Spark New Zealand Limited (SPK) Earnings Call Transcript & Summary

[Foreign Language] Good morning, and welcome to Spark's 2022 Annual Meeting of Shareholders. My name is Justine Smyth, and I am the Chair of Spark New Zealand. On behalf of the Board, it is my pleasure to update our shareholders on Spark's progress over the last year. The Board and I are very excited to be here in person after 2 years of virtual-only meetings as a result of COVID lockdowns. This year, we're holding our meeting in a hybrid manner, with some of you joining us online. For those of you joining us virtually, you'll still be able to vote and submit questions during the meeting. We will respond to questions on the resolutions when we get to that part of proceedings. And we'll also have time to respond to general questions after the resolutions. Before we get started, just some housekeeping matters. Bathrooms are located in the atrium behind subway. In the unlikely event of an emergency, please leave the venue using the nearest exit and follow the instructions of our Spark employees, and they'll be on hand to direct you to assemble outside on Halsey Street. With that taken care of, I'd now like to declare the meeting open. Based on the information conveyed to me, I confirm there is a quorum of shareholders and that the meeting is duly convened. Today, you'll hear from me as Chair of the Board and from our CEO, Jolie Hodson. We will then put forward the resolutions as described in the Notice of Meeting and respond to general questions put to us by shareholders. I'd like to introduce my fellow directors and management who are on the stage with me today: Alison Barrass; Paul Berriman; Warwick Bray; Sheridan Broadbent; Jolie Hodson, our CEO and Director; Charles Sitch; David Havercroft; and Stefan Knight, our Finance Director. We also have present today our General Counsel, our company's Secretary, auditors from Deloitte, lawyers from Russell McVeagh, and share registrar, Link Market Services. Unfortunately, our Director, Gordon MacLeod, is unable to join us today as he just undergone emergency surgery for a ruptured appendix. So we wish him well. Now let me turn to Spark's progress over the last year. In Aotearoa, a large part of 2022 was still defined by COVID. For Spark, we faced ongoing disruptions in the first half of the year from lockdowns, with Auckland, in particular, spending 107 days in lockdown. The second half saw economic volatility emerge as a result of the war in Ukraine, rising inflation, labor shortages and supply chain constraints. The most material impact for Spark continued to be our lower levels of mobile roaming revenue given travel was restricted for much of the year. The good news is we've now started to see this revenue return as border restrictions have eased and we're once again welcoming international tourists to our shores. Like all businesses, we're operating in an incredibly tight labor market, and skill shortages in the technology sector are an ongoing challenge. We're working 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. Our teams are also working to tightly manage our supply chain, holding more stock onshore and working longer -- working to longer lead times to mitigate the impact of delays and price volatility. But we're optimistic about the future, and we are well positioned for future growth. So just turning to our FY '22 results. Spark, pleasingly, returned to growth with revenue increasing 3.5% to $3.72 billion driven mainly by our mobile service revenue growth at 5.5% and outpacing the market. Our cloud service, security and service management grew modestly to $446 million, with performance impacted by the extended lockdowns in the first half, supply chain disruption and some execution challenges. Spark IoT and Spark Health made a strong contribution to revenue growth during the year, with Spark IoT revenue increasing 22% and Spark Health 46%. When overall revenue growth was combined with our long-term focus on disciplined cost reduction, we delivered EBITDAI growth to $1.15 billion towards the top end of our guidance range. Net profit after tax increased by 7.6% to $410 million, largely driven by EBITDAI growth, with net financing, depreciation, amortization and tax all remaining stable. Capital investment of $410 million was in line with guidance and our target envelope of approximately 10% to 11% of revenue. Our free cash flow of $296 million was lower than our aspiration impacted by advanced purchasing of inventory and capital items to mitigate supply chain disruption risks and the related impact on working capital. As a result of our overall strong performance, the Board declared a total FY '22 dividend of $0.25 per share, 100% imputed. In these uncertain times, we know our shareholders are looking for consistent returns, and we want to make sure that capital is used effectively. 