($1m) $159m ($47m) ($112m) N O I L L I M $ 180 160 140 120 100 80 60 40 20 0 I D A P X A T E M O C N I L A T O T S A E S R E V O S T N E M Y A P X A T I D E T U B R T N O C X A T E M O C N I Z N ) C T F I . C N I ( I S T D E R C X A T I D A P X A T I L A N O S V O R P I In addition to income tax paid by Spark, the Spark Group has payment and collection obligations across a wide range of tax types resulting in an excess of $538m of taxes under management during FY22. Taxes under management $1M $24M M 7 7 1 $ $ 1 5 9 M $177 M FOREIGN INCOME TAX OTHER NZ INCOME TAX PAYE GST The full tax strategy is available online: https://www.sparknz.co.nz/about/ governance/ Managing risk Our risk policy and framework helps our people to manage uncertainty and adapt to challenges as they pursue Spark’s strategy. Oversight by the Audit and Risk Management Committee (ARMC) and the diligent application of the defined roles and responsibilities across the business ensures Spark’s risk management system remains effective. The policy and framework are benchmarked to COSO ERM 2017 (COSO), a leading practice risk management standard. Spark also uses other leading risk management standards like ISO31000: 2018 and specific standards and guidance, where available, to benchmark and inform it risk management practices. Spark’s framework is structured into five risk management domains that all work together to enable a robust system for risk management. Below is a description of each domain and some examples of activities by domain to help understand the framework in more depth. Governance and culture This domain reinforces the importance of risk management and influences how people apply the framework. Managing risk is embedded in Spark’s organisational structure, its functional activities, and is supported by specialist resources from the Risk Team. Examples include the policy and the defined governance structure that supports its application across Spark. More information on the roles and responsibilities are included in the table on page 138. Strategy and objective setting This domain focuses on integrating risk management into strategy setting and business planning. Examples include the consideration of risks and opportunities to business objectives when making strategy decisions and checking in with every function using a systematic method as part of the Quarterly Business Review Process. Each quarter the Leadership Squad communicate the top priorities for the business to the Wider Leadership Group, and support execution with strategic guidance and access to extra resources as needed. Performance This domain involves maintaining a portfolio view of risks under active management. Examples include maintaining a principal risk profile that is used by the ARMC and Leadership Squad to understand relevant risks and how they are being managed. It also focuses on the quality of the embedded risk management practices that are used within functions across the business. These two views enable in-depth analysis of relevant business risks and how they are being managed from a top-down and bottom-up perspective. Review and revision This domain involves identifying and implementing opportunities to continuously improve risk management practices. Examples include regular assessments of the policy and framework. Information, reporting and communication This domain focuses on guiding Spark on how to use the policy and framework. Examples include information pages, access to support channels, and education sessions. The policy and framework are assessed annually, and externally every three years to ensure they remain effective. All assessment results and agreed actions are shared with the ARMC to ensure they remain informed about the status of the policy and framework. Spark’s principal business risks Principal risk profiles are updated twice yearly. The last update was finalised in May 2022. The principal risk themes identified were: Estimating economic environment impacts and responding with balanced judgement The effect of rising interest rates and inflation is likely to negatively impact consumer behaviour and business confidence and result in cost increases. Although the impact to Spark will be less than some parts of the economy, there will be some impact to consumer/SME segments as wage subsidies expire and businesses, tighten their spending. 69 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Our governance and risk management To mitigate this risk, Spark has identified probable scenarios and response plans, and tuned its performance monitoring to track measures that indicate if anticipated impacts are arriving so that we can respond quickly. Executing simplification projects Spark continues to simplify its portfolio of products and migrate customers to new plans. This objective introduces revenue and customer experience risks because execution requires cooperation by a complex set of stakeholders and retiring legacy products is challenging. In FY22, Spark’s mature approach and capability for simplification enabled it to make good progress towards its simplification and legacy plan retirement targets. Close monitoring by Management enables risk and issues to be worked through effectively, particularly when trade off decisions are required. Delivering technology and network leadership The use of already established and proven delivery methods for large-scale network and technology projects (such as our 5G roll-out) will help us to manage potential risks created by delivery of new technologies and will also sustain our existing technology. With a high share of operational cost, Spark’s technology units will also have to continue executing net-cost reduction while maintaining operational standards. In addition to cost optimisation mitigations, technology units continue to strengthen operational risk management to ensure visibility and coordinate risk response actions. Maintaining customer trust in our information security and privacy controls Evolving external threats, changing legislation, and high expectations from customers and stakeholders mean robust security and privacy roadmaps and strong governance, involving the Leadership Squad, continue to be needed to ensure that significant risks are managed. Security and Privacy roadmaps jointly created with Agile units and strong governance involving the Leadership Squad help to ensure that significant risks are managed. 70 Business continuity and crisis management The Business Continuity and Crisis Management Policy protects customers from the impact of disruptive events and ensures value generating activities are resilient and comply with relevant external standards, for example Civil Defence and 111 obligations. Spark’s framework is benchmarked to ISO22301 and ISO 22313, which are acknowledged as leading practice standards for business continuity. It is overseen by the ARMC in a similar way to the Managing Risk Policy and Framework. Regular reviews of the framework are performed by the Risk and Internal Audit Teams. External reviews and testing of key elements of the framework such as the Level One Crisis Management Plan and Team are also done to ensure that the framework remains effective. Spark’s business continuity framework performed well when called upon during the Covid-19 pandemic. Spark continues to navigate the pandemic’s impacts such as supply chain issues, access to off-shore talent and resources. Our continued investment in network resiliency, as outlined on pages 35-36, also demonstrates application of the framework in practice. The Security Tribe is responsible for critical operational controls to ensure standards and compliance are upheld. Our Digital Trust team sets privacy frameworks and standards that Agile units need to apply to maintain appropriate operational controls for Privacy. External reviews and certifications help to ensure that critical elements for our security risk management remain healthy. These reviews include security maturity validations and security device configuration audits to ensure our processes meet expected standards. Cost optimisation while maintaining operational standards Executing net cost reduction is a strength for Spark, we do it in a way that ensures operational delivery standards for customers are maintained. To mitigate unintended risks, the Leadership Squad has established a formal delivery structure. This structure includes strong governance, and all initiatives use road-tested execution methodologies. Trajectory toward targets is measured, which in turn enables intervention and course corrections when required Achieving planned performance when there is talent mobility shortages in New Zealand Like most businesses Spark is impacted by New Zealand’s labour shortages and access to the people and skills it needs to execute on its business strategy. Competition for skilled people is high with low unemployment resulting from many years of closed or partly-closed borders. Costs associated with attracting and retaining talent have also increased. Mitigation strategies are in place and continue to be developed. These include workforce plans, succession and bench strength projects, targeted internships, upskilling, increasing internal talent mobility, and strategic development programmes. Management is very aware of this risk and is actively managing it across specifically impacted business teams. For running header don't deleteHello Tomorrow Having access to data and modelling is essential to support Spark and other infrastructure providers to understand where infrastructure assets, and the services they provide, are exposed and vulnerable to the impacts of climate risk. This data will also inform long-term decisions on infrastructure design and investment, so the right infrastructure is in the right places and the appropriate programmes of work are in place to maintain, upgrade, repair or replace existing infrastructure. Improving access to data and modelling was included as a recommendation in Spark’s submission on the draft National Adaptation Plan. The Plan will build the foundation for adaptation action so that all sectors and communities are able to live and thrive in a changing climate. The Plan lists roads, rail, ports, airports, energy, water, and telecommunications and digital services as lifeline utilities. While the actions in the Plan are important next steps, industry and government will need to continue to work closely to manage national adaptation risk. Climate-related risk Climate change poses a risk to our business due to potential disruption to our supply chain, our infrastructure, and our customers. The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 has implemented a requirement for climate- related disclosures for larger New Zealand businesses. The details of the climate- related disclosure framework are under consultation, but this will be largely aligned to the requirements of the international Task Force on Climate-related Financial Disclosures (TCFD) framework. Spark’s climate reporting aligns to the TCFD framework requirements. Our Leadership Squad and Board have been engaged on the design of the risk process and reviewed the findings. We will continue to incorporate TCFD reporting into our Integrated Report, providing an annual process for the review of our climate- related financial risks and disclosures. In FY21 we completed our first scenario- based climate risk analysis against two scenarios. This initial analysis did not identify any immediate or extreme risks. We do not intend to complete a full climate scenario analysis on an annual basis. Over the past year there was no new available data to significantly impact the conclusions of this analysis. Our climate change scenario-based risk assessment: Our climate risk assessment considered two scenarios matching those used by the National Climate Change Risk Assessment produced by Ministry for the Environment and aligned to TCFD recommendations: Scenario 1 - RCP 4.5: A future where early, ambitious mitigation has limited temperature change. This identifies risks to Spark from rapid de-carbonisation, for example from regulatory intervention, a high carbon price. Scenario 2 - RCP 8.5: A future where insufficient early mitigation has led to significant risk requiring adaptation to rising temperatures. This identifies risks to Spark from extreme weather events, sea-level rise, and knock-on impacts on our operating environment. This analysis was undertaken through a series of interviews with key teams across Spark, with oversight of the Environment and ESG Squads. This was supported by a process to map our infrastructure against publicly available climate scenario modelling data, to understand the number and location of sites that may be of greater risk. 71 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Our governance and risk management Our climate change scenario-based risk assessment Our climate scenario risk analysis considered the likelihood, impact, and urgency of risks using 3, 10, and 30-year time horizons. Using the same impact and likelihood categories as our standard enterprise risk management system we identified no risks that met our highest ’Extreme’ risk category, and seven that fell into lower risk rating categories: OUR CLIMATE SCENARIO RISK ANALYSIS Physical adaption risk Includes impacts on network resilience and future investment, increased weather events, sea level rise, planning and Resource Management Act (RMA) requirements, and insurance costs. Rated as high likelihood with low impact in the 3-year horizon, growing in impact over the 10 and 30 year time horizons. We mapped key infrastructure against publicly available climate scenario models. This showed many of the most extreme climatic changes expected to 2050 are in lightly-populated areas, for example on the West Coast of the South Island. Most of the population, and therefore much of our network, is in coastal areas. Analysing site proximity to coastal inundation risk zones, and factoring site elevation, shows only a small number of sites at greater than moderate risk in 2050 under the RCP 8.5 scenario. In the next two years the RMA will be repealed and replaced with three new acts: the Natural and Built Environments Act; the Strategic Planning Act; and the Climate Change Adaptation Act (CAA). We will actively monitor RMA reform to inform our long-term adaptation work. Spark also engaged in the development of the New Zealand’s first National Adaptation Plan. The Plan will focus on addressing the 43 priority risks identified in the National Climate Change Risk Assessment and the risk to the telecommunications network. Supply chain risk Includes increased supply lead times, increased air freight cost, increased supply cost, supply chain disruption, and increased inventory and working capital Rated as high likelihood with low impact in the 3-year horizon, growing in impact over the 10 and 30 year time horizons. The increasing number of extreme weather events across the globe increases the risk of disruption to our supply chain. Growing competition for resources from emerging climate mitigation technologies such as EVs may also increase cost and disruption. This is likely to drive increased cost and lead-times on purchasing and require larger local inventory and working capital to manage risk. This may impact our ability to provide devices to our customers and maintain and grow our infrastructure. In the past year we have implemented an enhanced supplier relationship management system which includes improved risk monitoring, reporting, and supplier engagement processes. We have also joined the JAC (Joint Audit Cooperation) initiative, a coalition of global telecommunications operators working together to ensure adherence to internationally recognised standards along the ICT supply chain and upholding human rights, social, labour and environmental standards Provision of climate related services Includes provision of monitoring and control devices over Spark’s IoT network plus other potential climate related services Rated as medium likelihood with low business impact in the 3 year horizon, growing to moderate impact in 3-10 years. Digital technology has the opportunity to enable significant emissions reductions. We provide services that support digitisation towards a low-carbon economy, but it is difficult to isolate business-as-usual digital transformation from specific sustainability enablers. To assess this opportunity we analysed our IoT revenues that are related to climate or sustainability services such as environmental monitoring services, energy efficiency, metering, or fleet management. This analysis found that around half of our IoT revenue is associated with these services, and that this share is likely to grow alongside growth in our IoT business. In the past year we have done further evaluation of the opportunity for our industry to support New Zealand’s transition to a low-carbon economy. The New Zealand Climate Change Commission (CCC) has modelled a number of emissions pathways for the country to achieve its binding targets. However, the role of ICT is not prominent. Spark is working with an external partner to combine existing global research insights with the CCC’s modelling and our knowledge of current and future ICT opportunities to identify, quantify and prioritise future opportunities. SBTi science-based emissions reduction target Includes the risk we will not meet our SBTi target. Moderate risk. Risk we will not achieve our Scope 1 and 2 reduction target or risk we will be unable to influence 70% of suppliers by spend to adopt own SBTi-aligned targets. This risk rating reflects the ambition of our target, which will require significant effort over the next decade. Our planned actions reduce this risk rating to a ‘low’ rating. See page 51 for information on our SBTi target and plan. Social disruption Medium likelihood, low impact over the 30 year horizon Low direct risk to Spark, however highlights the national risk of increased inequality as climate-intensive roles are disestablished and the importance of digital equity in New Zealand's transition. See page 57 for our work in digital equity. Risk to NZ economic activity Medium likelihood, low impact over the 30 year horizon We referenced the Climate Change Commission’s projected cost of action to achieve New Zealand’s 2050 target, which was approximately 1% of projected annual GDP by 2050. Climate litigation Low likelihood, low impact, across all time horizons 72 Considered low-risk as Spark is not linked to infrastructure or investments with heavy emissions. I I H G H R S K R A T N G I I I M E D U M R S K R A T N G I I L O W R S K R A T N G I For running header don't deleteHello Tomorrow Our suppliers As a New Zealand-based telecommunications and digital services company we rely on a combination of local and global suppliers and partners to operate our business. We have around 2000 suppliers, ranging from the largest global technology businesses to small local operators providing local services. Each year we spend around $2 billion to support our business and meet our customers’ needs. Our global supply chain is complex, with many indirect suppliers providing the source materials and components required to deliver consumer electronics and network infrastructure. We set clear expectations for our suppliers related to social and environmental performance through our Supplier Code of Conduct. Over the past year have worked hard to implement processes and systems to improve our monitoring of supply chain risk and compliance, and to better engage with our suppliers. Spark’s Supplier Code of Conduct Spark is committed to sourcing our products and services from suppliers that provide safe working conditions, treat workers with respect and dignity, and conduct business in an environmentally and socially responsible manner. Our Supplier Code of Conduct sets out the minimum standards we expect from all our suppliers across labour and human rights, health and safety, environmental sustainability, and ethical business practices. See: www.sparknz.co.nz/suppliers/ The Supplier Code of Conduct was first introduced in FY18. To embed the Code, we worked with our top 100 suppliers by contract value to ensure they were signed up to the Code or could demonstrate they were adhering to an existing equivalent code of practice. All new suppliers are requested to sign up to the Code as part of their onboarding process. As part of the evaluation process, the only suppliers who did not sign up to Spark’s Code were either global suppliers that had their own code of conduct, which Spark deemed acceptable, or suppliers deemed low-risk based on the services provided and the nature of the supplier. Since the introduction of the Supplier Code of Conduct we have completed a small number of supplier audits. Given travel restrictions these have focussed on New Zealand suppliers. We completed four audits at the end of FY21 and beginning of FY22, covering New Zealand-based suppliers of accommodation, software, IT services, and infrastructure businesses. These audits did not find any material issues of non-compliance with the Spark Supplier Code of Conduct. We recognise that much of our supply chain risk lies overseas, and that we need to strengthen our approach to identifying risk in our supply chain and engaging our suppliers. Improving our Risk Management and Supplier Engagement processes In FY22 we began transitioning our supplier management system to the SAP Ariba platform. This system provides improved processes for data collection from suppliers, including self-assessment questionnaires and compliance declarations, covering topics such as modern slavery and science-based emissions reduction targets. The system also includes a risk module that enables us to monitor suppliers across 300+ incident types (such as ethical practices, labour compliance, legal incidents, and operational disruption), and then segment suppliers into risk profiles as a result. The migration process is enabling us to refresh and update our supplier database, with suppliers required to re-register and provide a fresh commitment to our existing Supplier Code of Conduct. We are also collecting more detailed supplier information to help us identify risk and prioritise suppliers for audits. We completed an initial risk assessment and supplier prioritisation at the end of FY22. This included data from the risk monitoring, geographic risk aligned to World Economic Forum risk factors, and a prioritisation of strategic suppliers. This process identified 53 suppliers for further engagement, with 21 considered higher risk. Auditing international suppliers - Membership of Joint Audit Cooperation (JAC) initiative Spark was accepted as a new member of JAC in FY22. JAC is an international association of telecommunications operators aiming to align around a common set of requirements and KPIs for ICT suppliers to uphold human rights, social, labour, and environmental standards. JAC has been running for over a decade and has been gradually growing as new operators join the initiative. JAC enables us to audit global suppliers against a common industry methodology. As a JAC member Spark is required to audit a minimum of five supplier locations each year which we will begin to implement in FY23. The suppliers and locations are mutually agreed and allocated across the members. Findings and corrective actions are also shared among all JAC members, which provides visibility of risk across a larger number of suppliers than Spark would be able to audit individually and a platform for collective industry engagement to improve performance. A requirement of JAC membership is alignment of our own policies and Supplier Code of Conduct to JAC best-practice guidance. In FY22 we published a new Human Rights Policy which sets out Spark’s commitment to uphold internationally recognised Human Rights. See page 68 for more information. JAC also runs a number of working groups for telecommunications companies to collaborate on shared issues. These include groups focussed on the circular economy, human rights, and climate change. The climate change group will support our scope 3 SBTi target, helping to engage with global suppliers to encourage them to set targets aligned to a 1.5 degrees pathway. For more information see: www.jac-initiative.com 73 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Our suppliers Our suppliers Modern Slavery Statement We are committed to taking meaningful action to identify, mitigate and manage any modern slavery risks and to continuously improving our approach. In the past year one of our strategic suppliers notified us of a suspected breach of their policies related to child or forced labour. This related to a subcontractor in their supply chain in the Philippines and is not connected to product or services provided to Spark. The supplier made the decision to permanently block the supplier and is undertaking remedial actions. This has been reported in our Modern Slavery Statement, which we publish each year alongside our Annual Report. See: www.sparknz.co.nz/about/governance Modern Slavery Framework Supply chain risk management Overarching Sustainability Governance Modern Slavery Risk Human Rights Policy and due diligence Annual non-financial reporting 74 Risk identification: Modern slavery risk will be identified through an ongoing human rights due diligence process, aligned to our annual sustainability materiality process, an annual process of supply chain risk identification, supplier self-assessments, independent audits conducted through our membership of the Joint Audit Cooperation Initiative (JAC), and additional local audits where needed. New suppliers are screened for risk as they are onboarded. Risk mitigation: The supply chain risk management process identifies issues to be rectified with suppliers, tracked through our SAP Ariba system and, where relevant, via the shared JAC database. Any non-supply chain risks identified have mitigation actions agreed and tracked by the ESG Squad and through our overarching sustainability governance. Governance framework: Modern