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. During FY '22, we established TowerCo as a subsidiary company to improve the performance, utilization and efficiency of our passive mobile infrastructure assets and to explore the introduction of third-party capital. This culminated in the agreement to sell a 70% stake in TowerCo to Ontario Teachers' Pension Plan just after the close of the financial year. Ontario is a high-caliber investor with a long-term partnering focus and significant experience managing a portfolio of infrastructure investments globally. As we confirmed to the market in October, the sale has now been completed, delivering net proceeds of $911 million and valuing that TowerCo business at $1.175 billion. We have allocated up to $350 million, which we intend to return to shareholders via an on-market share buyback. The buyback will be subject to market conditions at the time, and we may investigate alternative return opportunities. We will update the market in due course. A further $350 million will be invested in future growth opportunities like digital infrastructure, scaling Spark Health and Spark IoT, and accelerating the commercialization 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 due to the increased lease liability of our long-term agreement with TowerCo to secure access to existing and new towers. As we look to FY '23, our ambition is to grow free cash flow to between $460 million and $500 million. This growth reflects the changes we've 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 dividend in FY '23 of $0.27, 100% imputed, funding through earnings and free cash flow growth. This is the first time the total dividend has increased since 2016 and reflects the confidence that we have in Spark's strategy and future growth potential. Our strategic focus on sustainability has continued during the year. From an environmental perspective, there is no greater economic-wide priority than climate change. As we look to the future, we know the window to make -- take meaningful action to prevent the worst impacts of climate change is closing fast, and every business must act. During the year, we established an emissions reduction and energy efficiency program to drive action against our Science-Based Target of reducing Scope 1 and 2 emissions 56% by 2030 from a FY '20 baseline. Over the past year, we saw a 15% emissions reduction through a combination of grid decarbonization and energy efficiency improvements within Spark. We've also linked our financing to our sustainability performance, with Spark Finance, establishing 3 sustainability-linked loans totaling $425 million and issuing New Zealand's first sustainability-linked bond of $100 million. From a broader governance perspective, we recognize that we operate within a global supply chain, with suppliers in some geographies at high risk of issues like modern slavery. Over the past year, we've matured our approach to managing and mitigating these risks, including a new human rights policy making an explicit commitment to respect all internationally recognized human rights and setting clear expectations on how we will address issues across our value chain. We have transitioned to a new supplier risk management system, which improves our visibility of supply chain risk and compliance. And we joined the Joint Audit Cooperation of telecommunications companies to do so. We also continue to invest in community-led solutions to bridge the digital divide through the Spark Foundation. And in the last year, we have grown our not-for-profit broadband service Skinny Jump by 33%. Supporting over 23,000 households that would otherwise be excluded from the digital world. Finally, we have maintained our focus on investing in our people and culture which is undoubtedly the backbone of our business. We are pleased to have achieved our 40:40:20 gender diversity target at the Board, leadership squad and senior leadership levels. And during FY '22, female representation increased from 42% to 47% in our senior leadership roles. So we are also pleased to appoint 2 nonexecutive directors during the year. In August, we announced the appointment of Gordon MacLeod and Sheridan Broadbent. In accordance with the NZX Listing Rules, Gordon and Sheridan offer themselves for reelection. Shareholders will also be voting on the reelection of Warwick Bray and Jolie Hodson today. As my first reelection was at the 2019 AGM, I will also retire and offer myself for reelection today. And finally, as we announced recently, Paul Berriman will be stepping down at the close of this annual meeting. I wish to thank Paul for the significant contribution he's made to Spark during his tenure over a decade on Board. Paul has provided invaluable guidance during the pivotal moments in Spark's history and he's played an instrumental role in supporting Spark's transformation from a legacy telco to New Zealand's largest telecommunications and digital services provider. So on behalf of the Board, we thank you, Paul, and wish you every success in the future. As I noted, I will offer myself for reelection this year. And in doing so, I wanted to say what an honor and a privilege it has been to serve you, our shareholders, as a Non-Executive Director over the past 11 years and as Chair for the last 4. For me, the primary role of our Board is to develop a clear strategy for how we deliver value to shareholders, our customers and Aotearoa. I'm proud of the strong performance Spark has delivered over many years and that we closed out our FY '22 year ranked #2 against our international peers for total shareholder returns, with a compound annual growth rate of 12% for the last 3 years. We are well underway in forming our business strategy for the next 3 years ahead, with a focus on leveraging the competitive advantage we have built by looking at new sources of future growth. And finally, I'm enormously proud of how Spark delivers value. I've seen the culture grow stronger every year, fueled by a more diverse and empowered workforce who are committed to improving the experience we deliver to our customers and on living up to our purpose to help all of New Zealand win big in a digital world. On behalf of the Board, I'd like to thank all Spark people for their hard work and dedication and acknowledge and thank my fellow directors and you, our shareholders, for your support over the last year. [Foreign Language] I now invite Jolie to address the meeting.