Slavery reporting is integrated into quarterly reporting to our Leadership Squad, including issues identified and progress against mitigation actions. Our Leadership Squad and Board are also engaged in the preparation of our annual Modern Slavery Statement. Key policies include our Human Rights Policy and our Supplier Code of Conduct. Reporting: We report our progress, the effectiveness of our approach and actions, and future improvements in our annual Modern Slavery Statement and in the Our Suppliers section of our Annual Report. Hello Tomorrow Leadership and Board remuneration Spark seeks to remunerate our people with competitive salaries, paying in line with the market so we can recruit and retain the best talent. In keeping with our focus on customer experience, we incorporate customer satisfaction measures into our performance incentives. In February 2022, the Board approved a salary review allocation for FY23 (salaries from 1 July 2022) which was based on our Contribution Models with additional allocations for strategic actions including lifting our minimum full-time salary to $49,200 – above the Living Wage. As part of this process we also reviewed several salary staircases to ensure that they were competitive against the market. Leadership Squad remuneration Remuneration mix The table below shows the standard FY22 remuneration mix for the Leadership Squad expressed as a percentage of fixed remuneration. The Short-Term Incentive (STI) scheme is expressed at target, and the maximum payment possible through the scheme is double the target value. The Long-Term Incentive scheme (LTI) values represent the maximum LTI value. Leadership Squad remuneration Long-Term Incentive 40% of base Short-Term Incentive 50% of base Salary Base Fixed remuneration All Spark employee packages – including the Leadership Squad – include a fixed remuneration component that is set based on contribution, experience, and market relativities. Fixed remuneration supports the attraction, motivation, and retention of highly skilled executives. For FY23 reviews, the Board commissioned an external remuneration consultancy to provide detailed benchmarking information on our Leadership Squad roles against a relevant comparator group of NZ companies. Fixed remuneration generally consists of base salary. KiwiSaver sits outside fixed remuneration and as such, employees with KiwiSaver receive employer contributions on top of base salary and cash incentives. A number of Spark-funded benefits, including medical and life insurances, are also available to eligible employees on top of fixed remuneration. Short-term Incentive schemes Spark operates a small number of short-term incentive schemes, from monthly and quarterly commission and sales incentive plans to annual cash-based short-term incentives. Some employees in specific sales positions may have a component of their remuneration subject to individual or divisional sales performance targets, such that their total remuneration potential is directly linked to the acquisition and retention of profitable business for Spark. For senior leaders, including the Leadership Squad and CEO, a component of their remuneration package is at risk in the form of a discretionary annual cash-based Short-Term Incentive (STI). Spark’s STI scheme rewards senior leaders for the achievement of annual performance objectives, with payments awarded from a fixed cash pool that is set based on overall Spark performance against financial and/or non-financial annual performance objectives. The actual payment to individuals is at the sole discretion of Spark and takes into account contributing factors such as performance, and the performance of individual parts of the business. Eligibility to participate in the STI scheme on an annual basis is at the discretion of the company and is targeted at individuals in senior roles who play a significant role in driving the overall performance of Spark. The STI scheme rules contain a clawback provision that allows Spark to clawback any payments made under the STI scheme, for a period of 12 months following the payment. FY22 Short-term incentive scheme outcomes For FY22 substantively all STI participants shared the same Spark Group targets comprising of EBITDAI, customer experience measures, as well as additional measures based on our three-year strategy. The on target percentages are provided in the table below. Where the result of a performance metric falls below a specified threshold, there is no payment for that proportion of the STI. Where results exceed the target the payment can scale to up to twice the target percentage with a maximum overall payment of 200%. The FY22 Group performance outcome, as approved by the Board, is summarised as follows: Performance metric Weight Target Result Outcome EBITDAI 50% $1,150m Achieved target Consumer and Small Business iNPS Digital Customer Effort Score Wireless Broadband connections (net growth) Future market external revenue1 +26 50% Exceeded target Met threshold 22,000 Not achieved $253m Exceeded target 25% 25% 100% 1 Future markets revenue includes Health and IOT. 50% 31% 25% 106% 75 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Leadership and Board remuneration Leadership and Board remuneration Notes: We closed FY21 at +23 iNPS as stated in our last annual report. In order to have the broadest customer base included in the survey, we have removed the marketing opt out filters to maximise the number of customers we survey. This has resulted in a re-baseline of FY22 start, from +23 down to +20 and means that on a like-for-like basis our improvement was +9 in FY22. For the purpose of STI we exclude Skinny Jump connections for Wireless Broadband. Based on the above result, the total available funding pool for all eligible STI participants across Spark for FY22 was $6.2 million. Total payments cannot exceed $6.2 million. FY23 Short-term incentive scheme target The mechanics of the FY23 STI will be the same as those for FY22. Group results will be the main determinate of the STI pool, with substantively all participants sharing the same Group measures. The FY23 group measures will be a combination of EBITDAI, customer experience, and our three-year strategy. Measure EBITDAI Customer experience (iNPS and digital) 3-year strategy – Future markets revenue Weighting 50% 25% 25% Long-term incentive schemes Spark believes that some senior leaders should have part of their remuneration linked to the long-term performance of the Company, so for the Leadership Squad and a select group of senior leaders, a long-term incentive forms part of their remuneration package. In FY22, Spark operated one main scheme: the Spark New Zealand Long Term Incentive Scheme. FY22 / FY23 Long-term Incentive Scheme For FY22, members of the Leadership Squad (including the CEO) and selected senior leaders were granted options under the Spark Long-Term Incentive Scheme (LTI). Under the scheme, participants were granted options at the start of the three-year vesting period. The number of options granted equalled the gross LTI value divided by the volume weighted average price of Spark New Zealand shares for the 20 days prior to the grant date. Subject to satisfaction of the performance hurdle and continued employment, at vesting each option converts to a Spark share based on a zero exercise price. If the target is not met, or the participant leaves, then the options simply lapse. For FY23, members of the Leadership Squad, including the CEO, and selected senior leaders will be granted options under a similar scheme as FY22 with the only change being the introduction of new performance measures relating to Spark’s ESG performance alongside an absolute Total Shareholder Return performance hurdle. FY22 and FY23 Long-term Incentive Scheme performance measures Vesting of the FY22 LTI grant (September 2024) is contingent on participants’ continued employment with Spark through to September 2024 and the company achieving an absolute Total Shareholder Return (aTSR) performance hurdle. aTSR is a measure of share price appreciation and dividends paid over the three-year period of the grant. The target for this hurdle is Spark’s cost of equity plus 1% compounding annually. For FY23, the Long-term Incentive Scheme, 75% of the allocated shares will vest based on aTSR exceeding cost of equity +1.5% (compounding annually) over the vesting period and 25% will vest based on performance against environmental and diversity targets. Performance evaluation The CEO annually reviews the performance of her direct reports. The evaluation is undertaken using criteria set by the CEO, including the performance of the business, the accomplishment of strategic and operational objectives, and other non- quantitative objectives agreed with the HRCC at the beginning of each financial year. The last Leadership Squad evaluations were undertaken during June 2022. Spark undertakes appropriate checks before appointing someone onto the Leadership Squad. CEO remuneration Remuneration policy, strategy, and governance CEO Jolie Hodson’s remuneration package reflects the scope and complexity of her role and is set by the Board with reference to the remuneration of CEOs of similarly sized organisations. For the CEO’s FY23 remuneration review the Board commissioned an external remuneration consultancy to provide a detailed benchmarking report based on a comparator group of relevant NZ companies. CEO Remuneration FY22 For FY22 the CEO’s remuneration package comprised a fixed cash component, an at-risk short-term incentive, and an at-risk long-term incentive, to be awarded under the Spark Long-term Incentive Scheme. The targets and operation of the CEO’s STI and LTI is the same as described above under Short term incentive schemes and Long-term incentive scheme. The construct of the CEO’s remuneration package is such that 60% of her remuneration package is at risk. The table below shows the target remuneration mix: Long-Term Incentive Short-Term Incentive Salary 75% of base 75% of base Base The CEO is also expected to maintain a holding of Spark shares as set out on page 131 of this report. 76 Hello Tomorrow Remuneration components Short-term Incentive Scheme The CEO is eligible for an annual cash-based short-term incentive, subject to the achievement of specific performance objectives set by the Board based on Spark’s strategy and business plan for the respective financial year. These objectives will be a combination of financial and non-financial measures. This is covered in more detail in the earlier STI scheme section. The Board assesses the CEO’s performance at the end of the financial year to determine the actual payment value of her short-term incentive, which is in the range of 0% to 200% of her target value. The FY22 Group performance outcome, as approved by the Board and applicable to the CEO, is summarised as follows: Performance metric Weight Target Result Outcome EBITDAI 50% $1,150m Achieved target Consumer and Small Business iNPS Digital Customer Effort Score Wireless Broadband connections (net growth) Future market external revenue1 +26 50% Exceeded target Met threshold 22,000 Not achieved $253m Exceeded target 25% 25% 100% 50% 31% 25% 106% 1 Future markets revenue includes Health and IOT. Long-term Incentive Scheme For FY22 the CEO’s annual LTI was granted as share options under the Spark Long Term Incentive Scheme. This is covered in more detail in the earlier LTI scheme section. The LTI component of the CEO’s remuneration package is designed to link part of her remuneration to the long-term performance of Spark, and align her interests with those of shareholders, through the grant of options with a post-allocation performance hurdle. Performance hurdle A performance hurdle applies to long-term incentives made to the CEO. This hurdle is agreed by the Board and sets a minimum level of performance that is required to be achieved over the period of each grant, for the LTI to be eligible to vest. For FY22, a performance hurdle of Spark’s TSR applies. The target for this hurdle was Spark’s cost of equity plus 1% compounding annually. Spark’s TSR must meet or exceed this target over the period of the grant (from the date the options are granted to the date three years after that date) for the options to vest. If Spark’s TSR does not meet this target, all of the options will lapse. Testing to determine whether the TSR performance hurdle has been met will occur at the end of the vesting period of the grant. The Board will receive independent advice to the effect that the performance hurdle has been met, or not met, in determining whether the CEO can exercise the options or whether the options will lapse. CEO termination Spark may terminate the CEO’s employment with three months’ notice. A payment of nine months base remuneration will be made, plus entitlements for annual performance incentives and long-term incentives subject to the rules relating to these incentives, in the case of termination by Spark, other than for termination for cause. If there is a change of control that results in the CEO no longer being the CEO of a publicly listed company, then she will be able to terminate her employment with three months’ notice and receive payment as if Spark had terminated her employment. Spark may also terminate the CEO’s employment without notice for defined causes, in which case she will receive no further entitlement to any remuneration. Board remuneration Remuneration and strategy The remuneration of Directors is reviewed annually by the Human Resources and Compensation Committee (HRCC) – taking account of the company’s size and complexity and the responsibilities, skills, performance and experience of the Directors – with recommendations made to the Board for approval. Specialist independent consultants may be engaged from time to time to provide advice and ensure that the remuneration of Spark’s Directors is appropriate and comparable to that of similar companies in New Zealand. Apart from the CEO, no Director of Spark receives compensation in the form of share options or restricted shares, nor do they participate in any bonus or profit-sharing plan. Non-executive Directors are, however, expected to maintain a holding of Spark shares as set out on page 136 of this report. As is the case for employees, Directors are required to comply with the Insider Trading Policy when buying or selling Spark shares and any such transactions are disclosed to the market. Remuneration components No superannuation or retirement allowance was paid to any Spark Director during FY22. Spark does not have service contracts with any Director, apart from the CEO, that provide for any benefits or remuneration in the event that a Director’s service with Spark is terminated. New Zealand-based non-executive Directors are eligible for Spark-funded medical insurance, and all non-executive Directors are also eligible for Spark-funded life insurance. 77 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements Financial statements Notes to the financial statements Section 1 – General information 1.1 About this report 1.2 Key estimates and assumptions 1.3 Significant transactions and events 1.4 Impact of change in accounting policy 1.5 Assets and liabilities classified as held for sale Section 2 – Financial performance information 2.1 Segment information 2.2 Operating revenues and other gains 2.3 Operating expenses 2.4 Finance income, finance expense, depreciation, amortisation and net investment income 2.5 Non-GAAP measures Section 3 – Assets 3.1 Receivables and prepayments 3.2 Inventories 3.3 Long-term investments 3.4 Right-of-use assets 3.5 Leased customer equipment assets 3.6 Property, plant and equipment 3.7 Intangible assets 3.8 Net tangible assets 79 83 83 83 84 85 86 87 88 91 92 93 94 97 98 99 100 101 103 104 Section 4 – Liabilities and equity 4.1 Payables, accruals and provisions 4.2 Lease liabilities 4.3 Debt 4.4 Capital risk management 4.5 Equity and dividends Section 5 – Financial instruments 5.1 Derivatives and hedge accounting 5.2 Financial risk management Section 6 – Other information 6.1 Income tax 6.2 Employee share schemes 6.3 Related party transactions 6.4 Subsidiaries 6.5 Reconciliation of net earnings to net cash flows from operating activities 6.6 Commitments and contingencies Independent auditor’s report 105 106 108 109 110 112 116 119 120 121 122 123 123 124 78 For running header don't deleteHello Tomorrow Financial statements Statement of profit or loss and other comprehensive income YEAR ENDED 30 JUNE Operating revenues and other gains Operating expenses Earnings before finance income and expense, income tax, depreciation, amortisation and net investment income (EBITDAI) Finance income Finance expense Depreciation and amortisation Net investment loss Net earnings before income tax Income tax expense Net earnings Other comprehensive income NOTES 2.2 2.3 2.5 2.4 2.4 2.4 2.4 6.1 2022 $M RESTATED1 2021 $M 3,720 3,593 (2,570) (2,474) 1,150 1,119 26 (74) (520) (1) 581 (171) 410 34 (81) (521) (1) 550 (169) 381 Items that will not be reclassified to profit or loss: Revaluation of long-term investments designated at fair value through other comprehensive income 3.3 (55) (87) Items that may be reclassified to profit or loss: Translation of foreign operations Change in hedge reserves net of tax Other comprehensive income Total comprehensive income Earnings per share Basic and diluted earnings per share (cents) Weighted average ordinary shares (millions) Weighted average ordinary shares and options (millions) See accompanying notes to the financial statements. 1 Restated due to the implementation of the IFRS Interpretations Committee (IFRIC) agenda decision, see notes 1.1 and 1.4. 5.1 1 71 17 427 – 57 (30) 351 21.9 1,869 1,872 20.6 1,852 1,854 79 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements Statement of financial position Current assets Cash Short-term receivables and prepayments Short-term derivative assets Inventories Taxation recoverable Assets classified as held for sale Total current assets Non-current assets Long-term receivables and prepayments Long-term derivative assets Long-term investments Right-of-use assets Leased customer equipment assets Property, plant and equipment Intangible assets Total non-current assets Total assets Current liabilities Short-term payables, accruals and provisions Taxation payable Short-term derivative liabilities Short-term lease liabilities Debt due within one year Liabilities classified as held for sale Total current liabilities Non-current liabilities Long-term payables, accruals and provisions Long-term derivative liabilities Long-term lease liabilities Long-term debt Deferred tax liabilities Total non-current liabilities Total liabilities Equity Share capital Reserves Retained earnings Total equity Total liabilities and equity AS AT 30 JUNE 2022 RESTATED1 AS AT 30 JUNE 2021 NOTES $M $M 3.1 5.1 3.2 1.5 3.1 5.1 3.3 3.4 3.5 3.6 3.7 4.1 5.1 4.2 4.3 1.5 4.1 5.1 4.2 4.3 6.1 71 839 5 107 1 198 72 768 12 64 - - 1,221 916 197 13 212 508 90 1,109 839 2,968 4,189 460 40 1 52 293 94 940 64 77 292 1,233 108 1,774 2,714 271 24 227 647 77 1,080 858 3,184 4,100 479 23 4 60 373 – 939 60 91 406 1,030 82 1,669 2,608 1,105 1,084 (352) 722 1,475 4,189 (371) 779 1,492 4,100 See accompanying notes to the financial statements. 1 Restated due to implementation of the IFRIC agenda decision, see notes 1.1 and 1.4. On behalf of the Board Justine Smyth, CNZM Chair 80 Jolie Hodson Chief Executive Authorised for issue on 24 August 2022 For running header don't deleteHello Tomorrow Statement of changes in equity YEAR ENDED 30 JUNE 2022 Balance at 1 July 2021 Net earnings Other comprehensive income/(loss) Total comprehensive income/(loss) Contributions by, and distributions to, owners: Dividends Supplementary dividends Tax credit on supplementary dividends Dividend reinvestment plan Issuance of shares under share schemes Other transfers Total transactions with owners Balance at 30 June 2022 SHARE CAPITAL RETAINED EARNINGS HEDGE RESERVES NOTE $M $M 1,084 – – – – – – 18 4 (1) 21 1,105 779 410 – 410 (467) (46) 46 – – – (467) 722 4.5 4.5 $M (63) – 71 71 – – – – – – – 8 SHARE-BASED COMPEN- SATION RESERVE REVALUATION RESERVE FOREIGN CURRENCY TRANSLATION RESERVE $M $M $M TOTAL $M 3 – – – – – – – 2 – 2 5 (288) (23) 1,492 – (55) (55) – – – – – – – – 1 1 – – – – – – – 410 17 427 (467) (46) 46 18 6 (1) (444) (343) (22) 1,475 YEAR ENDED 30 JUNE 2021 – RESTATED1 NOTE $M $M $M $M $M $M SHARE CAPITAL RETAINED EARNINGS HEDGE RESERVES SHARE-BASED COMPEN- SATION RESERVE REVALUATION RESERVE FOREIGN CURRENCY TRANSLATION RESERVE TOTAL $M Balance at 1 July 2020 Net earnings Other comprehensive income/(loss) Transfer to retained earnings on disposal of historical long-term investments Total comprehensive income/(loss) Contributions by, and distributions to, owners: Dividends Supplementary dividends Tax credit on supplementary dividends Dividend reinvestment plan Issuance of shares under share schemes Total transactions with owners Balance at 30 June 2021 949 – – – – – – – 4.5 4.5 131 4 870 381 – (11) 370 (461) (47) 47 – – 135 (461) (120) – 57 – 57 – – – – – – 1,084 779 (63) 2 – – – – – – – – 1 1 3 (212) (23) 1,466 – (87) 11 (76) – – – – – – – – – – – – – – – – 381 (30) – 351 (461) (47) 47 131 5 (325) (288) (23) 1,492 See accompanying notes to the financial statements. 1 Restated due to implementation of the IFRIC agenda decision, see notes 1.1 and 1.4. 81 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements Statement of cash flows YEAR ENDED 30 JUNE Cash flows from operating activities Receipts from customers Receipts from interest Payments to suppliers and employees Payments for income tax Payments for interest on debt Payments for interest on leases Payments for interest on leased customer equipment assets Net cash flows from operating activities Cash flows from investing activities Proceeds from sale of property, plant and equipment Proceeds from sale of business Proceeds from long-term investments Receipts from finance leases Receipts from loans receivable Payments for purchase of business, net of cash acquired Payments for, and advances to, long-term investments Payments for purchase of property, plant and equipment, intangibles (excluding spectrum), and capacity Payments for purchase of spectrum intangible assets Payments for capitalised interest Net cash flows from investing activities Cash flows from financing activities Net proceeds from/(repayments of) debt Payments for dividends Payments for leases Payments for leased customer equipment assets Net cash flows from financing activities Net cash flows Opening cash position Closing cash position See accompanying notes to the financial statements. 1 Restated due to implementation of the IFRIC agenda decision, see notes 1.1 and 1.4. 2022 $M RESTATED1 2021 $M NOTES 3,656 3,547 24 32 (2,606) (2,458) (160) (188) 6.5 4.4 (48) (19) (6) 841 – – 4 3 – (7) (59) (46) (26) (8) 853 6 30 6 6 1 (25) (13) (425) (330) – (8) (51) (6) (492) (376) 214 (449) (69) (46) (38) (330) (56) (34) (350) (458) (1) 72 71 19 53 72 82 For running header don't deleteHello Tomorrow Consideration of the IFRIC agenda decision During the year ended 30 June 2022, Spark revised its accounting policy in relation to configuration and customisation costs incurred in implementing Software-as-a-Service (SaaS) cloud computing arrangements. This was in response to the IFRIC agenda decision, issued in April 2021, clarifying its interpretation of how current accounting standards apply to these types of arrangements. The IFRIC decision clarified that because SaaS arrangements are service contracts that provide Spark with the right to access the cloud provider’s application software over the contract period, costs to configure or customise this software should be recognised as operating expenses when the services are received. Previously Spark had recorded these configuration and customisation costs as part of the cost of an intangible asset and amortised these costs over the useful lives of the software assets. A summary of the impact of the change in accounting policy on the Group’s financial statements is provided in note 1.4. New and amended standards Spark has adopted amendments issued for NZ IFRS 9 Financial Instruments and NZ IFRS 16 Leases that address issues arising from the reform of benchmark interest rates. These amendments have not had a material impact on the Group’s financial statements. 1.2 Key estimates and assumptions The preparation of these financial statements requires management to make estimates and assumptions. These affect the amounts of reported revenues and expenses and the measurement of assets and liabilities as at 30 June. Actual results could differ from these estimates. The principal areas of judgement and estimation for Spark in preparing these financial statements are found in the following notes: • Note 2.2 Operating revenues and other gains • Note 3.1 Receivables and prepayments • Note 3.4 Right-of-use assets • Note 3.6 Property, plant and equipment • Note 3.7 Intangible assets • Note 4.2 Lease liabilities. NOTES TO THE FINANCIAL STATEMENTS Section 1 General information 1.1 About this report Reporting entity These financial statements are for Spark New Zealand Limited (the Company) and its subsidiaries (together ‘Spark’ or ‘the Group’). Spark is a major supplier of telecommunications and digital services in New Zealand. Spark provides a full range of telecommunications, information technology, media and other digital products and services, including: mobile services; voice services; broadband services; internet sports streaming services; cloud, security and service management services; procurement and partner services and managed data, networks and services. The Company is incorporated and domiciled in New Zealand, registered under the Companies Act 1993 and is an FMC reporting entity under the Financial Markets Conduct Act 2013. The Company is listed on the New Zealand Main Board equity security market and the Australian Securities Exchange and the address of its registered office is Spark City, 167 Victoria Street West, Auckland 1010, New Zealand. Basis of preparation The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for profit-oriented entities. The financial statements also comply with International Financial Reporting Standards (IFRS). The measurement basis adopted in the preparation of these financial statements is historical cost, modified by the revaluation of certain investments and financial instruments, as identified in the accompanying notes. These financial statements are expressed in New Zealand dollars, which is Spark’s functional and presentation currency. All financial information has been rounded to the nearest million, unless otherwise stated. Certain comparative information has been updated to conform with the current year’s presentation. The principal accounting policies applied in the preparation of these financial statements are set out in the accompanying notes where an accounting policy choice is provided by NZ IFRS. A policy is also included when it is new, has changed, is specific to Spark’s operations, is significant or is material. Where NZ IFRS does not provide an accounting policy choice, Spark has applied the requirements of NZ IFRS but a detailed accounting policy is not included. 