[Foreign Language] Thank you, Justine, and good morning, everyone. I echo Justine's earlier comments that it's fantastic to be here in person. And to those joining us remotely, a virtual [Foreign Language] to you as well. As Justine has shared, Spark delivered another strong financial result in FY '22. This was the second year of our 3-year strategy. And as we continue to deliver what we said we would, we've also been laying the foundations for future growth. We continue to grow in our established markets of wireless and cloud, and the market-leading result Justine outlined in mobile was driven by our maturing data-driven marketing capabilities, which has seen a 13% increase in customers on Endless mobile plans and supported a 4.9% increase in total ARPU. We've redesigned and launched simpler broadband plans during the year, which stabilized our broadband base. And we now have 28% of that base on wireless connections, meaning we are on track to meet our FY '23 target of 30% of our base on wireless and cloud security and service management, with a focus on lifting performance through refreshed products and pricing and further growing our cloud specialist skills. As Justine noted, we also continued to see strong momentum in our future markets, with revenue growth across both Spark Health and IoT. Spark Health has won new national contracts through the newly established Te Whatu Ora or Health New Zealand and launched its new cloud-based digital health platform, Kete Waiora. Spark grew connections in IoT by 75% to 832,000. We took a significant stake in our partner Adroit, and that's around accelerating future growth and sustainable monitoring solutions. In Sport, we delivered a successful season of cricket, and we remain focused on strategic partnerships to improve returns. So this growth across our established and our future core markets was supported by our focus on 4 core capabilities that are differentiating Spark in the market as they further embed across the business. We are a simpler business than we were a year ago. We retired 102 mobile and broadband plans while increasing digital journeys for sales and service by 23%. So it's made it easier for our customers to interact with Spark, evidenced by a 17.5% reduction in calls to our call center and an 18% growth in online revenue. We continue to hone our data capability to better understand our customers' needs. Our data and AI-driven marketing capability can now better predict the needs of almost 90% of our customers' households and make recommendations for more than half of our small, medium business customers. This has enabled us to increase our marketing campaign conversion by 19% year-on-year. And as we deliver these simpler, more digital, and data-driven customer experiences, we are improving engagement with our customer interaction Net Promoter Score, or iNPS, up 9 points from FY '21. We're also building a smart automated network that underpins Aotearoa's digital economy, and that remained a focus for us. So despite the challenges of COVID lockdowns, our 5G rollout continued at pace. We made solid progress towards our goal of 90% population coverage by the end of calendar year 2023, with 5G live and 21 locations across the country by the end of FY '22. And today, we're now live in 53 locations. We're also pleased to announce a couple of weeks ago that we've reached an agreement with the Crown in principle for a direct allocation of the C-band spectrum that will provide Spark with the long-term management rights to 80 megahertz of 3.5 gigahertz spectrum. And in return for that allocation, we'll commission an additional $24 million in funding to the Rural Connectivity Group between 2023 and 2025. This will enable RCG to expand mobile coverage further into rural New Zealand and to address more mobile black spots on state highways. We've also agreed to deploy more extensive 5G services in provincial towns in the same period. We encourage the government to proceed with pace on finalization of this agreement and on the future allocation of the 600 megahertz spectrum, which will be particularly important for rural 5G coverage. So looking beyond 5G, we also have continued to boost capacity and resilience in our network. Our Takanini Data Centre expansion is on track for delivery, our Mayoral Drive exchange upgrade is complete and the build of our optical transport network 2.0, which is really the fiber backbone of our network, is 87% complete. We're also pleased to welcome customers onto the new Southern Cross NEXT cable, which has almost doubled international capacity for New Zealand. And finally, we've made significant progress building a growth mindset across Spark, and we've continued to make significant investments in the capability and well-being of our people. We launched a new and a more holistic well-being strategy, Mahi Tahi, and that's to support our people's mental health and well-being during ongoing COVID-19 disruptions. We recently completed a culture survey across our business, and we're pleased to have 89% of our people participate, sharing their thoughts and feedback on Spark's culture with us. This resulted in an employee NPS, or Net Promoter Score, of plus 77, with 79% of our people feeling like they belong at Spark, which we're extremely proud of. This survey has also provided us with important insights on where we can do better and how we can continue to build a high-performance culture where all of our people feel like they belong. So as I look to the future and consider the challenges we face as a nation, it's clear that technology will continue to play a critical role in how we adapt and transition to a more sustainable future. This year, I stepped into the role of the convener of the Climate Leaders Coalition to work alongside my fellow signatories and collectively raise the bar on what business leadership on climate action looks like. As a digital services company, Spark has an important role to play on this journey, enabling Kiwi businesses across a range of sectors to decarbonize and improve their environmental performance. And we're already seeing this come to life in some parts of our business, with over half of our Spark IoT revenues in FY '22 linked to environmental solutions for more efficient use of water on farms, to enabling the deployment of electric car-charging stations to more areas across the country. Earlier this week, we were joined by the Prime Minister Jacinda Ardern and the Minister of Climate Change James Shaw at our Innovation Studio to officially launch a new piece of