83 1Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: GENErAL INFOrMATION 1.3 Significant transactions and events The following significant transactions and events affected the financial performance and financial position of Spark for the year ended 30 June 2022 or subsequent to balance date: Debt programme (see note 4.3) • On 30 November 2021, Spark established three Sustainability- Linked Loans totalling $425 million. These consist of: converting an existing $200 million facility with Westpac New Zealand, to mature on 30 November 2023; establishing a new $100 million facility with Commonwealth Bank of Australia, to mature on 30 November 2024; and extending a $125 million facility with MUFG Bank, Ltd., to mature on 30 November 2025. • On 23 March 2022, Spark issued $100 million of unsecured, unsubordinated Sustainability-Linked Bonds with an initial interest rate of 4.37% maturing on 29 September 2028. • On 25 March 2022, $100 million of unsecured fixed-rate bonds with a coupon rate of 4.50% matured. Long-term investments (see note 3.3) • The fair value of Spark’s investment in Hutchinson Dividends (see note 4.5) • Dividends paid during the year ended 30 June 2022 in relation to the H2 FY21 second-half dividend (ordinary dividend of 12.5 cents per share) and H1 FY22 first-half dividend (ordinary dividend of 12.5 cents per share) totalled $467 million or 25.0 cents per share, of this $18 million was settled through the dividend reinvestment plan. Leases (see notes 2.2, 3.1 and 3.6) • On 1 December 2021, Chorus exercised its right of renewal for the Spark exchange buildings lease. This resulted in a combination of lease renewals, lease relinquishments, a new operating lease and an annual price review. In exercising this right Chorus renewed some space and relinquished some space. As a result of these changes, Spark recognised an increase of $81 million in property, plant and equipment assets for the exchange space it has taken back control of from Chorus. This was offset by a reduction of $69 million in finance leases no longer receivable from Chorus and a gain of $12 million reported within other gains for the price increases over the remaining lease term. Telecommunications Australia Limited decreased by $55 million during the year due to a decrease in its quoted share price from AUD$0.110 to AUD$0.070. The change in fair value is recognised within other comprehensive income. Acquisitions (see note 3.7) • On 31 January 2022, Spark acquired the remaining 50% of its joint venture, Connect 8 Limited, a mobile infrastructure business. • Spark contributed $53 million of equity to its Southern Cross investment to fund the SX NEXT undersea cable build during FY22. No dividends were received from Southern Cross during FY22. Dividends have been suspended for the duration of the SX NEXT build phase and are not expected to resume until at least FY24. Capital expenditure (see notes 2.5, 3.4, 3.6 and 3.7) • Spark’s additions to property, plant and equipment, intangible assets (excluding spectrum) and capacity right-of-use assets were $410 million, details of which are provided in notes 3.4, 3.6 and 3.7 and on page 19 of this annual report. TowerCo (see note 1.5) • On 12 July 2022, Spark confirmed the Ontario Teachers’ Pension Plan Board will acquire a 70% interest in the TowerCo business, with completion anticipated to occur in the first half of FY23. More details on the anticipated transaction are contained within note 1.5. 84 For running header don't deleteHello Tomorrow 1.4 Impact of change in accounting policy Spark has changed its accounting policy in relation to SaaS arrangements in response to the IFRIC agenda decision that typically SaaS arrangements do not give rise to an asset, and configuration and customisation costs will likely need to be expensed. This has reduced EBITDAI, net earnings before tax, and total assets due to such expenses now being recognised as the services are received rather than capitalised as an intangible asset and amortised over the software asset’s useful life. There has been no net impact on Spark’s statement of cash flows. However, it has resulted in the reclassification of the applicable costs incurred from investing to operating activities. The impact of the change in Spark’s accounting policy in relation to SaaS arrangements in response to the IFRIC agenda decision on the comparative financials statements is as follows: Statement of profit or loss and other comprehensive income YEAR ENDED 30 JUNE 2021 Operating expenses Earnings before finance income and expense, income tax, depreciation, amortisation and net investment income (EBITDAI) Depreciation and amortisation Net earnings before income tax Net earnings for the period Earnings per share Basic and diluted earnings per share Statement of cash flows YEAR ENDED 30 JUNE 2021 Payments to suppliers and employees Net cash flows from operating activities Payments for purchase of property, plant and equipment, intangibles (excluding spectrum) and capacity Net cash flows from investing activities1 Statement of financial position AS AT 1 JULY 2020 Intangible assets Total assets Deferred tax liabilities Total liabilities Retained earnings Total equity Total liabilities and equity AS AT 30 JUNE 2021 Intangible assets Total assets Deferred tax liabilities Total liabilities Retained earnings Total equity Total liabilities and equity PREVIOUSLY REPORTED $M (2,469) 1,124 (523) 553 384 CHANGE IN ACCOUNTING POLICY $M (5) (5) 2 (3) (3) RESTATED $M (2,474) 1,119 (521) 550 381 20.7 (0.1) 20.6 (2,453) 858 (335) (381) 843 4,358 61 2,884 878 1,474 4,358 871 4,113 84 2,610 790 1,503 4,113 (5) (5) 5 5 (10) (10) (2) (2) (8) (8) (10) (13) (13) (2) (2) (11) (11) (13) (2,458) 853 (330) (376) 833 4,348 59 2,882 870 1,466 4,348 858 4,100 82 2,608 779 1,492 4,100 1 Previously reported net cash flows from investing activities includes a reclassification of receipts from finance leases ($6 million) and receipts from loans receivable ($1 million) from net cash flows from financing activities to conform with the current year’s presentation. 85 1Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: GENErAL INFOrMATION 1.5 Assets and liabilities classified as held for sale During FY22 Spark commenced a process to transfer its passive mobile tower assets into a separate subsidiary, TowerCo, and to introduce third-party capital into TowerCo. As at 30 June 2022 the assets and liabilities associated with TowerCo have been classified as held for sale. On 12 July 2022 Spark confirmed the Ontario Teachers’ Pension Plan Board will acquire a 70% interest in the TowerCo business, with completion anticipated to occur in the first half of FY23, conditional on Overseas Investment Office approval. The transaction will deliver proceeds of approximately $900 million and values the business at $1.175 billion. Under the terms of the deal, Spark has entered into a 15-year agreement with TowerCo (plus rights of renewal) to secure access to existing and new towers, with a build commitment of 670 sites over the next 10 years. The major classes of assets and liabilities comprising the operations classified as held for sale are as follows: AS AT 30 JUNE Right-of-use assets1 Property, plant and equipment and intangible assets Deferred tax assets Total assets classified as held for sale Payables, accruals and provisions Lease liabilities1 Total liabilities classified as held for sale 2022 $M 95 97 6 198 5 89 94 1 The leases associated with these balances will be assigned on transfer to TowerCo. No gain or loss was recognised in the statement of profit or loss on classification of the above assets and liabilities to held for sale. At the time the financial statements were authorised for issue the transaction had not yet completed and as such a final estimate of the gain on sale has not been made. 86 For running header don't deleteHello Tomorrow Section 2 Financial performance information 2.1 Segment information The segment results disclosed are based on those reported to the Chief Executive and are how Spark reviews its performance. Spark’s segments are measured based on product margin, which includes product operating revenues and direct product costs. The segment result excludes other gains, labour, operating expenses, depreciation and amortisation, net investment income, finance income and expense and income tax expense, as these are assessed at an overall Group level by the Chief Executive. YEAR ENDED 30 JUNE Mobile Voice Broadband Cloud, security and service management Procurement and partners Managed data, networks and services Other operating revenues1 Segment result 1 See note 2.2 for a description of other operating revenues. OPERATING REVENUES $M 1,351 285 639 446 538 283 152 2022 PRODUCT COSTS $M PRODUCT MARGIN $M (447) (120) (321) (103) (485) (146) (72) 904 165 318 343 53 137 80 OPERATING REVENUES $M 1,311 308 670 443 414 282 137 2021 PRODUCT COSTS $M PRODUCT MARGIN $M (474) (128) (331) (85) (371) (137) (67) 837 180 339 358 43 145 70 3,694 (1,694) 2,000 3,565 (1,593) 1,972 Reconciliation from segment product margin to consolidated net earnings before income tax YEAR ENDED 30 JUNE Segment product margin Other gains Labour Other operating expenses (note 2.3) Earnings before finance income and expense, income tax, depreciation, amortisation and net investment income (EBITDAI) Finance income Finance expense Depreciation and amortisation Net investment loss Net earnings before income tax 2022 $M 2,000 26 (495) (381) RESTATED 2021 $M 1,972 28 (493) (388) 1,150 1,119 26 (74) (520) (1) 581 34 (81) (521) (1) 550 87 2Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: FINANCIAL pErFOrMANCE INFOrMATION 2.2 Operating revenues and other gains The accounting policies specific to Spark’s operating revenues are outlined below: Contracts with customers Spark records revenue from contracts with customers in accordance with the five steps in NZ IFRS 15: 1. 2. Identify the contract with a customer Identify the performance obligations in the contract 3. Determine the transaction price, which is the total consideration provided by the customer 4. Allocate the transaction price amount to the performance obligations in the contract based on their relative stand-alone selling prices 5. Recognise revenue when or as the performance obligation is satisfied. Spark often provides products and services in bundled arrangements (for example, a broadband modem together with a broadband service). Where multiple products or services are sold in a single arrangement, revenue is recognised in relation to each distinct good or service. A product or service is distinct where, amongst other criteria, a customer can benefit from it on its own or together with other resources that are readily available. Revenue is allocated to each distinct product or service in proportion to its stand-alone selling price and recognised when, or as, control is transferred to the customer. Generally, control for products is transferred and revenue recognised at the point in time it is delivered to the customer and for services, control is transferred, and revenue recognised, over time as the service is provided. Revenue for performance obligations satisfied over time is recognised using the ‘resources consumed by customers’ method or the ‘time-elapsed method’, as these best depict the transfer of goods or services to customers. Performance obligations, where Spark acts as an agent, includes some third-party media services and certain cloud, security and service management contracts. Contracts with a significant financing component include those that have goods that were purchased on interest- free payment terms of greater than 12 months. The nature of the various performance obligations in our contracts with customers and when revenue is recognised is outlined below: PERFORMANCE OBLIGATIONS FROM CONTRACTS WITH CUSTOMERS TIMING OF SATISFACTION OF THE PERFORMANCE OBLIGATION AND PAYMENT Mobile services, broadband services, media services, cloud, security and service management services, managed data services and rental of equipment As the service is provided (usually monthly). Generally billed and paid on a monthly basis. Usage, other optional or non-subscription services, and pay-per- use services As the service is provided. Generally billed and paid on a monthly basis. Fixed modems, mobile handsets and other distinct goods Installation or set-up services (where distinct) When control is passed to the customer, generally when the customer takes possession of the goods. For goods sold in packages or on interest-free terms, customers usually pay in equal instalments over 6 to 36 months. As the service is provided. Generally billed and paid following the provision of the service. 88 For running header don't deleteHello Tomorrow 2.2 Operating revenues and other gains (continued) YEAR ENDED 30 JUNE Operating revenues Mobile Voice Broadband Cloud, security and service management Procurement and partners Managed data, networks and services Other operating revenues Other gains Net gain on sale of long-term investments/businesses Gain on sale of property, plant and equipment and intangibles Gain on lease modifications and terminations Total operating revenues and other gains 2022 $M 2021 $M 1,351 1,311 285 639 446 538 283 152 308 670 443 414 282 137 3,694 3,565 – 10 16 26 1 9 18 28 3,720 3,593 Other operating revenues Included in other operating revenues is revenue from Qrious, Internet of Things, Spark Sport, Connect 8 and exchange building sharing arrangements. Total operating revenues includes, income from operating leases, for the year ended 30 June 2022 was $6 million (30 June 2021: $1 million). Other gains In the year ended 30 June 2022 other gains comprises a $10 million gain from the sale of property, plant and equipment (primarily in relation to mobile network equipment), and gains from lease modifications and terminations of $16 million (this includes the $12 million gain from the Chorus lease changes outlined in note 1.3). In the year ended 30 June 2021 other gains included a $9 million gain from the sale of property, plant and equipment (primarily in relation to mobile network equipment), $1 million gain from the sale of Spark’s long-term investment, NOW New Zealand Limited, and gains from lease modifications and terminations of $18 million. 89 2Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: FINANCIAL pErFOrMANCE INFOrMATION 2.2 Operating revenues and other gains (continued) Key estimates and assumptions Determining the transaction price Determining the transaction price of Spark’s contracts requires judgement in estimating the amount of revenue we expect to be entitled to for delivering the performance obligations within a contract. The transaction price is the amount of consideration that is enforceable and to which we expect to be entitled in exchange for the goods and services we have promised to our customer. We determine the transaction price by considering the terms of the contract and business practices that are customary within that product, as well as adjusting the transaction price for estimated variable consideration and for any effects of the time value of money. The ‘expected value’ or ‘most likely amount’ methods are used to determine variable consideration and any amount where it is determined that it is highly probable a revenue reversal will not subsequently occur is included in the transaction price. In making this determination consideration is given to the likelihood and potential magnitude of the revenue reversal, as well as factors outside of Spark’s influence, the time when the uncertainty is expected to be resolved and Spark’s experience with similar types of contracts. Judgement is required to determine the discount rate underlying any time value of money calculations, as well as whether the financing component in a contract is significant. Discounts, rebates, refunds, credits, price concessions, incentives, penalties and other similar items are reflected in the transaction price at contract inception. Determining the stand-alone selling price and the allocation of the transaction price Determining the stand-alone selling price of performance obligations and the allocation of the transaction price between performance obligations involves judgement. The transaction price is allocated to performance obligations based on the relative stand-alone selling prices of the distinct goods or services in the contract. The best evidence of a stand-alone selling price is the observable price of a good or service when the entity sells that good or service separately in similar circumstances and to similar customers. If a stand-alone selling price is not directly observable, we estimate the stand-alone selling price taking into account reasonably available information relating to the market conditions, entity-specific factors and the class of customer. In determining the stand-alone selling price, we allocate revenue between performance obligations based on expected minimum enforceable amounts to which Spark is entitled. Any amounts above the minimum enforceable amounts are recognised as revenue as they are earned. Distinct goods and services We make judgements in determining whether a promise to deliver goods or services is considered distinct. We account for individual products and services separately if they are distinct (i.e. if a product or service is separately identifiable from other items in the bundled package and if the customer can benefit from it). The consideration is allocated between separate products and services in a bundle based on their stand-alone selling prices. Timing of satisfaction of performance obligations We make judgements in determining whether performance obligations are satisfied over time or at a point in time, as well as the methods used for measuring progress towards completed satisfaction of performance obligations. Refer to page 88 for Spark’s accounting policy on timing of satisfaction of performance obligations. 90 For running header don't deleteHello Tomorrow 2.3 Operating expenses YEAR ENDED 30 JUNE Product costs Labour Other operating expenses Network support costs Computer costs Accommodation costs Advertising, promotions and communication Bad debts Impairment expense Other Total other operating expenses Total operating expenses 2022 $M RESTATED 2021 $M 1,694 1,593 495 493 65 111 65 60 4 2 74 381 86 101 67 72 (7) 2 67 388 2,570 2,474 Cost of inventories recognised as an expense The cost of inventories recognised as an expense in relation to broadband modems, mobile devices and other accessories was $343 million (30 June 2021: $381 million). Lease expenses Expenses relating to short-term leases and leases of low-value assets were $7 million (30 June 2021: $5 million). In the year ended 30 June 2022 rent concessions of less than $1 million were received as a result of Covid-19 and treated as a reduction of expenses (30 June 2021: less than $1 million). Donations Donations for the year ended 30 June 2022 were $1,774,000 and comprised Spark’s donation to Spark Foundation of $1,734,000 and other donations of $40,000 (30 June 2021: $1,722,000, comprised Spark’s donation to the Spark Foundation of $1,692,000 and other donations of $30,000). Spark made no donations to political parties in the years ended 30 June 2022 or 30 June 2021. Auditor’s remuneration YEAR ENDED 30 JUNE Audit of financial statements Audit and review of financial statements1 Other services Regulatory audit work2 Other non-assurance services3 Total fees paid to auditor 2022 $’000 2021 $’000 1,171 1,000 54 105 50 94 1,330 1,144 1 The audit fee includes fees for both the annual audit of the financial statements and the review of the interim financial statements. 2 Regulatory audit work consists of the audit of telecommunications-related regulatory disclosures and reporting on trust deed requirements and solvency returns. 3 Other non-assurance services relate to taxation compliance services and administrative and other advisory services for the Corporate Taxpayer Group of which Spark, alongside a number of organisations, is a member. 91 2Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: FINANCIAL pErFOrMANCE INFOrMATION 2.4 Finance income, finance expense, depreciation, amortisation and net investment income YEAR ENDED 30 JUNE Finance income Finance lease interest income Other interest income Finance expense Finance expense on long-term debt Lease interest expense Leased customer equipment interest expense Other interest and finance expenses Plus: interest capitalised1 Depreciation and amortisation expense Depreciation – property, plant and equipment Depreciation – right–of–use assets Depreciation – leased customer equipment assets Amortisation – intangible assets Net investment loss Share of associates’ and joint ventures’ net losses 2022 $M RESTATED 2021 $M NOTES 9 17 26 (45) (19) (7) (11) (82) 8 (74) 13 21 34 (43) (26) (8) (10) (87) 6 (81) (234) (242) (80) (37) (169) (520) (77) (36) (166) (521) (1) (1) (1) (1) 4.2 3.6 3.4 3.5 3.7 3.3 1 Interest was capitalised on property, plant and equipment and intangible assets under development for the year ended 30 June 2022 at an annualised rate of 4.4% (30 June 2021: 3.8%). 92 For running header don't deleteHello Tomorrow 2.5 Non-GAAp measures Spark uses non-GAAP financial measures that are not prepared in accordance with New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’). Spark believes that these non-GAAP financial measures provide useful information to readers to assist in the understanding of the financial performance, financial position or returns of Spark. These measures are also used internally to evaluate performance of products, to analyse trends in cash-based expenses, to establish operational goals and allocate resources. However, they should not be viewed in isolation, nor considered as a substitute for measures reported in accordance with NZ IFRS, as they are not uniformly defined or utilised by all companies in New Zealand or the telecommunications industry. Spark’s policy is to present ‘adjusted EBITDAI’ and ‘adjusted net earnings’ when a financial year includes significant items (such as gains, expenses and impairments) individually greater than $25 million. There are no adjusting items for the years ended 30 June 2022 or 30 June 2021. Earnings before finance income and expense, income tax, depreciation, amortisation and net investment income (EBITDAI) Spark calculates EBITDAI by adding back depreciation and amortisation, finance expense and income tax expense and subtracting finance income and net investment income (which includes dividend income and Spark’s share of net profits or losses from associates and joint ventures) to net earnings. A reconciliation of Spark’s EBITDAI is provided below and based on amounts taken from, and consistent with, those presented in these financial statements. YEAR ENDED 30 JUNE Net earnings reported under NZ IFRS Less: finance income Add back: finance expense Add back: depreciation and amortisation Less: net investment income Add back: income tax expense EBITDAI 2022 $M 410 (26) 74 520 1 171 RESTATED 2021 $M 381 (34) 81 521 1 169 1,150 1,119 Capital expenditure Capital expenditure is the additions to property, plant and equipment and intangible assets (excluding goodwill, acquisitions and other non-cash additions that may be required by NZ IFRS, such as decommissioning costs) and additions to capacity right-of-use assets where such additions are paid up front. YEAR ENDED 30 JUNE Additions to property, plant and equipment Additions to intangible assets Additions to capacity right-of-use assets Total additions Less spectrum additions Less property, plant and equipment transfers from finance lease receivables Less capacity right-of-use assets paid over time Capital expenditure NOTES 3.6 3.7 3.4 3.7 1.3 3.4 2022 $M 328 156 8 492 – (81) (1) 410 RESTATED 2021 $M 203 187 13 403 (51) (3) – 349 93 2Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: ASSETS Section 3 Assets 3.1 receivables and prepayments AS AT 30 JUNE Short-term receivables and prepayments Trade receivables Short-term prepayments Short-term unbilled revenue Short-term contract assets Short-term contract costs Short-term finance lease receivables Other short-term receivables Long-term receivables and prepayments Long-term unbilled revenue Long-term prepayments Long-term contract costs Long-term finance lease receivables Other long-term receivables 2022 $M 2021 $M 371 148 248 2 40 2 28 314 137 242 5 43 4 23 839 768 72 1 68 52 4 197 79 - 64 108 20 271 Amounts are stated at their net carrying value, including expected credit loss allowance provisions. The fair value of finance lease receivables is estimated to be $75 million (30 June 2021: $213 million) and the carrying amount of all other receivables, measured at amortised cost, are approximately equivalent to their fair value because of the short term to maturity. Contract assets Contract assets primarily relate to Spark’s rights to consideration for performance obligations delivered but not billed at the reporting date. Contract assets are transferred to receivables when the rights become unconditional. The following summarises significant changes in those balances: YEAR ENDED 30 JUNE Opening balance as at 1 July Additions from new contracts with customers, net of terminations and renewals Transfer of contract assets to trade receivables Closing balance as at 30 June 2022 $M 5 1 (4) 2 2021 $M 11 8 (14) 5 94 For running header don't deleteHello Tomorrow 3.1 receivables and prepayments (continued) Contract costs Contract costs include costs to obtain a contract (such as commission costs) and costs to fulfil a contract. These costs are expected to be recovered and are therefore initially deferred and then recognised within operating expenses on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. The following summarises significant changes in those balances: YEAR ENDED 30 JUNE Opening balance as at 1 July Additions Amortisation recognised in operating expenses Closing balance as at 30 June Short-term contract costs Long-term contract costs COSTS TO OBTAIN A CONTRACT 2022 COSTS TO FULFIL A CONTRACT $M 19 9 (11) 17 7 10 $M 88 34 (31) 91 33 58 COSTS TO OBTAIN A CONTRACT 2021 COSTS TO FULFIL A CONTRACT $M 28 8 (17) 19 11 8 $M 85 36 (33) 88 32 56 TOTAL $M 107 43 (42) 108 40 68 TOTAL $M 113 44 (50) 107 43 64 Key estimates and assumptions Determining the costs we incur to obtain or fulfil a contract that meets the deferral criteria within NZ IFRS 15 requires us to make significant judgements. Further, where such costs can be deferred, determining the appropriate amortisation period to recognise the costs within operating expenses requires management judgement, including assessing the expected average customer tenure for consumer customers and the expected contract term for enterprise customers. Expected credit loss allowance provision Movements in the loss allowance provision are as follows: YEAR ENDED 30 JUNE Opening balance as at 1 July Charged to costs and expenses Bad debts recovered Utilised Closing balance as at 30 June1 2022 $M 2021 $M 17 7 (3) (6) 15 31 (4) (3) (7) 17 1 The total expected loss provision reduced by $14 million in FY21, of which $8 million reflected the release of additional provisions taken in FY20 primarily as a result of Covid-19. 95 3Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: ASSETS 3.1 receivables and prepayments (continued) Spark has applied the simplified approach to providing for expected credit losses, which requires the recognition of a lifetime expected loss provision for trade receivables, unbilled revenue, contract assets, contract costs, finance lease receivables and other receivables. The calculation of the allowance provision incorporates forward-looking information, such as forecasted economic conditions. The expected credit loss allowance provision has been determined as follows: AS AT 30 JUNE 2022 Expected loss rate Gross carrying amount Expected credit loss allowance provision Short-term loss allowance provision Long-term loss allowance provision AS AT 30 JUNE 2021 Expected loss rate Gross carrying amount Expected credit loss allowance provision Short-term loss allowance provision Long-term loss allowance provision CURRENT ≤ 1 MONTH > 1 MONTH $M 1.2% 823 10 8 2 $M 1.4% 837 12 9 3 $M 2.5% 40 1 1 - $M 2.5% 40 1 1 – $M 10.3% 39 4 4 - $M 9.5% 42 4 4 – TOTAL $M 1.7% 902 15 13 2 $M 1.8% 919 17 14 3 The composition of the credit loss allowance provision between receivable types is as follows: AS AT 30 JUNE Trade receivables Unbilled revenue Contract assets and contract costs Finance lease receivables Expected credit loss allowance provision 2022 $M 2021 $M 7 5 2 1 7 7 2 1 15 17 The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities to comply with the Group’s procedures for recovery of amounts due. Key estimates and assumptions The expected credit loss allowance provision is determined based on assumptions about the risk of default and expected loss rates of customers and other counterparties. Spark uses judgement in making these assumptions and selecting the inputs to the impairment calculation based on Spark’s past collection history, existing market conditions, as well as forward-looking estimates at the end of the reporting period. Forward-looking estimates include assessment of forecasted changes to interest rates, unemployment rates and Gross Domestic Product in New Zealand. 96 For running header don't deleteHello Tomorrow 3.1 receivables and prepayments (continued) Finance lease receivables Spark has a number of leases for space in exchange buildings, including as a lessor for space in Spark exchanges and a lessee for space in Chorus exchanges. These leases include a legal right of offset, as Spark and Chorus settle the payments on a net basis and are therefore shown as a net finance lease receivable or net lease liability on the statement of financial position. In addition, Spark sublease a number of office building floors. Where sublease are for the whole of the remaining non-cancellable term of the head lease, these are classified as a finance lease. The profile of lease net receipts is set out below: AS AT 30 JUNE Less than one year1 Between one and five years More than five years Net finance lease receivables Plus short-term portion of finance lease receivables in liability position Total finance lease receivables Less unearned finance income Present value of finance lease receivables Short-term finance lease receivables Long-term finance lease receivables 2022 2021 UNDISCOUNTED DISCOUNTED UNDISCOUNTED DISCOUNTED $M 6 16 135 157 – 157 (103) 54 $M 13 41 266 320 – 320 (208) 112 $M – (7) 59 52 2 54 – 54 2 52 $M 3 (7) 115 111 1 112 – 112 4 108 1 Included within the discounted balance as at 30 June 2022 is a $2 million sublease receivable asset, offset by a $2 million liability relating to the Chorus finance lease receivable (30 June 2021: $4 million sublease receivable asset, offset by a $1 million liability relating to the Chorus finance lease receivable). The lease with Chorus, where Spark is the lessor, has multiple rights of renewals and the full lease term has been used in the majority of the calculation of the financial lease receivable at lease inception, as it was likely that because of the specialised nature of the buildings, the lease would be renewed to the maximum term. 3.2 Inventories AS AT 30 JUNE Goods held for resale Content rights inventory Maintenance materials and consumables Total inventories 2022 $M 95 10 2 107 2021 $M 56 7 1 64 Content rights inventory Spark enters into contracts for the right to stream digital content for sport. Content rights are stated at the lower of cost and net realisable value, less accumulated amortisation and includes prepaid content that is not yet available for broadcast. The amortisation of content rights is recognised within operating expenses on a straight-line basis over the live events across the broadcast period. The content rights amortisation charge for the year ended 30 June 2022 was $20 million (30 June 2021: $28 million). 97 3Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: ASSETS 3.3 Long-term investments AS AT 30 JUNE Shares in Hutchison MEASUREMENT BASIS Fair value through other comprehensive income Investment in associates and joint ventures Equity method Other long-term investments Cost 2022 $M 105 101 6 212 2021 $M 160 59 8 227 Spark holds a 10% interest in Hutchison Telecommunications Australia Limited (Hutchison) which is quoted on the Australian Securities Exchange (ASX) and its fair value is measured using the observable bid share price as quoted on the ASX, classified as being within Level 1 of the fair value hierarchy. As at 30 June 2022 the quoted price of Hutchison’s shares on the ASX was AUD$0.070 (30 June 2021: AUD$0.110). The decrease in fair value of $55 million is recognised in other comprehensive income (30 June 2021: $87 million decrease). Investment in associates and joint ventures Spark’s investment in associates and joint ventures at 30 June 2022 consists of the following: NAME TYPE COUNTRY OWNERSHIP PRINCIPAL ACTIVITY Adroit Holdings Limited Flok Limited Associate Associate New Zealand New Zealand Pacific Carriage Holdings Limited, Inc. Associate United States Rural Connectivity Group Limited Joint Venture New Zealand Southern Cross Cables Holdings Limited Associate Bermuda TNAS Limited Joint Venture New Zealand 38% 38% 41% 33% 41% 50% Environmental IoT solutions Hardware and software development A holding company Rural broadband A holding company Telecommunications development All investments in associates and joint ventures are measured using the equity method. Changes in the aggregate carrying amount of Spark’s investment in associates and joint ventures was as follows: YEAR ENDED 30 JUNE Opening balance as at 1 July Additional investment during the year Impairment Disposals Share of net losses Deferred gains Dividends received Closing balance as at 30 June ASSOCIATES 2022 JOINT VENTURES TOTAL ASSOCIATES 2021 JOINT VENTURES $M 30 56 – (4) – – – 82 $M 29 3 – (11) (1) – (1) 19 $M 59 59 – (15) (1) – (1) $M 31 5 (1) (5) – – – 101 30 $M 23 8 – – (1) (1) – 29 TOTAL $M 54 13 (1) (5) (1) (1) – 59 Spark has suspended equity accounting for Pacific Carriage Holdings Limited, Inc. and Southern Cross Cables Holdings Limited (together ‘Southern Cross’) as their carrying values were reduced to nil. Spark has no obligation to fund Southern Cross’ deficits or repay dividends. For the year ended 30 June 2022 Spark’s share of Southern Cross profits was not recognised because of the existence of historic cumulative Southern Cross deficits. In the current year Southern Cross’ profit was $39 million (30 June 2021: $39 million). 98 For running header don't deleteHello Tomorrow 3.4 right-of-use assets Spark is a lessee for a large number of leases, including: • Property – Spark leases a number of office buildings and retail stores. Some of these leases have rights of renewal that are reasonably certain to be exercised and therefore may have long expected lease terms • Capacity arrangements – Spark enters into a number of indefeasible right-of-use capacity arrangements for cable capacity • Mobile sites – Spark has entered into a number of agreements to allow the operation of mobile network infrastructure throughout New Zealand • Motor vehicles – Spark leases motor vehicles for use in sales, field operations and maintenance of infrastructure equipment • Other – Spark leases equipment that is held at Spark premises and used to provide services to customers. Movements in right-of-use assets are summarised below: YEAR ENDED 30 JUNE 2022 Opening net book value Additions and acquisitions Assets classified as held for sale and other disposals Remeasurements1 Depreciation charge Closing net book value YEAR ENDED 30 JUNE 2021 Opening net book value Additions Disposals Remeasurements2 Depreciation charge Closing net book value PROPERTY CAPACITY $M 281 20 – (19) (32) 250 $M 224 8 – – (21) 211 PROPERTY CAPACITY $M 333 74 (2) (90) (34) 281 $M 233 13 – – (22) 224 MOBILE SITES $M 117 8 (95) 2 (13) 19 MOBILE SITES $M 102 27 (3) 1 (10) 117 MOTOR VEHICLES OTHER $M 4 1 – – (2) 3 $M 21 16 – – (12) 25 MOTOR VEHICLES OTHER $M 2 4 – – (2) 4 $M 28 11 (9) – (9) 21 TOTAL $M 647 53 (95) (17) (80) 508 TOTAL $M 698 129 (14) (89) (77) 647 1 Remeasurements to property in FY22 primarily relate to modifications for corporate property leases and exiting of space in exchange buildings. The reduction in property right-of-use assets for corporate property leases is substantially offset by a reduction in property lease liabilities (see note 4.2). 2 Remeasurements to property in FY21 primarily relate to modifications and changes of assumptions for leases, including market rent reviews and reductions in lease terms for corporate property leases. The reduction in property right-of-use assets is substantially offset by a reduction in property lease liabilities (see note 4.2). Of the $8 million within capacity additions for the year ended 30 June 2022, $7 million were fully paid on control being obtained and therefore deemed capital expenditure as reconciled in note 2.5 (30 June 2021: all fully paid and deemed capital expenditure). Income from sub-leasing right-of-use assets for the year ended 30 June 2022 was $3 million (30 June 2021: $1 million). 99 3Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: ASSETS 3.4 right-of-use assets (continued) Key estimates and assumptions At inception of a contract Spark assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, Spark assesses whether: • The contract involves the use of an identified asset • Spark has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use • Spark has the right to direct the use of the asset. At inception or on reassessment of a contract that contains a lease component, Spark allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. Spark recognises a right-of-use asset at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically assessed for impairment losses and adjusted for certain remeasurements of the lease liability. 3.5 Leased customer equipment assets Spark acts as the intermediate party (as a lessee and a lessor) in a number of lease arrangements for customer premises equipment. Such arrangements may also include an initial sale and leaseback transaction. A sale and leaseback transaction contains a genuine sale if control of an asset is transferred under NZ IFRS 15. For Spark’s back-to-back lease arrangements we have assessed that a sale does not occur, as control over the equipment remains with Spark instead of passing to the buyer-lessor. Spark as the seller-lessee continues to recognise the leased customer equipment asset, which is initially measured at cost. The asset is subsequently depreciated using the straight-line method based on the expected lease term. Movements in leased customer equipment assets are summarised below: YEAR ENDED 30 JUNE Opening net book value Additions Disposals Depreciation charge Closing net book value AS AT 30 JUNE Cost Accumulated depreciation and impairment losses Closing net book value 2022 2021 $M 77 51 (1) (37) 90 228 (138) 90 $M 86 28 (1) (36) 77 182 (105) 77 Leased customer equipment assets are leased to customers under operating leases. Amounts recovered from customers for the year ended 30 June 2022 were $42 million (30 June 2021: $43 million). 100 For running header don't deleteHello Tomorrow TELECOMMUNI- CATIONS EQUIPMENT AND PLANT FREEHOLD LAND BUILDINGS OTHER ASSETS WORK IN PROGRESS 3.6 property, plant and equipment YEAR ENDED 30 JUNE 2022 Opening net book value Additions Transfers Acquisitions Assets classified as held for sale and other disposals Depreciation charge Closing net book value AS AT 30 JUNE 2022 Cost Accumulated depreciation and impairment losses Closing net book value YEAR ENDED 30 JUNE 2021 Opening net book value Additions Transfers Disposals Depreciation charge Closing net book value AS AT 30 JUNE 2021 Cost Accumulated depreciation and impairment losses Closing net book value $M 648 – 162 4 (15) (168) 631 3,394 (2,763) 631 TELECOMMUNI– CATIONS EQUIPMENT AND PLANT $M 641 – 167 – (160) 648 4,006 (3,358) 648 $M 61 – – – – – 61 61 – 61 $M 207 82 11 – (59) (28) 213 534 (321) 213 $M 79 10 21 4 (3) (38) 73 507 (434) 73 FREEHOLD LAND BUILDINGS OTHER ASSETS $M 60 – 1 – – 61 61 – 61 $M 198 40 – – (31) 207 550 (343) 207 $M 114 – 18 (2) (51) 79 553 (474) 79 $M 85 236 (194) 6 (2) – 131 131 – 131 WORK IN PROGRESS $M 108 163 (186) – – TOTAL $M 1,080 328 – 14 (79) (234) 1,109 4,627 (3,518) 1,109 TOTAL $M 1,121 203 – (2) (242) 85 1,080 85 – 85 5,255 (4,175) 1,080 101 3Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: ASSETS 3.6 property, plant and equipment (continued) Joint arrangement Spark has entered into a joint arrangement in relation to the construction and operation of the Tasman Global Access fibre-optic submarine cable between Australia and New Zealand. As at 30 June 2022 the carrying value of Spark’s share of property, plant and equipment and intangible assets in the joint operation was $30 million (30 June 2021: $30 million). Key estimates and assumptions Spark’s property, plant and equipment is measured at cost and depreciation is charged on a straight-line basis over the assets’ estimated useful lives. Determining the appropriate useful life of property, plant and equipment requires management judgement, including the expected period of service potential, the likelihood technological advances will make the asset obsolete, the likelihood of Spark ceasing to use it and the effect of government regulation. The estimated useful lives of Spark’s property, plant and equipment is as follows: Telecommunications equipment Links and cables Network transport Mobile radio access network 10 – 50 years 3 – 15 years 5 – 25 years Customer premises equipment 3 – 5 years International cable and satellite 10 – 15 years Buildings Buildings Furniture and fittings Air conditioning Power systems Batteries Other Motor vehicles Computer equipment Internal IT system assets 15 – 53 years 3 – 15 years 8 – 20 years 3 – 25 years 5 – 15 years 3 – 10 years 2 – 8 years 3 – 15 years The assessment of assets for impairment is based on a large number of factors, such as changes in current competitive conditions, expectations of growth in the telecommunications industry, the discontinuance of services, the expected future cash flows an asset is expected to generate and other changes in circumstances that indicate an impairment exists. Key judgements include rates of expected revenue growth or decline, expected future margins and the selection of an appropriate discount rate for valuing future cash flows. 102 For running header don't deleteHello Tomorrow TOTAL $M 858 156 – 12 (18) (169) 839 TOTAL $M 833 187 – 4 (166) 858 3.7 Intangible assets YEAR ENDED 30 JUNE 2022 Opening net book value Additions1 Transfers Acquisitions Assets classified as held for sale and other disposals Amortisation charge Closing net book value AS AT 30 JUNE 2022 Cost Accumulated amortisation and impairment losses Closing net book value SOFTWARE SPECTRUM LICENCES OTHER INTANGIBLES GOODWILL WORK IN PROGRESS $M 307 – 160 – – (141) 326 1,911 (1,585) 326 $M 193 – – – – (18) 175 336 (161) 175 $M 49 – – – (18) (10) 21 103 (82) 21 $M 222 – – 12 – – $M 87 156 (160) – – – 234 83 282 (48) 234 83 – 83 2,715 (1,876) 839 1 Total software capitalised in the year ended 30 June 2022 includes $59 million of internally generated assets. Other software capitalised in the year includes software licences and externally supplied labour. SOFTWARE SPECTRUM LICENCES OTHER INTANGIBLES GOODWILL WORK IN PROGRESS YEAR ENDED 30 JUNE 2021 - RESTATED Opening net book value Additions1 Transfers Acquisitions Amortisation charge Closing net book value AS AT 30 JUNE 2021 - RESTATED Cost Accumulated amortisation and impairment losses Closing net book value $M 343 – 100 – (136) 307 2,063 (1,756) 307 $M 158 51 – – (16) 193 336 (143) 193 $M 59 – – 4 (14) 49 146 (97) 49 $M 222 – – – – 222 270 (48) 222 $M 51 136 (100) – – 87 87 – 87 2,902 (2,044) 858 1 Total software capitalised in the year ended 30 June 2021 includes $36 million of internally generated assets. Other software capitalised in the year includes software licences and externally supplied labour. Key estimates and assumptions Intangible assets are amortised over their useful lives on a straight-line basis, except goodwill, which is tested for impairment annually. Determining the appropriate useful life of an intangible asset requires management judgement, including assessing the expected period of service potential, the likelihood technological advances will make it obsolete and the likelihood of Spark ceasing to use it. The estimated useful lives of Spark intangible assets is as follows: Spectrum licences Software Customer contracts and brands Other intangible assets 2 – 21 years 2 – 12 years 5 – 10 years 2 – 100 years 103 3Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: ASSETS 3.7 Intangible assets (continued) Goodwill Goodwill by cash-generating unit (CGU) is presented below: AS AT 30 JUNE Mobile Broadband Cloud, security and service management Qrious Digital Island 2022 $M 34 3 170 14 13 234 2021 $M 28 – 167 14 13 222 On 31 January 2022, Spark acquired the remaining 50% of its joint venture, Connect 8 Limited, a fibre network construction company. Goodwill recognised from the acquisition of $12 million has been allocated to each CGU that is expected to benefit from the synergies of the transaction. Goodwill of $6 million has been allocated to the mobile CGU, $3 million to the broadband CGU and $3 million to the cloud, security and service management CGU. During the years ended 30 June 2022 and 30 June 2021 no impairment arose as a result of the assessment of the carrying value of goodwill. Headroom currently exists in each CGU and, based on sensitivity analysis performed, no reasonably possible changes in the assumptions would cause the carrying amount of the CGUs to exceed their recoverable amounts. Key estimates and assumptions Goodwill is assessed annually for impairment using a value-in-use model, which estimates the future cash flows, based on the FY23 Board-approved business plan, applied to the next three years, with key assumptions being forecast earnings and capital expenditure for each CGU. The forecast financial information is based on both past experience and future expectations of CGU performance. The major inputs and assumptions used in performing an impairment assessment that require judgement include revenue forecasts, operating cost projections, customer numbers and customer churn, discount rates, growth rates and future technology paths. Nil terminal growth was applied to all CGUs and a pre-tax discount rate of 10.6% was utilised for the year ended 30 June 2022 (30 June 2021: 10.0%). 3.8 Net tangible assets The calculation of Spark’s net tangible assets per share and its reconciliation to the statement of financial position is presented below: AS AT 30 JUNE Total assets Less intangible assets Less total liabilities Net tangible assets Number of shares outstanding (in millions) Net tangible assets per share 2022 $M 4,189 (839) RESTATED 2021 $M 4,100 (858) (2,714) (2,608) 636 1,872 $0.34 634 1,867 $0.34 Net tangible assets per share is a non-GAAP financial measure that is not defined in NZ IFRS. Total assets includes assets held for sale and right-of-use assets. Total liabilities includes lease liabilities. 104 For running header don't deleteHello Tomorrow Section 4 Liabilities and equity 4.1 payables, accruals and provisions AS AT 30 JUNE Short-term payables, accruals and provisions Trade accounts payable and accruals Revenue billed in advance Accrued personnel costs Accrued interest GST payable Short-term sale and leaseback liabilities Short-term provisions Other short-term payables and accruals Long-term payables, accruals and provisions Long-term sale and leaseback liabilities Long-term provisions Other long-term payables and accruals 2022 $M 2021 $M 260 270 80 38 3 37 35 2 5 80 37 2 34 34 3 19 460 479 52 5 7 64 47 10 3 60 Trade accounts payable and sale and leaseback liabilities are financial instruments held at amortised cost. Provisions Total provisions as at 30 June 2022 were $7 million (30 June 2021: $13 million). New provisions of $1 million were made during the year (30 June 2021: $10 million) and provisions of $7 million were utilised, released or transferred to held for sale (30 June 2021: $8 million). The largest portion of the provisions relate to make-good provisions of $7 million (30 June 2021: $12 million). 105 4Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: LIAbILITIES ANd EquITy 4.2 Lease liabilities YEAR ENDED 30 JUNE 2022 Opening lease liability balance Leases entered into during the year and acquisitions Liabilities classified as held for sale and other disposals Interest expense Principal repayments Remeasurements1 Balance at the end of the year Short-term portion of finance lease receivable Total lease liability balance Short-term lease liabilities Long-term lease liabilities Lease liabilities - non-cancellable commitments2 PROPERTY CAPACITY $M 325 20 – 12 (53) (14) 290 2 292 37 255 148 $M 2 2 – – (1) – 3 – 3 1 2 3 MOBILE SITES $M 113 7 (89) 6 (19) 2 20 – 20 2 18 10 MOTOR VEHICLES OTHER $M 4 1 – – (2) – 3 – 3 2 1 3 $M 21 17 – 1 (13) – 26 – 26 10 16 TOTAL $M 465 47 (89) 19 (88) (12) 342 2 344 52 292 26 190 YEAR ENDED 30 JUNE 2021 Opening lease liability balance Leases entered into during the year Disposals Interest expense Principal repayments Remeasurements3 Balance at the end of the year Short-term portion of finance lease receivable Total lease liability balance Short-term lease liabilities Long-term lease liabilities Lease liabilities - non-cancellable commitments2 PROPERTY CAPACITY MOBILE SITES MOTOR VEHICLES OTHER $M 443 19 (2) 19 (49) (105) 325 1 326 38 288 170 $M 2 – – – – – 2 – 2 – 2 2 $M 99 27 (4) 6 (15) – 113 – 113 12 101 53 $M 2 4 – – (2) – 4 – 4 2 2 4 $M 26 12 (9) 1 (9) – 21 – 21 8 13 20 TOTAL $M 572 62 (15) 26 (75) (105) 465 1 466 60 406 249 1 Remeasurements to property in FY22 primarily relate to modifications for corporate property leases. The reduction in lease liabilities is substantially offset by a reduction in property right-of-use assets (see note 3.4). 2 Relates to the discounted lease liability for future minimum rental commitments for non-cancellable periods of leases, excluding rights of renewal, which are at Spark’s option. 3 Remeasurements to property in FY21 primarily relate to modifications and changes of assumptions for leases, including market rent reviews and reductions in lease terms for corporate property leases. The reduction in lease liabilities is substantially offset by a reduction in property right-of-use assets (see note 3.4). 106 For running header don't deleteHello Tomorrow 4.2 Lease liabilities (continued) Key estimates and assumptions Spark recognises a lease liability at the lease commencement date. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, Spark’s incremental borrowing rate. Generally, Spark uses its incremental borrowing rate as the discount rate, with adjustments for the type and term of the lease. Lease payments included in the measurement of the lease liability comprise: • Fixed payments, including in-substance fixed payments • Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date • Amounts expected to be payable under a residual value guarantee • The exercise price under a purchase option that Spark is reasonably certain to exercise • Lease payments in an optional renewal period if Spark is reasonably certain to exercise an extension option. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in Spark’s estimate of the amount expected to be payable under a residual value guarantee or if Spark changes its assessment of whether it will exercise a purchase or extension option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or it is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Spark has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have lease terms of 12 months or less and leases of low-value assets. Spark recognises the lease payments associated with these leases within operating expenses on a straight-line basis over their lease terms. 107 4Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: LIAbILITIES ANd EquITy 4.3 debt Debt is recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, debt is classified and measured at amortised cost plus, for hedged liabilities that are in a fair value hedging relationship, adjustments for fair value changes attributable to the risk being hedged. Any difference between cost and redemption value (including fair value changes) is recognised in the statement of profit or loss over the period of the borrowings, using the effective interest rate method. FACILITY COUPON RATE MATURITY 2022 $M 2021 $M AS AT 30 JUNE FACE VALUE Short-term debt Short-term borrowings Commercial paper Supplier financing arrangements1 Amounts with a term less than six months Amounts due within one year Amounts due in more than a year Bank funding Variable < 1 months Variable < 2 months 8.33% < 6 months Variable < 2 years Variable < 2 years The Hongkong and Shanghai Banking Corporation Limited 100 million NZD Variable 30/11/2021 MUFG Bank, Ltd. Westpac New Zealand Limited2 Commonwealth Bank of Australia2 MUFG Bank, Ltd.2 125 million NZD Variable 30/11/2022 200 million NZD Variable 30/11/2023 100 million NZD Variable 30/11/2024 125 million NZD Variable 30/11/2025 Domestic notes 100 million NZD 100 million NZD 125 million NZD 125 million NZD 100 million NZD3 Foreign currency Medium Term Notes Australian Medium Term Notes – 100 million AUD Australian Medium Term Notes – 150 million AUD Australian Medium Term Notes – 125 million AUD Norwegian Medium Term Notes – 1 billion NOK4 Debt due within one year Long-term debt 4.50% 4.51% 3.37% 3.94% 4.37% 1.90% 4.00% 2.60% 3.07% 25/03/2022 10/03/2023 07/03/2024 07/09/2026 29/09/2028 05/06/2026 20/10/2027 18/03/2030 19/03/2029 – 160 160 19 14 9 42 – – 140 100 125 365 – 100 122 117 100 439 97 158 113 152 520 3 155 158 – 14 18 32 100 60 – – – 160 101 104 130 131 – 466 106 177 132 172 587 1,526 1,403 293 373 1,233 1,030 1 Supplier financing arrangements relate to amounts payable to suppliers on extended payment terms and are therefore considered as debt. Amounts paid under these arrangements are presented in the statement of cashflows within financing activities. 2 These facilities are Sustainability-Linked Loans. Spark will receive lower interest rates if it achieves sustainability targets and higher rates on the loans if it falls short of these targets. 3 This bond is a Sustainability-Linked Bond. The bond includes an interest rate step up depending on the achievement of a sustainability target as at 30 June 2026. 4 Norwegian krone. 108 For running header don't deleteHello Tomorrow 4.3 debt (continued) None of Spark’s debt is secured and all debt ranks equally with other liabilities. There are no financial covenants over Spark’s debt, however, there are certain triggers in the event of default, as defined in the various debt agreements. There have been no events of default over Spark’s debt in the years ended 30 June 2022 and 30 June 2021. The fair value of long-term debt, including long-term debt due within one year, based on market observable prices, was $1,359 million compared to a carrying value of $1,347 million as at 30 June 2022 (30 June 2021: fair value of $1,270 million compared to a carrying value of $1,245 million). AS AT 30 JUNE Total debt Less short-term debt Total long-term debt (including long-term debt due within one year) 2022 $M 1,526 (179) 2021 $M 1,403 (158) 1,347 1,245 4.4 Capital risk management Spark manages its capital considering shareholders interests, the value of Spark’s assets and the Company’s credit rating. The Board is committed to the Company maintaining an investment grade rating and its capital management policies are designed to ensure this objective is met. As part of this commitment Spark currently manages its debt levels to ensure that the ratio of net debt at hedged rates (being inclusive of associated derivatives) to EBITDAI does not materially exceed 1.4 times on a long-run basis, which for credit rating purposes, Spark estimates equates approximately to adjusted net debt to EBITDA of 1.7 times. The difference between these two ratios is primarily due to the credit rating agency managing adjustments for leases and captive finance operations. As at 30 June 2022 the Company’s Standard and Poor’s credit ratings for long-term and short-term debt was, respectively, A- and A-2 with outlook stable (30 June 2021: same). Net debt Net debt at hedged rates, the primary net debt measure Spark monitors, includes long-term debt at the value of hedged cash flows due to arise on maturity, plus short-term debt, less any cash. Net debt at carrying value includes the non-cash impact of fair value hedge adjustments and any unamortised discount. Net debt at hedged rates is a non-GAAP measure and is not defined in accordance with NZ IFRS but is a measure used by management. A reconciliation of net debt at hedged rates and net debt at carrying value is provided below: AS AT 30 JUNE Cash Short-term debt at face value Long-term debt at face value Net debt at face value To retranslate debt balances at swap rates where hedged by currency swaps Net debt at hedged rates1 Non-cash adjustments Impact of fair value hedge adjustments2 Unamortised discount Net debt at carrying value 2022 $M (71) 179 1,417 1,525 (3) 2021 $M (72) 158 1,212 1,298 5 1,522 1,303 10 (1) 12 (2) 1,531 1,313 1 Net debt at hedged rates is the value of hedged cash flows due to arise on maturity and includes an adjustment to state the principal of foreign currency medium term notes at the hedged currency rate. 2 Fair value hedge adjustments arise on domestic notes in fair value hedges and foreign currency medium term notes in dual fair value and cash flow hedges. These have no impact on the cash flows to arise on maturity. 109 4Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: LIAbILITIES ANd EquITy 4.4 Capital risk management (continued) A reconciliation of movements in net debt is provided below: YEAR ENDED 30 JUNE 2022 Cash Short-term debt Long-term debt Derivatives Net debt CASH FLOWS NON-CASH MOVEMENTS AS AT 1 JULY 2021 $M (72) 158 PROCEEDS1 $M PAYMENTS $M (24,730) 24,731 1,524 (1,503) 1,245 19,512 (19,326) (18) – – 1,313 (3,694) 3,902 INTEREST AMORTISATION $M FAIR VALUE CHANGES $M FOREIGN EXCHANGE MOVEMENT $M OTHER $M AS AT 30 JUNE 2022 $M – – 1 – 1 – – (103) 102 (1) – – 8 (8) – – – 10 – 10 (71) 179 1,347 76 1,531 1 $7 million of proceeds were received from closing out derivatives and are included in the net proceeds from debt as shown in statement of cash flows. These derivatives were in a cash flow hedge relationship, so do not form part of net debt and are not included in the above table. YEAR ENDED 30 JUNE 2021 Cash Short-term debt Long-term debt Derivatives Net debt CASH FLOWS NON-CASH MOVEMENTS AS AT 1 JULY 2020 $M (53) 228 1,244 (57) PROCEEDS $M (8,996) 2,044 3,323 – PAYMENTS $M 8,977 (2,115) (3,290) – 1,362 (3,629) 3,572 INTEREST AMORTISATION $M FAIR VALUE CHANGES $M FOREIGN EXCHANGE MOVEMENT $M OTHER $M AS AT 30 JUNE 2021 $M – 1 (1) – – – – (48) 46 (2) – – 7 (7) – – – 10 – 10 (72) 158 1,245 (18) 1,313 4.5 Equity and dividends Share capital Movements in the Company’s issued ordinary shares were as follows: YEAR ENDED 30 JUNE Shares at the beginning of the year Dividend reinvestment plan Issuance of shares under share schemes and other transfers Shares at the end of the year 2022 NUMBER 2021 NUMBER 1,867,125,093 1,837,044,943 3,735,931 29,190,684 726,451 889,466 1,871,587,475 1,867,125,093 All issued shares are fully paid and have no par value. Shareholders of ordinary shares have the right to vote at any general meeting of the Company. Dividends YEAR ENDED 30 JUNE Previous year second half-year dividend First half-year dividend Total dividends in the year Second half-year dividend declared subsequent to balance date not provided for 2022 CENTS PER SHARE 12.5 12.5 25.0 12.5 2021 CENTS PER SHARE 12.5 12.5 25.0 12.5 $M 233 234 467 234 $M 230 231 461 233 Events after balance date On 23 August 2022 the Board approved the payment of a second-half ordinary dividend of 12.5 cents per share or approximately $234 million. This ordinary dividend will be 100% imputed. In addition, supplementary dividends totalling approximately $23 million will be payable to shareholders who are not resident in New Zealand. In accordance with the Income Tax Act 2007, Spark will receive a tax credit from Inland Revenue equivalent to the amount of supplementary dividends paid. 110 For running header don't deleteHello Tomorrow 4.5 Equity and dividends (continued) Dividends declared Ordinary shares American Depositary Shares1 Imputation Percentage imputed Imputation credits per share Supplementary dividend per share2 ‘Ex’ dividend dates New Zealand Stock Exchange Australian Securities Exchange American Depositary Shares Record dates New Zealand Stock Exchange Australian Securities Exchange American Depositary Shares Payment dates New Zealand and Australia American Depositary Shares H1 FY22 ORDINARY DIVIDENDS H2 FY22 ORDINARY DIVIDENDS 12.5 cents 12.5 cents 42.93 US cents 39.26 US cents 100% 100% 4.8611 cents 4.8611 cents 2.2059 cents 2.2059 cents 24/03/2022 15/09/2022 24/03/2022 15/09/2022 24/03/2022 15/09/2022 25/03/2022 16/09/2022 25/03/2022 16/09/2022 25/03/2022 16/09/2022 8/04/2022 7/10/2022 18/04/2022 21/10/2022 1 Spark’s American Depositary Shares, each representing five ordinary Spark shares and evidenced by American Depositary Receipts (ADRs), are traded over-the-counter in the United States. This is a Level 1 ADR programme that is sponsored by Bank of New York Mellon. For H2 FY22 these are based on the exchange rate at 17 August 2022 of NZ$1 to US$0.6282 and a ratio of five ordinary shares per one American Depositary Share. The actual exchange rate used for conversion is determined in the week prior to payment when the Bank of New York Mellon performs the physical currency conversion. 2 Supplementary dividends are paid to non-resident shareholders. Dividend Reinvestment Plan The Company has a dividend reinvestment plan under which shareholders can elect to receive dividends in additional shares. For the year ended 30 June 2022 shares with a total value of $18 million (30 June 2021: $131 million) were issued in lieu of dividends. Shares issued in lieu of dividends are excluded from dividends paid in the statement of cash flows. The dividend reinvestment plan has been suspended for the H2 FY22 dividend and for the foreseeable future. 111 4Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: FINANCIAL INSTruMENTS Section 5 Financial instruments 5.1 derivatives and hedge accounting AS AT 30 JUNE Designated in a cash flow hedge Designated in a fair value hedge Designated in a dual fair value and cash flow hedge Other Short-term derivatives Long-term derivatives 2022 2021 DERIVATIVE ASSETS DERIVATIVE LIABILITIES DERIVATIVE ASSETS DERIVATIVE LIABILITIES $M 18 – – – 18 5 13 $M (2) (12) (64) – (78) (1) (77) $M 10 16 9 1 36 12 24 $M (83) – (7) (5) (95) (4) (91) Spark’s derivatives are held at fair value, calculated using discounted cash flow models and observable market rates of interest, foreign exchange and electricity prices. This represents a level two measurement under the fair value measurement hierarchy, being inputs other than quoted prices included within level one that are observable for the asset or liability. As at 30 June 2022 and 30 June 2021 no derivative financial assets or derivative financial liabilities have been offset in the statement of financial position. The potential for offsetting of any derivative financial instruments is $8 million (30 June 2021: $20 million), which if applied would result in a reduction of derivative assets and derivative liabilities. Hedge accounting Derivatives are hedge accounted when they are designated into an effective hedge relationship as a hedging instrument. The nature and the effectiveness of the hedge accounting relationship will determine where the gains and losses on remeasurement are recognised. Derivatives are designated: • Fair value hedges, where the derivative is used to manage interest rate risk in relation to debt • Cash flow hedges, where the derivative is used to manage the variability in cash flows of highly probable forecast transactions • Dual fair value and cash flow hedges, where the derivative is used to hedge the interest rate risk on foreign debt and the variability in cash flows due to movements in foreign exchange rates. At inception, each hedge relationship is formalised in hedge documentation. Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. Spark determines the existence of an economic relationship between the hedging instrument and the hedged item based on the currency, amount and timing of respective cash flows, reference interest rates, tenors (time to maturity), repricing dates, maturities and notional amounts. Spark assesses whether the derivative designated in each hedging relationship is expected to be, and has been, effective in offsetting the changes in cash flows of the hedged item using the hypothetical derivative method. Derivatives in hedge relationships are designated based on a hedge ratio of 1:1. In these hedge relationships the main source of ineffectiveness is the effect of the counterparty and Spark’s own credit risk on the fair value of the derivatives, which is not reflected in the change in the fair value of the hedged item attributable to changes in foreign exchange and interest rates. Cash flow hedges Cross-currency interest rate swaps and interest rate swaps are jointly designated in cash flow hedges to manage interest and foreign exchange rate risk on debt. The hedged cash flows will affect Spark’s statement of profit or loss and other comprehensive income as interest and principal amounts are repaid over the remaining term of the debt. Interest rate swaps are designated in cash flow hedges to manage the interest rate exposure of highly probable forecast variable rate debt and aggregate variable interest rate exposures created by swapping local or foreign currency fixed-rate debt into variable rate debt. Electricity hedge contracts were designated in cash flow hedges to reduce electricity price risk from price fluctuations. These hedge contracts established the price at which future specified quantities of electricity are purchased and settled. Any resulting differential to be paid or received was recognised as a component of electricity costs through the term of the contracts. Spark also enters into forward exchange contracts to hedge forecast foreign currency purchases, the majority expected to be made within 12 months. The related cash flows are recognised in the statement of profit or loss and other comprehensive income over this period. 112 For running header don't deleteHello Tomorrow 5.1 derivatives and hedge accounting (continued) A reconciliation of movements in the hedge reserves, net of tax, is outlined below: YEAR ENDED 30 JUNE Opening balance as at 1 July Gain recognised in other comprehensive income Amount reclassified to finance expense Amount reclassified to property, plant and equipment/intangible assets and inventory Amount reclassified to other operating expenses Total movements to other comprehensive income Closing balance as at 30 June 2022 $M (63) 52 12 6 1 71 8 2021 $M (120) 57 14 (9) (5) 57 (63) Other amounts deferred in equity will be transferred to the statement of profit or loss over the next three years (30 June 2021: four years). Included within the closing balance at 30 June 2022 is $3 million relating to the cost of hedging reserve (30 June 2021: $3 million). The movement in the hedge reserves includes $98 million in the change in fair value of interest rate swaps less $27 million associated deferred tax (30 June 2021: $68 million in the change in fair value of interest rate swaps less $19 million associated deferred tax, $6 million in relation to electricity derivatives and $2 million for forward foreign exchange contracts). Fair value hedges Interest rate swaps are designated in a fair value hedge to manage interest rate risk in relation to debt. The gain or loss from remeasuring the interest rate swaps and debt at fair value is recognised in the statement of profit or loss and other comprehensive income. During the year ended 30 June 2022 there has been no material ineffectiveness on fair value hedging relationships (30 June 2021: no material ineffectiveness) and as a result no material changes have been recognised in profit and loss. Dual fair value and cash flow hedges Spark has Australian dollar (AUD) and Norwegian krone (NOK) denominated debt. As part of Spark’s risk management policy, cross- currency interest rate swaps (CCIRSs) are entered into to convert all of the proceeds of the debt issuances to New Zealand dollars and convert the foreign currency fixed rate of the debt issuance to a New Zealand dollar floating rate. To mitigate profit or loss volatility, the CCIRSs were designated into a dual fair value and cash flow hedge relationship. The foreign currency basis element of the CCIRSs are excluded from the designation and are separately recognised in other comprehensive income in a cost of hedging reserve. For fair value hedges the gain or loss from remeasuring the CCIRSs and debt at fair value is recognised in the statement of profit or loss and other comprehensive income. For cash flow hedges gains or losses deferred in the cash flow hedge reserve will be reclassified to Spark’s statement of profit or loss and other comprehensive income as interest and principal amounts are repaid over the remaining term of the debt. The change in fair value of the hedging instruments relating to the foreign currency basis component of the CCIRSs are recognised in other comprehensive income and accumulated in a cost of hedging equity reserve. Subsequently, the cumulative amount is transferred to profit or loss at the same time as the hedged item impacts profit or loss. 113 5Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: FINANCIAL INSTruMENTS 5.1 derivatives and hedge accounting (continued) The details of the hedging instruments are as follows: NOTIONAL AMOUNT OF HEDGING INSTRUMENT STATEMENT OF FINANCIAL POSITION LINE ITEM CARRYING AMOUNT OF THE HEDGING INSTRUMENT ASSETS LIABILITIES LIFE-TO-DATE CHANGE-IN- VALUE USED FOR CALCULATING HEDGE INEFFECTIVE- NESS $M $M $M NZD 640m Derivatives NZD 78m Derivatives NZD 350m Derivatives NZD 18m Derivatives AUD 150m Derivatives NOK 1b Derivatives AUD 125m Derivatives AUD 100m Derivatives NZD 780m Derivatives NZD 200m Derivatives 66.24 GWh Derivatives NZD 390m Derivatives NZD 8m Derivatives AUD 150m Derivatives NOK 1b Derivatives AUD 125m Derivatives AUD 100m Derivatives 13 5 – – – – – – 18 – 3 7 16 – 9 – – – (2) – (12) – (10) (21) (23) (10) (78) (80) (3) – – – – (2) (3) (2) 11 5 (12) – (10) (21) (23) (10) (60) (80) – 7 16 – 9 (2) (3) (2) 35 (90) (55) AS AT 30 JUNE 2022 Cash flow hedges Interest rate swaps Forward foreign exchange contracts Fair value hedges Interest rate swaps Forward foreign exchange contracts Fair value and cash flow hedges Cross-currency swaps Cross-currency swap Cross-currency swaps Cross-currency swaps AS AT 30 JUNE 2021 Cash flow hedges Interest rate swaps Forward foreign exchange contracts Electricity derivatives Fair value hedges Interest rate swaps Forward foreign exchange contracts Fair value and cash flow hedges Cross-currency swaps Cross-currency swap Cross-currency swaps Cross-currency swaps 114 For running header don't deleteHello Tomorrow 5.1 derivatives and hedge accounting (continued) The details of hedged items are as follows: AS AT 30 JUNE 2022 Cash flow hedges STATEMENT OF FINANCIAL POSITION LINE ITEM CARRYING AMOUNT OF THE HEDGED ITEM ACCUMULATED AMOUNT OF FAIR VALUE HEDGE ADJUSTMENTS ON THE HEDGED ITEM INCLUDED IN THE CARRYING AMOUNT OF THE HEDGED ITEM ASSETS LIABILITIES ASSETS LIABILITIES LIFE-TO-DATE CHANGE-IN- VALUE USED FOR CALCULATING HEDGE INEFFECTIVE- NESS $M $M $M $M $M $M Aggregated variable interest rate exposure Committed foreign exchange transactions – – Fair value hedges Domestic Notes Fair value and cash flow hedges Long–term debt Australian Medium Term Note (AUD 150m) Long–term debt Norwegian Medium Term Note (NOK 1b) Long–term debt Australian Medium Term Note (AUD 125m) Long–term debt Australian Medium Term Note (AUD 100m) Long–term debt AS AT 30 JUNE 2021 Cash flow hedges Aggregated variable interest rate exposure Highly probable forecast purchases of electricity – – Fair value hedges Domestic Notes Fair value and cash flow hedges Long-term debt Australian Medium Term Note (AUD 150m) Long-term debt Norwegian Medium Term Note (NOK 1b) Long-term debt Australian Medium Term Note (AUD 125m) Long-term debt Australian Medium Term Note (AUD 100m) Long-term debt – – – – – – – – – – – – – – – – – – (339) (158) (152) (113) (97) (859) – – (407) (177) (172) (132) (106) (994) – – 12 7 11 25 13 68 – – – – – 2 2 4 – – – – – – – – – – (11) (5) 12 10 21 23 10 60 80 (7) (17) (16) (17) (6) – – (40) (9) 2 3 2 55 115 5Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: FINANCIAL INSTruMENTS Interest rate risk Nature of the risk Interest rate risk is the risk that fluctuations in interest rates impact Spark’s cash flows, financial performance or the fair value of its holdings of financial instruments. Exposure and risk management Spark is exposed to interest rate risk from its financing activities, which primarily include loans and debt issuance either at fixed or floating rates. For floating-rate exposures Spark employs the use of derivative financial instruments to reduce its exposure to fluctuations in interest rates, with the objective to minimise the cost of net borrowings and to minimise the impact of interest rate movements on interest expense and net earnings. Cross-currency interest rate swaps are used to convert foreign currency debt into floating-rate New Zealand dollar exposures. Interest rate swaps are used to convert floating-rate exposures into fixed-rate exposures and vice versa. As a result Spark’s interest rate exposure is limited to New Zealand only. Sensitivity to interest rate movements As at 30 June 2022 a movement in interest rates of 25 basis points would (after hedging) impact the statement of profit or loss by less than $1 million (30 June 2021: less than $1 million) and the statement of changes in equity by less than $1 million (30 June 2021: less than $2 million). 5.2 Financial risk management a) Market risk Spark is exposed to market risk primarily from changes in foreign currency exchange rates and interest rates. Spark employs risk management strategies, including the use of derivative financial instruments, to manage these exposures through a Board- approved treasury policy, which provides the framework within which treasury-related activities are conducted. Spark manages the concentration of exposures using well-defined market and credit risk limits and through timely reporting to senior management. All contracts have been entered into with high-credit quality financial institutions. The risk associated with these transactions is that the fair value or cash flows of financial instruments will change due to movements in market rates or, in the case of default by a counterparty, through the cost of replacement at the current market rates. Currency risk Nature of the risk Currency risk is the risk that eventual New Zealand dollar net cash flows from transactions undertaken by Spark will be adversely affected by changes in foreign currency exchange rates. Exposure and risk management Spark’s total net exposure (from non-derivative financial instruments) to foreign currency as at 30 June 2022 is $559 million (30 June 2021: $598 million). This includes $163 million long-term debt principal denominated in NOK (30 June 2021: $167 million) and $414 million long-term debt principal denominated in AUD (30 June 2021: $403 million). The remaining exposure is primarily trade payables and other receivables denominated in United States dollars (USD). Spark manages currency risk arising from foreign currency debt through hedging. Spark’s long-term debt issued in NOK and AUD is fully hedged using cross-currency interest rate swaps to convert foreign currency cashflows into floating-rate New Zealand dollar exposures. Currency risk from capital and operational expenditure in foreign currencies (and related trade payables) has been substantially hedged by entering into forward exchange contracts. Sensitivity to foreign currency movements As at 30 June 2022 a movement of 10% in the New Zealand dollar would (after hedging) impact the statement of profit or loss by less than $1 million (30 June 2021: less than $3 million) and the statement of changes in equity by less than $12 million (30 June 2021: less than $19 million). This analysis assumes a movement in the New Zealand dollar across all currencies and only includes the effect of foreign exchange movements on monetary financial instruments. 116 For running header don't deleteHello Tomorrow 5.2 Financial risk management (continued) b) Credit risk Nature of the risk c) Liquidity risk Nature of the risk Liquidity risk represents Spark’s ability to meet its contractual obligations as they fall due. Exposure and risk management Spark uses cash and derivative financial instruments to manage liquidity and evaluates its liquidity requirements on an ongoing basis. In general, Spark generates sufficient cash flows from its operating activities to meet its financial liabilities. As at 30 June 2022 Spark had current assets of $1,221 million and current liabilities of $940 million (30 June 2021: current assets of $916 million and current liabilities of $939 million). Positive operating cash flows enable working capital to be managed to meet short-term liabilities as they fall due. In the event of any shortfalls Spark has the following financing programmes: • An undrawn committed standby facility of $200 million with a number of creditworthy banks (30 June 2021: $200 million) • Committed bank facilities of $425 million with $365 million drawn as at 30 June 2022 (30 June 2021: $575 million facilities with $160 million drawn) • Committed bank overdraft facilities of $15 million with New Zealand banks (30 June 2021: $15 million). There are no compensating balance requirements associated with these facilities. Spark’s liquidity policy is to maintain unutilised committed facilities of at least 110% of the next 12 months’ forecast peak net funding requirements, including coverage for short-term capital market issues. Spark’s funding policy requires that no more than 30% of long-term debt (including undrawn and standby facilities) can mature within the next 12 months, which has been met. Credit risk arises in the normal course of Spark’s business on cash, receivables and derivative financial instruments if a counterparty fails to meet its contractual obligations. Exposure and risk management Spark is exposed to credit risk if customers and counterparties fail to make payments in respect of: • Payment of trade and other receivables as they fall due; and • Contractual cash flows of derivative assets held at fair value. Spark’s assets subject to credit risk as at 30 June 2022 were $976 million (30 June 2021: $1,010 million). Spark considers the probability of default upon initial recognition of cash, receivables and derivative assets and whether there has been a significant and ongoing increase in credit risk at the end of each reporting period. To assess this Spark compares the risk of default occurring on these assets at the reporting date, with the risk of default at the date of initial recognition. Available, reasonable and supportive forward-looking information is considered, especially the following indicators: • External credit rating (as far as available) • Actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the customer or counterparty’s ability to meet their obligations • Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements. Spark manages its exposure using a credit policy that includes limits on exposures with significant counterparties that have been set and approved by the Board and are monitored on a regular basis. Spark places its cash and derivative financial instruments with high-credit quality financial institutions and does not have significant concentration of risk with any single party. Concentration of credit risk for trade and other receivables is limited because of Spark’s large customer base. Spark has certain derivative and debt arrangements that are subject to bilateral credit support agreements that require Spark or its counterparties to post collateral funds to support the value of certain derivatives subject to certain agreed threshold amounts. As at 30 June 2022 no collateral was posted (30 June 2021: nil). Letters of credit and guarantees may also be held over some receivable amounts. The carrying amounts of financial assets represent the maximum credit exposure. 117 5Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: FINANCIAL INSTruMENTS 5.2 Financial risk management (continued) c) Liquidity risk (continued) Maturity analysis The following table provides an analysis of Spark’s remaining contractual cash flows relating to financial liabilities. Contractual cash flows include contractual undiscounted principal and interest payments. AS AT 30 JUNE 2022 $M $M $M $M $M $M $M CARRYING AMOUNT CONTRACTUAL CASH FLOWS 0–6 MONTHS 6–12 MONTHS 1–2 YEARS 2–5 YEARS 5+ YEARS Non-derivative financial liabilities Trade payables Sale and leaseback liabilities Lease liabilities Short and long-term debt Derivative financial liabilities 260 87 344 260 93 434 1,526 1,765 260 22 35 568 – 25 30 – 24 52 126 164 – 22 111 310 – – 206 597 Interest rate swaps (net settled) 14 – 3 – – (2) (1) Cross-currency interest rate swaps (gross settled) Inflows Outflows Forward exchange contracts (gross settled) Inflows Outflows – 64 – – (686) 771 (18) 18 2,295 2,637 CARRYING AMOUNT CONTRACTUAL CASH FLOWS (6) 14 (18) 18 896 (11) 17 – – (17) 34 – – (161) 197 (491) 509 – – – – 187 257 477 820 0–6 MONTHS 6–12 MONTHS 1–2 YEARS 2–5 YEARS 5+ YEARS AS AT 30 JUNE 2021 $M $M $M $M $M $M $M Non-derivative financial liabilities Trade payables Sale and leaseback liabilities Lease liabilities Short and long-term debt Derivative financial liabilities 270 81 466 270 91 616 1,403 1,509 270 22 40 330 – 25 36 – 31 70 120 130 – 13 147 301 – – 323 628 Interest rate swaps (net settled) 85 69 7 6 13 31 12 Cross-currency interest rate swaps (gross settled) Inflows Outflows Forward exchange contracts (gross settled) Inflows Outflows – 7 – 3 (695) 707 (89) 92 2,315 2,570 (6) 6 (85) 87 671 (11) 6 (4) 5 (17) 15 – – (159) 165 (502) 515 – – – – 183 242 498 976 118 For running header don't deleteHello Tomorrow Section 6 Other information 6.1 Income tax Income tax expense The income tax expense is determined as follows: YEAR ENDED 30 JUNE Statement of profit or loss and other comprehensive income Current income tax Current year income tax expense Adjustments in respect of prior periods Deferred income tax Depreciation, provisions, accruals, tax losses and other Adjustments in respect of prior periods 2022 $M 2021 $M (177) (1) (172) 4 8 (1) 4 (5) Income tax expense recognised in the statement of profit or loss and other comprehensive income (171) (169) Reconciliation of income tax expense YEAR ENDED 30 JUNE Net earnings before income tax Tax at current rate of 28% Adjustments to taxation Non-assessable gains on sale Other non-assessable items Tax effects of non-New Zealand profits Taxes paid in foreign jurisdictions Adjustments in respect of prior periods Total income tax expense 2022 $M 581 (163) RESTATED 2021 $M 550 (154) (3) 3 (7) - (1) 1 (3) (6) (6) (1) (171) (169) 119 6Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: OTHEr INFOrMATION 6.1 Income tax (continued) Deferred tax assets and liabilities Deferred tax assets and liabilities are offset in the statement of financial position and presented as a net deferred tax liability. The movement in the deferred tax assets and liabilities is provided below: ASSETS/(LIABILITIES) Opening balance as at 1 July 2021 Amounts recognised in statement of profit or loss and other comprehensive income Relating to the current period Adjustments in respect of prior periods Amounts recognised in equity relating to the current year Amounts classified as held for sale Closing balance as at 30 June 2022 Opening balance as at 1 July 2020 – RESTATED Amounts recognised in statement of profit or loss and other comprehensive income Relating to the current period Adjustments in respect of prior periods Amounts recognised in equity relating to the current year Reclassifications Closing balance as at 30 June 2021 FIXED ASSETS $M (77) LEASES $M (19) 20 (1) – – (58) (125) 20 (1) – 29 (77) 16 – – – (3) 27 (17) – – (29) (19) PROVISIONS & ACCRUALS $M (5) (2) – – – (7) – (1) (4) – – (5) OTHER $M 19 (26) – (27) (6) (40) 39 2 – (22) – 19 TOTAL $M (82) 8 (1) (27) (6) (108) (59) 4 (5) (22) – (82) Spark has not recognised the tax effect of accumulated unrestricted losses and temporary differences amounting to AUD$461 million at 30 June 2022 based on the relevant corporation tax rate of Australia (30 June 2021: AUD$461 million). These losses and temporary differences may be available to be carried forward to offset against future taxable income. However, utilisation is contingent on the production of taxable profits over a significant period of time and is subject to compliance with the relevant taxation authority requirements. Spark has a negative 16 million imputation credit account balance as at 30 June 2022 due to the timing of dividend and tax payments (30 June 2021: negative 18 million). The imputation credit account had a positive balance as at 31 March 2022 and 31 March 2021. 6.2 Employee share schemes Spark operates share-based compensation plans that are equity settled as outlined below. Restricted share schemes (RSS) A restricted share scheme was initially introduced for selected employees in September 2001. For new allocations after August 2015 these were replaced by two new restricted share schemes: • Spark New Zealand Long-Term Incentive Scheme • Spark New Zealand Managing Director Long-Term Incentive Scheme. The Spark New Zealand Long-Term Incentive Scheme is for the senior leaders including the Leadership Squad and delivers one scheme with the same set of rules under one long-term incentive, with a performance hurdle in place. The Spark New Zealand Managing Director Long-Term Incentive Scheme related to the previous Managing Director, Simon Moutter. Under these restricted share schemes, ordinary shares in the Company are issued to Spark Trustee Limited. Participants purchase shares from Spark Trustee Limited with funds lent to them by the Company and which are held on their behalf by Spark Trustee Limited. If the individual is still employed by Spark at the end of the vesting period (generally three years) and applicable performance hurdles are met, the employee is provided a cash bonus, which must be used to repay the loan and the shares are then transferred to the individual. The target for this hurdle is the Company’s cost of equity plus 1% compounding annually. The last year when RSS shares were granted was FY19 therefore FY22 was the last year where RSS shares vested. 120 For running header don't deleteHello Tomorrow 6.2 Employee share schemes (continued) Share option scheme From September 2019, members of the Leadership Squad (including the CEO) and selected senior leaders have been granted options under the new Spark Long-Term Incentive (LTI) scheme. Under the scheme participants are granted options at the start of the three- year vesting period. The number of options granted equals the gross LTI value divided by the volume weighted average price of Spark New Zealand shares for the 20 days prior to the grant date. Subject to satisfaction of the performance hurdle and continued employment, at vesting each option converts to a Spark share based on a zero exercise price. If the target is not met (or the participant leaves Spark employment) then the options simply lapse, with exceptions for redundancy, death and disablement. Spark enables participants to meet tax obligations through PAYE by authorising the sale of a sufficient number of shares on their behalf. Vesting of the LTI grants are contingent on: participants’ continued employment with Spark for three years from grant date (subject to exceptions); and the Company achieving the specified performance hurdles. The performance hurdle targets are set annually and for grants issued in 2019, 2020 and 2021 this was the Company’s cost of equity plus 1% compounding annually. Options with an intrinsic value of $14 million (30 June 2021: $9 million) remain outstanding at 30 June 2022 and have a weighted average remaining life of 1.3 years (30 June 2021: 1.7 years). Information regarding shares and options awarded under these schemes is as follows: Opening balance as at 1 July Granted Vested Lapsed Closing balance as at 30 June Percentage of total ordinary shares 2022 2021 OPTIONS NUMBER OF OPTIONS RSS OPTIONS RSS NUMBER OF SHARES NUMBER OF OPTIONS NUMBER OF SHARES 1,845,544 566,041 998,125 1,086,461 1,042,944 – 939,898 – – (566,041) – (512,447) (48,195) 2,840,293 – – (92,479) (7,973) 1,845,544 566,041 0.15% 0.00% 0.10% 0.03% The fair value of the employee services received in exchange for the grant of equity instruments is recognised as an expense, with a corresponding entry in equity. The total charge recognised for these schemes for the year ended 30 June 2022 was $1.3 million (30 June 2021: $1.8 million) and the expense relating to the restricted shares schemes was $0.1 million (30 June 2021: $1.2 million). As at 30 June 2022, $1.6 million of share scheme awards remain unvested and not expensed (30 June 2021: $1.6 million). This expense, measured at its fair value based on a valuation model, will be recognised over the remaining vesting period of the awards. 6.3 related party transactions Related parties of Spark include the associates and joint venture companies listed in note 3.3 and key management personnel detailed below. Interest of directors in certain transactions A number of the Company’s directors are also directors of other companies and any transactions undertaken with these entities have been entered into on a commercial basis. Transactions with associate and joint venture companies Spark’s transactions with associates and joint ventures include the following: • Spark provided network operations and management services to Southern Cross in respect of its operations in New Zealand • Spark made payments to Southern Cross in connection with capacity it has purchased on Southern Cross’ network • Spark made payments to Southern Cross for operational expenditure relating to cable maintenance • Spark made payments to Connect 8 Limited for fibre and telecommunications construction services until the full acquisition of the entity on 31 January 2022 • Spark made payments to Adroit Holdings Limited for operational expenditure relating to environmental IoT services and hardware following the acquisition of approximately 38% of the entity on 18 March 2022 • Spark received revenue from Rural Connectivity Group for the sale of mobile backhaul equipment • Spark received revenue from Connect 8 Limited in the prior year for the sale of mobile network equipment. 121 6Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Financial statements NOTES TO THE FINANCIAL STATEMENTS: OTHEr INFOrMATION 6.3 related party transactions (continued) Balances and amounts in respect of these transactions with associate and joint venture companies are set out in the table below: AS AT AND FOR THE YEAR ENDED 30 JUNE Operating revenues Operating expenses Capacity acquired and other capital expenditure1 Receivables Payables 1 As at 30 June 2022 Spark has committed to purchases of $49 million for cable capacity from Southern Cross (30 June 2021: $50 million). Key management personnel compensation YEAR ENDED 30 JUNE Directors’ remuneration1 Salary and other short-term benefits Share-based compensation 1 Excludes Chief Executive remuneration. 2022 $M 5 (13) (15) 20 – 2021 $M 12 (14) (23) 18 (1) 2022 $’000 1,263 8,116 743 2021 $’000 1,292 7,577 831 10,122 9,700 The table above includes remuneration of the Chief Executive and the other members of the Leadership Squad, including amounts paid to members of the Leadership Squad who left during the year ended 30 June or were in acting Leadership Squad positions. Like other Spark employees, members of the Leadership Squad also receive product and service concessions. In addition, where members of the Leadership Squad are KiwiSaver members, they receive contributions towards their KiwiSaver schemes. 6.4 Subsidiaries Subsidiaries are all entities over which Spark has control. The significant subsidiary companies of Spark and their activities are as follows: NAME COUNTRY OWNERSHIP PRINCIPAL ACTIVITY Computer Concepts Limited New Zealand 100% IT infrastructure and business cloud services Connect 8 Limited New Zealand 100% Mobile infrastructure business Digital Island Limited New Zealand 100% Business telecommunications provider Gen-i Australia Pty Limited Australia1 Provides international wholesale and outsourced telecommunications services 100% Mattr Limited Qrious Limited Revera Limited New Zealand 94% Software company focused on decentralised identity and verifiable data New Zealand 100% Data analytics business New Zealand 100% IT infrastructure and data centre provider Spark Finance Limited New Zealand 100% A Group finance company Spark New Zealand Trading Limited New Zealand 100% Telecommunications and digital services company TCNZ (Bermuda) Limited New Zealand 100% A holding company Teleco Insurance Limited Bermuda1 100% A Group insurance company Telecom New Zealand USA Limited United States1 100% Provides international wholesale telecommunications services Telecom Southern Cross Limited New Zealand 100% A holding company Entelar Limited (previously Telegistics Limited) New Zealand 100% Mobile phone repair and equipment distribution 1 These foreign incorporated entities are tax resident in New Zealand. 122 For running header don't deleteHello Tomorrow The financial year end of all significant subsidiaries is 30 June. 6.5 reconciliation of net earnings to net cash flows from operating activities YEAR ENDED 30 JUNE Net earnings for the year Adjustments to reconcile net earnings to net cash flows from operating activities Depreciation and amortisation Bad and doubtful accounts Deferred income tax Share of associates' and joint ventures' net losses Impairments Other gains Other Changes in assets and liabilities net of effects of non-cash and investing and financing activities Movement in receivables and related items Movement in inventories Movement in current taxation Movement in payables and related items Net cash flows from operating activities 2022 $M 410 520 7 (6) 1 2 (26) – (52) (41) 17 9 RESTATED 2021 $M 381 521 (4) 2 1 2 (28) (5) (1) 31 (20) (27) 841 853 6.6 Commitments and contingencies Capital and other commitments As at 30 June 2022 capital expenditure contracted for, but not yet incurred, was $498 million (30 June 2021: $173 million) with $327 million due in the year ending 30 June 2023. Commitments principally relate to telecommunications network equipment, data centre infrastructure and cable capacity. As at 30 June 2022 Spark had other supplier commitments of $689 million (30 June 2021: $633 million), with $567 million due in the year ending 30 June 2023. Commitments include mobile handsets, subscription services, modems, licences and content rights. Contingencies No ongoing claims, investigations and inquiries are expected to have a significant effect on Spark’s financial position or profitability. 123 6Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Independent auditor’s report Independent auditor’s report Independent Auditor’s report To the Shareholders of Spark New Zealand Limited Opinion We have audited the consolidated financial statements of Spark New Zealand Limited and its subsidiaries (the ‘Group’), which comprise the consolidated statement of financial position as at 30 June 2022, and the consolidated statement of profit and loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements, on pages 79 to 123, present fairly, in all material respects, the consolidated financial position of the Group as at 30 June 2022, and its consolidated financial performance and cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We are independent of the Company in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards), and we have fulfilled our other ethical responsibilities in accordance with these requirements. Our firm carries out other assignments for Spark New Zealand Limited in relation to regulatory audit, other assurance related services (such as trustee reporting), taxation compliance and non-assurance services provided to the Corporate Taxpayers Group of which Spark New Zealand Limited is a member. These services have not impaired our independence as auditor of the Group. In addition to this, the Chief Executive has both a sister and brother-in-law that are partners at Deloitte. These Deloitte partners are not involved in the provision of any services to the Group and its subsidiaries, and this matter has not impacted our independence. Also, partners and employees of our firm deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. The firm has no other relationship with, or interest in the Group. Audit materiality We consider materiality primarily in terms of the magnitude of misstatement in the financial statements of the Group that in our judgement would make it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced (the ‘quantitative’ materiality). In addition, we also assess whether other matters that come to our attention during the audit would in our judgement change or influence the decisions of such a person (the ‘qualitative’ materiality). We use materiality both in planning the scope of our audit work and in evaluating the results of our work. We determined materiality for the Group financial statements as a whole to be $27 million. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 124 For running header don't deleteHello Tomorrow Key audit matter How our audit addressed the key audit matter Revenue recognition and recoverability of certain contract cost assets The Group’s reported operating revenue of $3,694m, (2021: $3,565m) includes: Our audit approach included both controls testing and substantive procedures. For our procedures on the design and operating effectiveness of controls over significant IT systems, we involved our IT specialists. • Mobile $1,351m (2021: $1,311m) • Voice $285m (2021: $308m) • Broadband $639m (2021: $670m) • Cloud, security, and service management $446m (2021: $443m) • Procurement and partners $538m (2021: $414m) • Managed data, networks, and services $283m (2021: $282m) • Other operating revenues $152m (2021: $137m) Revenue recognition is considered to be a key audit matter. For Mobile and Broadband revenue, and to a lesser extent other revenue streams, there is an inherent risk around the accuracy and timing of revenue recognition given the complexity of systems and the large volume of data processed; moreover, judgement is required for multiple element arrangements. This risk is most pronounced for new or changing product plans and prices. Cloud, security and service management revenue requires significant management judgements and estimates, particularly for larger contracts, which are bespoke and cover several accounting periods. The judgements and estimates that significantly impact the accuracy of revenue recognition for these contracts include: • identifying the separate performance obligations; • assessing whether the performance obligations are satisfied at a point in time or over time; and • determining the amount and appropriate method of measuring the costs of fulfilling the performance obligations or, where appropriate, the completeness and valuation of provisions against contracts that are expected to be loss- making. Contract costs incurred to fulfil a contract arising from these contracts require significant estimation in determining their recoverability, and the appropriate period of amortisation. Disclosures relating to revenue recognition and the revenue stream break down can be found in Note 2.2. Operating revenues and other gains. Refer also to Note 3.1 Contract Costs for further information on costs to fulfil a contract. Our audit procedures included: Across Mobile and Broadband, and Cloud, security and service management revenue streams: • assessing the appropriateness of the revenue recognition policies for the products and services offered by the Group, which included but were not limited to: – challenging the Group’s assessment for each performance obligation about whether the customer can benefit from the product or service on its own or together with readily available resources; – assessing the allocation of the transaction price to the performance obligations by comparing the stand-alone selling price assigned to observed market prices or estimated prices; and – examining the stages at which revenue for each performance obligation is recognised. • testing of manual journal entries recorded in the general ledger relating to revenue recognition. Mobile and Broadband: • Testing of the design and implementation, and the operating effectiveness of automated controls and interfaces between relevant IT applications, measurement and billing of revenue, and the recording of entries in the general ledger. We also tested the access controls and change management controls over the relevant billing systems; • Testing of the design and implementation, and the operating effectiveness of manual controls over the initiation, authorisation, recording and processing of revenue transactions. This included evaluating process controls over authorising new price plans and rate changes and the adjustments to the relevant billing systems; • Testing the design and implementation of revenue recognition controls, including rating and billing during the year as it relates to new or changing product plans; • Recalculating revenue recognised to evaluate that the processing by the relevant telecommunication system is materially correct; • Reviewing new product plans in the current year to understand each of the performance obligations in the bundled offering; • For new product plans that provide a bundle of services, assessing whether the customer can benefit from the product or service on its own or together with readily available resources; and • Assessing the recognition and timing of costs to acquire and costs to fulfil customer contracts. 125 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Independent auditor’s report Key audit matter How our audit addressed the key audit matter Cloud, security and service management: • testing of cloud, security and service management contracts for appropriate revenue recognition and provisioning for contracts that were expected to be loss-making. We considered the future forecast profitability and the contractual terms to assess the recoverability of the contract-specific assets and to determine if any contracts required loss provisions; and • testing a sample of revenue transactions recorded during the year by agreeing to supporting evidence, which included cash receipts, customer contracts, and invoices. We focused our work on contracts which we regarded as higher risk because of the nature of the contract and the stage of delivery. Carrying value of property, plant & equipment and intangible assets The Group has property, plant & equipment and intangible assets of $1,948m (2021: $1,938m). Our audit procedures included the following: • testing of the design and implementation, and the operating effectiveness of controls over the acquisition and disposal of assets; There are a number of areas where judgements significantly impact the carrying value of property, plant & equipment and intangible assets and their respective depreciation and amortisation profiles. These areas are as follows: • assessing the appropriateness of capitalisation of costs incurred on capital projects, by examining a sample of additions to identify if the expenditure meets the definition of an asset in accordance with the applicable accounting standards; • the impact of planned or unexpected replacement technology • assessing the reasonableness of the internal labour rates used to which will impact the way in which an asset is used or is expected to be used; capitalise internal labour; • assessing the appropriateness of the date from which assets • the determination as to whether to capitalise or expense costs, commenced being depreciated; particularly in relation to internal labour costs; • the useful economic life of the asset; and • the timely transfer and commencement of depreciation of assets transferred from work in progress. Changes in these judgements may have a significant impact on the results of the Group. Due to the significance of these judgements and the materiality of these assets to the consolidated Statement of Financial Position, this is considered a key audit matter. Refer to notes 3.6 and 3.7. • assessing the allocated useful economic lives, by comparing to industry benchmarks and our knowledge of the business and its operations; and • reviewing Board minutes and performing inquiries with management personnel around the prevailing risks of technological obsolescence and assessing their impact on the useful lives/impairment risk of existing assets. We assessed the application of the Group’s annual asset life review. This included assessing judgements made by the Group on: • the appropriateness of asset lives applied in the calculation of depreciation and amortisation; • the nature and impact of changes on the business from Spark’s strategy, including which specific assets are impacted; and • the extent of the impact of these changes on the carrying value of identified property, plant and equipment and software intangible assets. 126 For running header don't deleteHello Tomorrow Other information The directors are responsible on behalf of the Group for the other information. The other information comprises the information in the Annual Report that accompanies the consolidated financial statements and the audit report. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and consider whether it is materially inconsistent with the consolidated financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If so, we are required to report that fact. We have nothing to report in this regard. Directors’ responsibilities for the consolidated financial statements The directors are responsible on behalf of the Group for the preparation and fair presentation of the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibilities for the audit of the consolidated financial statements In preparing the consolidated financial statements, the directors are responsible on behalf of the Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs and ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located on the External Reporting Board’s website at: https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1 This description forms part of our auditor’s report. Restriction on use This report is made solely to the Company’s shareholders, as a body. Our audit has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed. Jason Stachurski, Partner for Deloitte Limited Auckland, New Zealand 24 August 2022 127 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Other information Other information 128 For running header don't deleteHello Tomorrow Corporate governance disclosures Stock exchange listings Spark’s ordinary shares are listed on the NZX and ASX. Spark is admitted to the Official List of ASX as a foreign exempt issuer. As an NZX listed issuer and ASX foreign exempt issuer, Spark complies with NZX Listing Rules and applicable ASX Listing Rules. Spark’s American Depositary Shares, each representing five ordinary Spark shares and evidenced by American Depositary Receipts (ADRs), are traded over-the-counter in the United States. This is a Level 1 ADR programme that is sponsored by Bank of New York Mellon. Spark Finance Limited, a wholly owned subsidiary of Spark New Zealand Limited, has debt securities listed on the NZDX. Details of debt securities issued by Spark Finance Limited can be found in Spark Finance Limited’s reports at: investors.sparknz.co.nz/Investor-Centre Director remuneration The total remuneration available to non-executive directors is fixed by shareholders. The current annual remuneration limit is $1,630,000 approved at the annual meeting held in November 2017. The fees payable to non-executive directors during FY22 were: BOARD/COMMITTEE1 Board of Directors Audit and Risk Management Committee (ARMC) Human Resources and Compensation Committee (HRCC) CHAIR2 $374,200 $39,700 $34,000 MEMBER3 $147,400 $19,300 $17,100 1 All non-executive directors are members of the Nominations and Corporate Governance Committee (NOMs) and receive no additional fees for this role. 2 Committee chair and member fees were not payable to the Chair of the Board. Committee member fees were not payable to committee Chairs. 3 Member fees were payable for each committee. From 1 July 2022 the non-executive directors’ fees increased by 2% (rounded to the nearest $100), to be paid out of the current shareholder- approved annual remuneration limit of $1,630,000. This increase is expected to broadly maintain the market positioning outlined in the independent Ernst & Young benchmarking report that was distributed alongside the 2017 Notice of Annual Meeting. Committee membership as at 30 June 2022 was as follows: HUMAN RESOURCES AND COMPENSATION COMMITTEE Alison Barrass (Chair) David Havercroft Justine Smyth AUDIT AND RISK MANAGEMENT COMMITTEE Charles Sitch (Chair) Paul Berriman Warwick Bray Justine Smyth (ex officio) NOMINATIONS AND CORPORATE GOVERNANCE COMMITTEE Justine Smyth (Chair) Alison Barrass Paul Berriman Warwick Bray David Havercroft Jolie Hodson Charles Sitch 129 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Other information The total remuneration received by non-executive directors of Spark during FY22 was as follows:1 NAME OF DIRECTOR2 Justine Smyth Alison Barrass Paul Berriman Warwick Bray Pip Greenwood5 David Havercroft6 Charles Sitch Total AUDIT & RISK MANAGEMENT COMMITTEE FEES HUMAN RESOURCES AND COMPENSATION COMMITTEE FEES TOTAL REMUNERATION4 – – $19,300 $19,300 $6,713 $39,700 $85,013 – $374,200 $34,000 – $5,948 $12,825 - $181,400 $166,700 $166,700 $63,930 $123,375 $187,100 $52,773 $1,263,405 BOARD FEES3 $374,200 $147,400 $147,400 $147,400 $51,269 $110,550 $147,400 $1,125,619 1. The figures shown are gross amounts and exclude GST (where applicable) and are rounded to the nearest dollar. 2. Ms Broadbent and Mr MacLeod joined the Board from 1 August 2022 so no fees were payable in FY22. 3. All non-executive directors are members of the Nominations and Corporate Governance Committee (NOMs) and receive no additional fees for this role. 4. This table excludes contributions towards medical and life insurance of a total of $11,051. Spark meets costs incurred by directors that are incidental to the performance of their duties. This includes providing New Zealand-based directors with mobile phones and $120 per month which can be used towards Spark products or services and overseas-based directors with $400 per month phone allowances. Spark also meets the costs of directors’ Spark-related travel. As these costs are incurred by Spark to enable directors to perform their duties, no value is attributable to them as benefits to directors for the purposes of the above table. 5. Ms Greenwood resigned as a director from 5 November 2021. 6. Mr Havercroft was appointed a director from 1 October 2021. Former Managing Director remuneration The following former Managing Director long-term incentives vested in FY22: GRANT YEAR SECURITIES PERFORMANCE PERIOD PERFORMANCE MEASURE VESTING OUTCOME SHARES TRANSFERRED VALUE TRANSFERRED1 FY19 Restricted Shares September 2018 – September 2021 Absolute TSR, hurdle – Spark’s annual cost of equity +1% compounding 100% – 3 year TSR result was 49.54% compared with a 34.66% target 168,907 NZ$788,796 1. Represents the NZX listed price of Spark shares on the exercise/transfer date multiplied by the number of shares transferred. Additionally, Mr Moutter’s FY20 Equity Incentive (essentially a deferred STI) vested on 20 September 2021, as the service condition was satisfied. Accordingly, 111,003 redeemable ordinary shares converted to ordinary shares. CEO remuneration The total remuneration earned or paid in FY22, and anticipated target remuneration expected to be earned or paid in FY23, by and to the CEO, Jolie Hodson is as follows: PERIOD BASE SALARY1 SHORT-TERM INCENTIVE2 LONG-TERM INCENTIVE3 FY22 actual remuneration NZ$1,230,000 FY23 anticipated target remuneration NZ$1,266,900 NZ$977,850 NZ$950,175 NZ$922,500 in the form of share options NZ$950,175 in the form of share options 1. Base salary excludes employer contributions towards KiwiSaver and is not at risk. 2. FY22 actual short-term incentive was earned in FY22 and will be paid in FY23. The gross amount earned in FY21 and paid in FY22 was $815,700. FY23 anticipated short-term incentive will be earned in FY23 and paid in FY24. 3. FY22 long-term incentive was granted in FY22 and, subject to performance hurdles, will vest in September 2024. 130 Hello Tomorrow The following CEO long-term incentives vested in FY22: GRANT YEAR SECURITIES FY19 Restricted Shares PERFORMANCE PERIOD PERFORMANCE MEASURE VESTING OUTCOME SHARES TRANSFERRED VALUE TRANSFERRED1 September 2018 – September 2021 Absolute TSR, hurdle – Spark’s annual cost of equity + 1% compounding 100% – 3 year TSR result was 49.54% compared with a 34.66% target 47,294 NZ$220,863 1. Represents the NZX listed price of Spark shares on the exercise/transfer date multiplied by the number of shares transferred. The CEO is expected to acquire and hold shares that are at least equivalent in value to 25% of the CEO’s base salary but ideally would increase this shareholding to 100% of base salary subject to the vesting of shares under any long-term incentive schemes. To fulfil this expectation shares are to be acquired within a four-year period from 1 July 2019. As at 30 June 2022 the CEO holds 189,508 ordinary shares which fulfils this expectation to hold shares that are at least equivalent in value to 25% of the CEO’s base salary. Other directors’ fees Mr Richard Quince received a directors fee of NZ$10,000 (excluding GST) for acting as a director of Teleco Insurance (NZ) Limited. Ocorian Services (Bermuda) Limited received directors fees of US$2,900 in relation to Ms Carol Feathers acting as a director of Teleco Insurance Limited. Board and committee meeting attendance for FY22 The Board held eight formal meetings during FY22. The table below shows director attendance at these Board meetings and committee member attendance at committee meetings. Sub-committees of the Board also met regularly throughout the year to consider matters of special importance. BOARD ARMC HRCC NOMS Total number of meetings held Alison Barrass Paul Berriman Warwick Bray Pip Greenwood1 David Havercroft2 Jolie Hodson3 Charles Sitch Justine Smyth4 1. Ms Greenwood resigned as a director from 5 November 2021. 2. Mr Havercroft was appointed as a director from 1 October 2021. 3. Ms Hodson attended ARMC and HRCC meetings as Executive Director. 4. Ms Smyth attended ARMC meetings in an ex officio capacity. 8 8 8 8 3 7 8 8 8 6 – 6 6 3 - 6 6 6 5 5 - - 3 3 5 - 5 2 2 2 2 - 2 2 2 2 131 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Other information Director independence The Board has determined, based on information provided by directors regarding their interests, that at 30 June 2022 Ms Barrass, Mr Berriman, Mr Bray, Mr Sitch and Ms Smyth were independent. The Board determined that Ms Hodson was not independent due to her position as CEO, and Mr Havercroft was not independent due to his recent relationships with Spark which have now ceased. The criteria for determining director independence and conflict of interest may be found in the Board Charter at: www.sparknz.co.nz/about/governance Director interests Directors made the following entries in the interests register for FY22: • Directors disclosed, pursuant to section 140 of the Companies Act 1993, interests in the following entities during FY22: DIRECTOR Alison Barrass Paul Berriman David Havercroft ENTITY RELATIONSHIP Southern Pastures Advisory Board Institute of Directors Heilala Vanilla Limited Ceased to be Chair Member of the nominations committee Ceased to be director MTS (Mobile Telesystems) PJSC Board Member W3 Capital Limited Portfolio Custodial Nominees Limited Kiwi Wealth Investments General Partner Limited Kiwi Wealth Management Limited Kiwi Investment Management Limited Kiwi Wealth Limited Westpac New Zealand Limited Director Director Director Director Director Director Director Jolie Hodson Justine Smyth Digital Boost Alliance Aotearoa Climate Leaders Coalition Appointed Chair Convenor of the Coalition’s CEO Steering Group MATTR Limited Auckland International Airport Limited Director Ceased to be a director • Directors disclosed, pursuant to section 148 of the Companies Act 1993, the following acquisitions and disposals of relevant interests in Spark shares during FY22: NAME DATE NATURE OF TRANSACTION CONSIDERATION NUMBER OF SHARES Jolie Hodson 20 September 2021 Issue of options 5 October 2021 Unrestricting of restricted ordinary shares Services to Spark Services to Spark Charles Sitch 27 October 2021 Purchase of ordinary shares AUD$28,637 189,846 47,294 6,621 • Directors disclosed, for the purposes of section 162 of the Companies Act 1993, that insurance was renewed for Spark’s directors and senior managers for the 12-month period from 1 June 2022 and deeds of indemnity provided to all directors and specified senior managers of Spark. 132 For running header don't deleteHello Tomorrow Employee benefits The following table sets out benefits provided to employees during FY22 by employee group1: FULL-TIME PERMANENT EMPLOYEES PART-TIME PERMANENT EMPLOYEES FIXED-TERM / CASUAL EMPLOYEES Parental Leave Insurance cover: • Medical • Life & Terminal Illness • Income Protection • Trauma Spark Account Credit4 Ability to participate in Spark Share5 Volunteer Day6 Spark Give7 Eligibility to join Marram9 Eligible for Purchased Leave10 Mahi Tahi – Wellbeing support11 Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes3 Yes Yes Yes Yes Yes Yes Yes Yes2 No No No No No8 No No Yes 1. Excludes benefits offered to some subsidiaries, which differ from Spark’s overall benefits suite. 2. Eligibility for Parental Leave is in accordance with Government legislation. 3. Employees must work at least 15 hours a week to be eligible. 4. Employees with Spark accounts will receive monthly credits of $120, which can be used towards Spark products or services. 5. Spark’s employee share purchase scheme. 6. The opportunity for Spark employees to take a day of paid volunteer leave. 7. For specific charities, Spark will match employee donations dollar-for-dollar, up to a $500 annual matching cap. 8. Only casual employees are ineligible. 9. Marram Trust offers access to accommodation across New Zealand for discounted rates, as well as providing a basic level of healthcare cover. 10. The ability to purchase additional annual leave via a deduction of base salary. 11. Wellbeing support includes our Employee Assistance Programme, access to wellbeing coaches, counselling with OutLine Aotearoa, specialist clinical support from our in-house psychotherapist and health psychologist and subscription to the Take A Breath Platform. 133 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Other information Employee remuneration The table below shows the number of employees and former employees, not being directors of Spark, who, in their capacity as employees, received remuneration and other benefits during FY22 totalling NZ$100,000 or more1. RANGE CURRENT FORMER TOTAL RANGE CURRENT FORMER TOTAL $100,000 – $110,000 $110,001 – $120,000 $120,001 – $130,000 $130,001 – $140,000 $140,001 – $150,000 $150,001 – $160,000 $160,001 – $170,000 $170,001 – $180,000 $180,001 – $190,000 $190,001 – $200,000 $200,001 – $210,000 $210,001 – $220,000 $220,001 – $230,000 $230,001 – $240,000 $240,001 – $250,000 $250,001 – $260,000 $260,001 – $270,000 $270,001 – $280,000 $280,001 – $290,000 $290,001 – $300,000 $300,001 – $310,000 $310,001 – $320,000 $320,001 – $330,000 337 306 271 222 208 144 103 83 54 51 30 27 17 17 16 12 11 7 7 2 8 4 1 39 27 23 24 9 16 4 9 0 3 3 2 2 0 1 0 0 0 1 0 1 1 0 376 333 294 246 217 160 107 92 54 54 33 29 19 17 17 12 11 7 8 2 9 5 1 $330,001 – $340,000 $340,001 – $350,000 $350,001 – $360,000 $360,001 – $370,000 $370,001 – $380,000 $390,001 – $400,000 $400,001 – $410,000 $410,001 – $420,000 $420,001 – $430,000 $430,001 – $440,000 $450,001 – $460,000 $460,001 – $470,000 $470,001 – $480,000 $490,001 – $500,000 $570,001 – $580,000 $600,001 – $610,000 $670,001 – $680,000 $800,001 – $810,000 $890,001 – $900,000 $980,001 – $990,000 $1,000,001 – $1,010,000 $1,080,001 – $1,090,000 2 2 4 2 2 1 2 3 2 3 3 2 2 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 2 2 4 2 2 1 2 3 3 3 4 2 2 1 1 1 1 1 1 1 1 1 Total 1977 167 2144 1. The table includes base salaries, short-term incentives and vested long-term incentives. The table does not include: amounts paid after 30 June 2022 relating to FY22; long-term incentives that have been granted and have yet to vest (based on grant values, the total value of which was NZ$10.5 million as at 30 June 2022); product and service concessions received by employees; contributions paid towards health and other insurances; contributions paid to the Government Superannuation Fund (a legacy benefit provided to a small number of employees); and, if the individual is a KiwiSaver member, contributions of 3% of gross earnings towards that individual’s KiwiSaver scheme. 134 For running header don't deleteHello Tomorrow Shareholdings As at 30 June 2022 there were 1,871,587,475 Spark ordinary shares on issue, each conferring to the registered holder the right to one vote on a poll at a meeting of shareholders on any resolution, held as follows: SIZE OF HOLDING NUMBER OF HOLDERS1 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 and over Total 13,930 18,955 6,357 5,759 237 45,238 % 30.80 41.90 14.05 12.73 0.52 100.00 NUMBER OF SHARES 6,994,521 49,499,265 46,910,600 133,949,753 1,634,233,336 1,871,587,475 1. Includes 1,744,191 shares on issue held by Spark Trustee Limited on behalf of 1,321 holders for Spark Share. The 20 largest registered holders of Spark shares at 30 June 2022 were: NAME1 NUMBER OF SHARES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. HSBC Nominees (New Zealand) Limited2 HSBC Nominees (New Zealand) Limited2 JP Morgan Chase Bank Citibank Nominees (NZ) Limited HSBC Custody Nominees (Australia) Limited BNP Paribas Nominees NZ Limited3 Custodial Services Limited Accident Compensation Corporation New Zealand Superannuation Fund Nominees Limited FNZ Custodians Limited Forsyth Barr Custodians Limited Citicorp Nominees Pty Limited BNP Paribas Nominees NZ Limited3 National Nominees New Zealand Limited JB Were (NZ) Nominees Limited JP Morgan Nominees Australia Pty Limited Premier Nominees Limited New Zealand Depository Nominee New Zealand Permanent Trustees Limited Cogent Nominees Limited 344,596,473 206,329,385 177,483,942 144,768,569 66,095,799 62,320,288 62,229,947 43,884,865 38,004,134 34,758,594 33,636,117 33,320,893 32,038,187 30,956,152 26,444,736 26,158,207 23,742,835 22,716,231 17,422,317 16,218,354 % 0.37 2.64 2.51 7.16 87.32 100.00 % 18.41 11.02 9.48 7.74 3.53 3.33 3.32 2.34 2.03 1.86 1.80 1.78 1.71 1.65 1.41 1.40 1.27 1.21 0.93 0.87 1. The shareholding of New Zealand Central Securities Depository Limited (custodian for members trading through NZClear) has been reallocated to the applicable members. 2. Has a different holder identification number to the other HSBC Nominees (New Zealand) Limited entry. 3. Has a different holder identification number to the other BNP Paribas Nominees NZ Limited entry. 135 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Other information According to substantial holder notices as at 30 June 2022 the substantial holders in Spark were as follows: NAME NUMBER OF ORDINARY SHARES % OF ORDINARY SHARES ON ISSUE1 Blackrock Investment Management (Australia) Limited 161,169,532 8.61 1. Based on issued share capital of 1,871,587,475 as at 30 June 2022. As at 30 June 2022 directors, or entities related to them, held relevant interests (as defined in the Financial Markets Conduct Act 2013) in Spark shares as follows: RELEVANT INTEREST IN SPARK SHARES AT 30 JUNE 2022 NAME Alison Barrass Paul Berriman Warwick Bray David Havercroft Jolie Hodson Charles Sitch Justine Smyth NUMBER 37,716 43,000 31,2302 100,086 770,1013 39,3504 430,2015 %1 0.002 0.002 0.002 0.005 0.041 0.002 0.023 1. Each percentage stated has been rounded to the nearest 1/1000th of a percent. 2. Relevant interest in beneficial ownership of 31,230 ordinary shares held by WDB Insight Pty Limited. 3. Includes 189,508 ordinary shares and 580,593 options. 4. Relevant interest in beneficial ownership of 39,350 ordinary shares held by Sitch Superannuation Pty Limited. 5. Relevant interest in beneficial ownership of 375,201 ordinary shares held by Miksha Trust and beneficial ownership of 55,000 ordinary shares held by PJ Trust. All non-executive directors are expected to hold Spark shares. Subject to personal circumstances (that should be discussed with the Chair or, in the case of personal circumstances of the Chair, with the Chair of the ARMC, as appropriate), there is an expectation that each non-executive director will purchase and hold an amount of shares that are at least equivalent in value to the non-executive director base member fee as at the date of their appointment or, in the case of directors appointed before 1 July 2017, as at 1 July 2017. Shares are to be purchased within a three-year period from the date of appointment or, in the case of directors appointed before 1 July 2017, within a three-year period from that date. To assess whether this expectation has been met, the aggregate purchase price for all shares acquired, less the aggregate sale price for all shares disposed (if any), is used to calculate value. 136 For running header don't deleteHello Tomorrow Subsidiary company directors The following people held office as directors of subsidiary companies at 30 June 2022. Alternate directors are indicated with an (A). SUBSIDIARY COMPANY PRINCIPAL ACTIVITY CURRENT DIRECTORS DIRECTORS WHO RETIRED DURING THE YEAR Computer Concepts Limited IT infrastructure and Cloud services M Anastasiou, G McBeath, S Knight Connect 8 Limited Mobile infrastructure business R Singh, C Phipps R Mateparae Digital Island Limited Business telecommunications provider S Knight, G McBeath Entelar Limited Gen-i Australia Pty Limited MATTR Limited Qrious Limited Revera Limited Mobile phone repair and equipment distribution Provides international wholesale and outsourced telecommunications services Software company focussed on decentralised identity and verifiable data R Singh, J Bahlman, G Clark R Patel F Evett, I Hopkins C Barber, J Hodson, J Smyth, S Knight F Evett Data analytics business S Knight, M Anastasiou N Morris IT infrastructure and data centre provider M Anastasiou, G McBeath, S Knight Spark Finance Limited Group finance company M Anastasiou, M Sheppard, S Knight, A White Spark New Zealand Cables Limited Investment company M Sheppard, L Urquhart C Fraser Spark New Zealand Trading Limited Telecommunications and digital M Anastasiou, S Knight, M Beder Spark TowerCo Limited services company Telecommunications infrastructure provider1 S Knight , M Anastasiou N Morris Spark Trustee Limited Trustee company M Anastasiou, S Knight TCNZ Australia Investments Pty Limited Australian operations F Evett, I Hopkins TCNZ (Bermuda) Limited Holding company J Wesley-Smith, J Wong D Havercroft TCNZ Financial Services Limited Investment company M Anastasiou, F Evett TCNZ (United Kingdom) Securities Limited Holding/investment company F Evett, M Palmer, J Reader Teleco Insurance Limited Group insurance company C Phipps, C Feathers, A White, M Anastasiou (A), F Evett (A) Teleco Insurance (NZ) Limited Mobile phone insurance Telecom Capacity Limited Holding company A White, R Quince S Knight, J Wong Telecom Enterprises Limited Investment company M Anastasiou, S Knight Telecom New Zealand (UK) Enterprises Limited Telecom New Zealand USA Limited Holding/investment company F Evett, M Sheppard Provides international wholesale telecommunications services D Reeve, J Wong Telecom Pacific Limited Holding company M Anastasiou, M Sheppard Telecom Southern Cross Limited Holding company Telecom Wellington Investments Limited Investment company 1. Principal activity effective from 1 July 2022. M Anastasiou, S Knight M Anastasiou, F Evett 137 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Other information Spark’s managing risk framework roles and responsibilities ACTIVITY PERFORMED Approves the Managing Risk Policy Monitors the managing risk framework Reviews principal risk updates Performs other items from its charter Prepares strategy and annual plan Runs QBR process and determines priorities Coaches and guides Leads Assigned as owners of identified principal risks Designs and continuously improves the managing risk framework Helps the business apply the framework Prepares principal risk updates for the LS and ARMC Helps Leads to capture their risks for the QBR content Executes Internal Audit plan (objective assurance) Designs and continuously improves the empowerment framework Creates empowerment & and functional guidance kits Oversees essential policies and webpage Creates and delivers training modules Use the Empowerment and Managing Risk Frameworks Understand and adhere with the essential policies Maintain view of risks for OKRs and fill in QBR Memo Provide input into principal risk process Escalate risks to LS or Risk Team (if required) Review risk sections in QBR packs across Spark Maintain view of risks for their OKRs and fill in QBR Support Leads to manage identified risks Provide input into principal risks Maintain policy and guidance material Complete assessments of effectiveness Participate in policy owner working groups Follow this framework and the essential policies Make informed decisions after assessing the benefits and risks 138 BOARD & ARMC LEADER- SHIP SQUAD LEGAL (DIGITAL TRUST) ORG UNIT LEADS CENTRE OF EXCELLENCE LEADS POLICY OWNERS ALL SPARK PEOPLE RISK ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ For running header don't deleteHello Tomorrow Sustainability appendix 139 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Sustainability appendix Sustainability appendix This appendix includes GRI-led information related to our most material topics, linking back into the content of the report and to other sources. As an integrated report we have included disclosure on our sustainability performance throughout this report. Page 8 details our integrated reporting value creation model, aligned to the ‘capitals’ which each have a dedicated section in the report. This report is prepared in accordance with the International Framework and with the Global Reporting Initiative (GRI) Core Option. It also incorporates climate risk disclosure aligned to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We publish a summary of our approach to sustainability at Spark on our website. https://www.sparknz.co.nz/sustainability/ Our Sustainability Framework Sustainability is integrated as a pillar of our business strategy, including our commitment to improving our environmental, social, and governance performance. Our ambition is to create a positive digital future for all of New Zealand, with clear focus areas outlined in our Sustainability Framework. Our Sustainability Framework is informed by our materiality assessment (see page 142). While the three focus areas of the framework are enduring, the activities within them will evolve over time to ensure we are responsive to our changing operating environment and the needs of our stakeholders. Our Sustainability Framework sits alongside our Māori Strategy, Te Korowai Tupu (the cloak of growth of Spark New Zealand), which informs how we develop strong connections with Māori and builds our understanding of Te Ao Māori. Create a Sustainable Spark Be bold in our business to have a positive impact on our people, the environment and our communities. • Our people. We will invest in the capabilities and wellbeing of our people, equipping them to thrive in a digital future. We will champion diversity and inclusion, achieving 40:40:20 gender representation across Spark by June 2024. • Environment. We will reduce our impact on the natural environment. Our science-based emissions reduction target is to reduce Scope 1 and 2 emissions 56% from FY20–FY30 and ensure 70% of our spend is with suppliers with science-based targets by FY26. • Governance. We will operate a responsible and ethical business and supply chain, and hold ourselves accountable for year-on-year improvement through transparent reporting and participation in key external benchmarks. A POSITIVE DIGITAL FUTURE FOR ALL OF We will work alongside New Zealand to harness the power of technology and create a positive digital future for all. Economic Recovery and Transformation Help New Zealand transform to a high productivity, low carbon economy. • Infrastructure. We will focus our infrastructure investment on supporting Aotearoa New Zealand’s transformation to a high productivity, low-carbon economy. • Business digitisation. We will support Kiwi businesses to adapt and become more productive, resilient, and sustainable through technology. • Digital skills. We will support New Zealanders and small-medium businesses to upskill and adapt to new ways of working. Champion Digital Equity Champion digital equity so all New Zealanders have the opportunity to thrive in a digital future. • Spark Foundation. We will invest in community partnerships that support the Foundation’s mission to accelerate towards digital equity, with a focus on digital access, digital skills and pathways, and digital wellbeing. • Our products and services. We will continue to extend the reach of our not-for-profi t broadband service Skinny Jump, improving accessibility for 35,000 households by June 2023. • Security and privacy. We will support our customers to participate in the digital world safely by putting cybersecurity, customer safety, and privacy at the heart of everything we do. 140 For running header don't deleteHello Tomorrow Our Sustainability Governance Framework Our sustainability governance structure helps us ensure sustainability is overseen at the highest levels of our organisation and embedded throughout our everyday operations. Spark New Zealand Board of Directors Approval of business strategy and sustainability framework. Reviews climate change and modern slavery risks. Reviews sustainability progress quarterly. Leadership Squad Sets three-year business strategy and approves sustainability framework. Reviews climate change and modern slavery risks. Reviews sustainability progress monthly. Corporate Relations and Sustainability Director and Sustainability Lead Sustainability Director and Lead design the sustainability framework and ensure Spark makes progress against it. Sustainability framework Create a sustainable Spark Economic recovery and transformation Championing digital equity Sustainability Lead and ESG Squad Spark Foundation Skinny Jump Squad Quarterly Business Review (QBR) Identifies focus areas of most materiality to guide activity and resource allocation. The Sustainability Lead works across Spark with a cross-functional ESG Squad to improve sustainability performance and integrate it into the business. Spark Foundation has a sole focus on digital equity, and Skinny Jump is operated through a dedicated squad. Spark’s business strategy is executed through the QBR process, with priorities agreed every three months. Sustainability is a standing priority on the QBR. All Spark people Support execution of sustainability framework priorities and consider sustainability impacts in decision making. 141 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Sustainability appendix Materiality To prioritise Spark’s reporting on sustainability topics we follow the GRI materiality principle (set out in GRI 101) to identify and prioritise topics which substantively influence the assessments and decisions of stakeholders or have a significant environmental, social, or economic impact. We also consider the materiality principles of the Integrated Reporting International Framework, considering whether a matter could substantively affect Spark's ability to create value in the short, medium, or long term. Our assessment of material topics includes analysis of stakeholder feedback, review of industry peers and interviews with external stakeholders. Internally we consult with a range of employees, including members of our strategy, finance, community, corporate relations, risk, legal and HR teams, to determine Spark’s view of topics meeting the GRI materiality principle criteria. In FY22 we have reviewed and updated our list of material impacts. This included a third-party review of our existing materiality assessment against industry standards (SASB, WEF, GRI) and our global industry peers, including the requirements of our membership of the JAC initiative (see page 73). Over the past year we have observed increased interest from our business customers in measuring their scope 3 emissions, including emissions from the services provided by Spark. We have also linked our financing to our performance against our emissions reduction target (see page 15). The implementation of the Australian Modern Slavery Act, and consultation on a similar act in New Zealand, has raised interest in labour standards in our workforce and our supply chain. Consultation on New Zealand’s first National Adaptation Plan has also raised the profile of long-term climate impacts and the topic of adapting to physical risk from climate change. • Competition and regulation • Diversity and Inclusion • Ethical behaviour • Customer experience and support • Data privacy and security • Digital equity • Ethical supply chain and procurement practices • Equipping people for the future of work • Operational efficiency, emissions and waste • Operational excellence and financial performance • Responsible employment practices • Building partnerships for a strong Aotearoa • Resilient, adaptable network infrastructure • Supporting business customers through partnership • Adaptation to physical risk from climate change • Community investment • Infrastructure impact • Tax • Disaster and crisis response • Heath, Safety and Wellbeing • Investment in innovation • Leveraging services for community and environmental outcomes • Product stewardship • Responsible and fair use of our products and services SIGNIFICANCE OF ECONOMIC, ENVIRONMENTAL AND SOCIAL IMPACTS Issue moved up from FY21 due to greater influence on stakeholder assessments and decisions S N O I S I C E D D N A S T N E M S S E S S A R E D L O H E K A T S N O E C N E U L F N I 142 For running header don't deleteHello Tomorrow Our most material sustainability issues TOPIC TOPIC DESCRIPTION AND SCOPE Customer experience and support Providing high-quality, reliable products and services that enable our customers. Supporting our customers and rectifying issues where they may arise. REFERENCE Our customers Pages 20–29 Data privacy and security How we collect, use and share personal information and how we keep it safe. Building trust in our products and services. Our customers Pages 26–29 Digital equity Providing equitable access to telecommunication products and services and to the benefits of digital technology. Our communities Pages 56–61 Equipping people for the future of work Developing and upskilling for future ways of working including building digital skills aligned to digital equity outcomes. Operational excellence and financial performance Executing our business strategy to build financial capital. Economic impact (greater focus on investment in resilient infrastructure). Building partnerships for a strong Aotearoa Focus on community partnerships and collaboration aligned to our Māori Strategy, Te Korowai Tupu. Our people Pages 40–49 Our communities Pages 56–61 Our performance Pages 16–19 Financial statements Pages 78–82 Our communities Pages 56–61 Te Korowai Tupu Page 44 Resilient, adaptable network infrastructure (inc. climate adaptation) The resilience of our infrastructure. Our long-term adaptation to climate change. Our network and technology Pages 30–39 Climate change risk Pages 71–72 Supporting business customers through partnership Partnering with our customers to support them through digital technology to increase their resilience, productivity and sustainability. Our customers Pages 20–29 143 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Sustainability appendix Stakeholder engagement Spark engages with a broad range of stakeholders as detailed in the table below. We have also engaged a small number of stakeholders specifically for the purposes of developing and improving our non-financial reporting and as part of our reporting materiality process. In selecting the stakeholders we engaged with, we are guided by the definition set out in GRI 101: “entities or individuals that can reasonably be expected to be significantly affected by the organisation’s activities, products or services; or whose actions can reasonably be expected to affect the ability of the organisation to implement its strategies or achieve its objectives.” STAKEHOLDER GROUP HOW WE ENGAGE Spark employees • Regular engagement through eNPS (employee net promoter score) methodology and the Joyous real-time employee feedback tool. • Comprehensive programme of internal communication and engagement from Leadership Squad (through roadshows and online channels). • Engagement with cross-section of employees in the preparation of this report. Shareholders Regular engagement with investors including: • Semi-annual earnings announcements, together with semi-annual post result investor briefings; • Annual meeting that allows shareholders a chance to meet and ask questions directly of the Spark Board and management; • Regular investor roadshows; and • Periodic investor strategy briefings. Suppliers Customers • Ongoing conversations with our suppliers – both informal and formal. • Regular feedback from customers on their experiences with us and their views of Spark as a business through our Net Promoter Score methodology and through our Voice of the Customer programme. • Meetings with customers on sustainability topics, sharing sustainability focus areas and exploring opportunities to work together. Government • Engagement with central Government on issues related to the telecommunications industry, competition, infrastructure investment, environmental sustainability and digital equity. • Engagement with local government to manage the process and impacts of infrastructure investment. Media • Responding to media enquiries and through a proactive programme of engagement with key members of New Zealand’s media. Local communities • Spark engages with local communities affected by our activities, in particular where we are building new network infrastructure. Community partners • Spark Foundation works in partnership with community partners on an ongoing basis. Industry organisations • Engagement with a number of industry organisations, representing the telecommunications and technology sector, community groups, and the New Zealand business community. External initiatives Spark subscribes to or endorses • Spark is a founding member of the Climate Leaders Coalition (CLC). The CLC is a group of CEOs who have collectively committed to voluntary action on climate change, measuring and publicly reporting on their emissions, and setting an absolute target for reducing emissions in line with the Paris Agreement. Spark’s CEO, Jolie Hodson, is the Convenor of the CLC. See page 15. • Spark has committed to a government-accredited voluntary Product Stewardship scheme for mobile phones, which is actioned by the Re:Mobile initiative. See page 55. Spark was an active member of the following associations in FY22: • International Telecommunication Union (Radiocommunication Sector membership) • Business NZ • Sustainable Business Council • GSM Association (GSMA) • New Zealand Internet Task Force • Telecommunications Forum (TCF) • Global Women (including Champions for Change) • Joint Audit Cooperation (JAC) initiative • Digital Boost Alliance • NZ Tech (Including Internet of Things Alliance and AI Industry • Digital Equity Coalition Aotearoa (DECA) (membership through Forum) • TUANZ 144 Spark Foundation) Hello Tomorrow Global Reporting Initiative (GRI) content index Our disclosure against each material topic includes our management approach, considering the requirements of GRI 103: Management Approach. Note: CGS refers to Spark’s Annual Corporate Governance Statement, which may be found here: www.sparknz.co.nz/about/governance Indicator Disclosure Page number / reference GRI 102: General disclosures 2016 102-1 102-2 102-3 102-4 102-5 102-6 102-7 102-8 102-9 102-10 102-11 102-12 102-13 102-14 102-16 102-18 102-40 102-41 102-42 102-43 102-44 102-45 102-46 102-47 102-48 102-49 102-50 102-51 Name of the organisation Activities, brands, products and services Location of headquarters Location of operations Ownership and legal form Markets served Scale of the organisation Information on employees and other workers Supply chain Significant changes to the organisation and its supply chain Precautionary principle or approach External initiatives Membership of associations Statement from senior decision-maker Values, principles, standards and norms of behaviour Governance structure List of stakeholder groups Collective bargaining agreements Identifying and selecting stakeholders Approach to stakeholder engagement Key topics and concerns raised Entities included in the consolidated financial statements Defining report content and topic boundaries List of material topics Restatements of information Changes in reporting Reporting period Date of most recent report 102-52 Reporting cycle 102-53 Contact point for questions relating to the report 102-54 Claims of reporting in accordance with GRI standards 102-55 GRI content index External assurance 102-56 GRI 200 Economic Standard Series 201-2 203-1 206-1 207-1 Financial implications and other risks and opportunities due to climate change Infrastructure investments and services supported Legal actions for anti-competitive behaviour, anti-trust and monopoly practices Approach to tax 10 10 148 10 122, 129 10 10, 85 47, 48, 49 73 84 51 144 144 12 8, 42, CGS Principle 1 62 – 69, CGS Principles 2, 3 and 4 144 <1% of Spark employees in FY22 144 144 144 83 5, 140, 142, 143 142, 143 GHG Inventory Report p7 N/A 5 Spark’s FY22 Annual Report was published on 24 August 2022 Spark reports annually. Our financial year is 1 July – 30 June 148 5, 140 145, 146 124 – 127 71, 72 30 – 39 29 68, 69 145 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Sustainability appendix Indicator Disclosure Page number / reference 52 and GHG Inventory Report 52 and GHG Inventory Report 54 and GHG Inventory Report 55 55 54, 73 73 48 133 48 43 43 41 47, 48, 49 47 73 73 and Modern Slavery Statement 29 29 GRI 300 Environmental Standard Series 305-1 305-2 305-3 306-2 306-3 308-1 308-2 GRI 400 Social Standard Series 401-1 401-2 Direct (Scope 1) emissions Energy indirect (Scope 2) emissions Other indirect (Scope 3) emissions Management of significant waste-related impacts Waste generated New suppliers that were screened using environmental criteria Negative environmental impacts in the supply chain and actions taken New employee hires and employee turnover Benefits provided to full-time employees that are not provided to temporary or part-time employees Parental leave Occupational health and safety management system Work-related injuries Programmes for upgrading employee skills and transition assistance programmes Diversity of governance bodies and employees Ratio of basic salary and remuneration of women to men New suppliers that were screened using social criteria Negative social impacts in the supply chain and actions taken Incidents of non-compliance concerning marketing communications Substantiated complaints concerning breaches of customer privacy and losses of customer data 401-3 403-1 (2018) 403-9 (2018) 404-2 405-1 405-2 414-1 414-2 417-3 418-1 146 For running header don't deleteHello Tomorrow Glossary 3G 4G 5G ADR ARMC ASX CCL CCN Company EBITDAI eNPS GRI Group HRCC iNPS IoT IFRS LTI Millimetre waves Multi-access edge computing Network slicing NOMs NPS NZ GAAP NZ IFRS NZX OTN PSTN QBR SME third-generation mobile network as defined by the International Telecommunications Union. fourth-generation mobile network as defined by the International Telecommunications Union. fifth-generation mobile network as defined by the International Telecommunications Union. an American Depositary Receipt. the Audit and Risk Management Committee. the Australian Securities Exchange. Computer Concepts Limited. Converged Communications Network. Spark New Zealand Limited. earnings before finance income and expense, income tax, depreciation, amortisation and net investment income. employee Net Promoter Score and is our measure of employee satisfaction. the Global Reporting Initiative, the most widely used global sustainability reporting standard. the Group in relation to these financial statements, which are prepared for Spark New Zealand Limited (the Company) and its subsidiaries (together the Group). the Human Resources and Compensation Committee. Interaction Net Promoter Score is our measure of customer satisfaction. the Internet of Things. International Financial Reporting Standards. Long-Term Incentive, which is part of Spark Leadership Team and former Managing Director and CEO remuneration. Millimetre waves, also known as extremely high frequency (EHF), is a band of radio frequencies that has wavelengths between 1 mm and 10 mm. These frequencies can carry massive amounts of data at very high speeds. That makes them ideal for accommodating the massive increase in data demanded from new 5G use cases such as augmented/virtual reality, cloud gaming, video analytics and other cloud-compute capabilities. Multi-access Edge Computing (MAEC) extends the capabilities of cloud computing by bringing it to the ‘edge’ of the network. While traditional cloud computing occurs on remote servers that are situated far from the customer and device, MAEC allows this processing to take place much closer to the end customer – meaning data has to travel a shorter distance, decreasing latency, and the amount of data sent across the network can be reduced, reducing congestion and delivering a better customer experience. Network slicing allows the operator to ‘slice’ its network to support different types of services through each ‘slice’. Multiple slices can be tuned independently to meet different quality of service parameters. For example, one slice may simply need a standard speed connection to enable office email, another might be tuned to support very low data IoT devices, while another slice may need high reliability and ultra-low latency to support robotics. the Nominations and Corporate Governance Committee. Net Promoter Score. Generally Accepted Accounting Practice in New Zealand. New Zealand Equivalent to International Financial Reporting Standards. NZX Limited. The Optical Transport Network (OTN) is the high speed backbone of Spark’s network, stretching from the Far North to the bottom of the South Island. The OTN uses light signals through optical fibre cables to carry all of Spark's data traffic up and down the country through diverse paths, ensuring resilient, fast connectivity for all users. Public Switched Telephone Network. Quarterly Business Review. Small and medium enterprise. Southern Cross SRAN STI TRIFR TSR Southern Cross group of companies, which consists of two sister companies, Southern Cross Cables Holdings Limited and Pacific Carriage Holdings Limited, Inc. and their subsidiaries. Single Radio Access Network. Short-Term Incentive, which is part of Spark Leadership Team and former Managing Director and CEO remuneration. Total Recordable Incident Frequency Rate per million Spark employee hours worked. Total Shareholder Return and is a measure of share price appreciation and dividends paid over a given period. 147 Spark New Zealand Annual Report 2022Ko Te Pae Anamata, Whakamaua Contact details Contact details Contact details Registered office Level 2 Spark City 167 Victoria Street West Auckland 1010 New Zealand Ph +64 4 471 1638 or 0800 108 010 Company secretary Silvana Roest For more information For inquiries about transactions, changes of address or dividend payments contact the share registries below. New Zealand registry Link Market Services Limited Level 30, PWC Tower 15 Customs Street West Auckland 1142 PO Box 91976 Auckland 1142 Ph +64 9 375 5998 (investor inquiries) enquiries@linkmarketservices.com www.linkmarketservices.co.nz Australian registry Link Market Services Limited Level 12 680 George Street Sydney NSW 2000 Australia Locked Bag A14 Sydney South NSW 1235 Australia Ph +61 1300 554 484 (investor inquiries) Fax +61 2 9287 0303 registrars@linkmarketservices.com.au www.linkmarketservices.com.au United States registry Computershare Investor Services P.O. Box 505000 Louisville, KY 40233-5000 United States of America Ph +1 888 BNY ADRS (+1 888 269 2377) or +1 201 680 6825 (from outside the United States) shrrelations@cpushareownerservices.com www.mybnymdr.com For inquiries about Spark’s operating and financial performance contact: investor-info@spark.co.nz Investor Relations Spark New Zealand Limited Private Bag 92028 Auckland 1142 New Zealand investors.sparknz.co.nz Spark New Zealand Limited ARBN 050 611 277 148 Hello Tomorrow 6 6 0 K R A P S z n . o c . e v i t a e r c t h g i s n i Ēkore e taea e te whenu Kotahi ki te raranga i te whāriki, kia mōhio tātou ki a tātou. Mā te mahitahi o ngā whenu, ma te mahitahi o ngā kai raranga, ka oti tenei whāriki. I te o tinga, me titiro ki ngā pai ka puta mai. Ā tāna wā, me titiro I ngā raranga i makere. Nō te mea, he kōrero ano kei reira. The tapestry of understanding cannot be woven by one strand alone. Only by the working together of strands, and the working together of weavers, will such a tapestry be completed. When it has been completed, let us look at the good that comes from it. In time, we should also look at those stitches, which have been dropped because they also send a message. Whakatauaki by Kukupa Tirikatene (Ngāi Tahu, Kāti Māmoe, Waitaha, Ngāti Pahauwera, Ngāti Toa Rangatira). Gifted to Kora Aotearoa by Kukupa Tirikatene and the Tirikatene whānau (Ngāi Tahu, Kāti Māmoe, Waitaha, Ngāti Pahauwera, Ngāti Toa Rangatira). investors.sparknz.co.nz ARBN 050 611 277