research. This research quantifies the emissions reductions that can be enabled by digital technology and identifies what these opportunities look like across different sectors. So we are seeing an acceleration in technology convergence. It's 5G multi-access edge compute data and AI, IoT and cloud computing all combined to deliver powerful solutions to business problems. This is opening up new opportunities to help our business transform and to help our customers transform, and new commercialization opportunities for Spark. For example, our investment in our subsidiary, MATTR, which specializes in digital identity and verifiable data, reached the stage of commercialization during the year. So MATTR's focused on solutions that enable trusted digital interactions for individuals. It supported the creation of the government's COVID-19 vaccination certificates and it secured additional contracts in offshore markets, like the colleges of Canada around education credentials. So as businesses harness that power of technology to become more sustainable, we expect to see digitization continuing to accelerate. And this brings the issue of digital equity firmly into the spotlight. With 1 in 5 New Zealanders digitally excluded in some way, we will not achieve a just transition unless we lift the digital equity across our communities, and this remains a strategic focus for Spark. Finally, I offer myself for reelection as a Director this year. I wanted to finish by saying that it has been my absolute privilege to lead our team of incredible people here at Spark and to serve on the Board. During a time of significant disruption in New Zealand, we've been able to maintain our focus on delivering results that we committed to you, our shareholders, and we're on track to deliver our FY '23 strategy ambitions. We are maximizing shareholder value as we grow earnings and free cash flow and as we better realize the value of our passive mobile assets through the TowerCo transaction. As I look ahead, I'm excited about the opportunity we now have to harness the power of technology to help our customers transform, to help Aotearoa transition to a low-carbon economy and to keep delivering great experiences for our customers and great returns for our shareholders. I want to finish by recognizing the pivotal role our people have played in delivering these results, while supporting our customers through what have been unprecedented times. Spark has an important role to play as New Zealand transforms in the years ahead, and we are only able to fulfill our purpose as a business with the support of our shareholders, the support of our customers, our people and our communities. So I thank you for your ongoing support. [Foreign Language] Thank you.

So we now turn to matters requiring resolution as outlined in the Notice of Meeting with a poll to be called on each resolution. The polls will be conducted at the end of the resolutions, and your ballot papers and online voting cards will be collated by our share registry, Link Market Services. Each of the resolutions 1 to 6 set out in the Notice of Meeting are to be considered as ordinary resolutions. To be passed, they require the approval of a simple majority of votes cast by shareholders entitled to vote and voting on the resolution. There will be an opportunity for shareholders to ask questions on each matter at the end of the resolutions. There will also be a further opportunity to ask general questions following the resolutions. When I call for questions, for those of you who are attending in person, can I please ask that you move to the microphone nearest to you and clearly state your name prior to asking a question. In the interest of fairness to all shareholders, anyone wishing to speak should be as concise as possible and be considerate to other shareholders. Shareholders are asked that they only speak once to give the shareholders a reasonable -- other shareholders a reasonable opportunity to raise any questions they may have. We'll also be responding to questions from shareholders attending virtually via the online portal and those attending on the phone. So if there are any questions that relate to personal customer matters, these can be directed to customer service support we have available at the customer services desk in the foyer once the meeting has closed or will be directed to our Investor Relations team who will address these directly following the meeting. [Operator Instructions] I'd like to take this opportunity to remind everyone that this meeting is being webcast. So you'll also be heard by an audience outside of this room. Our first resolution relates to the company's auditor, Deloitte. The Companies Act sets out the procedure for the reappointment of auditors. Under that procedure, the auditors are automatically reappointed. Deloitte was first appointed as an auditor in 2020. The motion before you concerns the fixing of the auditor's remuneration and seeks shareholder approval that the directors be authorized to fix the auditor's remuneration. So I now propose that directors are authorized to fix the remuneration of the auditor, Deloitte. Are there any questions for the Board concerning this motion? I can see that we have no questions online or on the phone. Great. Thank you. The next resolution concerns the reelection of Gordon MacLeod as a Director of Spark. Gordon joined the Board as a Non-Executive Director in August this year. Gordon is retiring in accordance with the NZX Listing Rules and offers himself for reelection. As I previously mentioned, unfortunately, due to emergency surgery, Gordon is unable to join us today. I know he's very sad about that, I've spoken to him. And so I am going to share a little bit more about his experience and credentials. Gordon has held a range of senior executive roles over a 15-year tenure at Ryman Health 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 high-tech U.K. listed company based on the Cambridge Science Park in England. Gordon is an Independent Director of Delegat Group and a trustee of the Breast Cancer Foundation. He holds a Bachelor of Commerce from the University of Canterbury, is a Chartered Accountant Fellow, and a member of the Institute of Directors. The Board recommends Gordon to you as an Independent Director of Spark and unanimously supports his reelection. I now propose that Gordon MacLeod be elected as a Director of the company. Are there any questions concerning the motion relating to Gordon's reelection? Yes, sir.

Good morning. My name is [ Ewan Haim ], I'm a shareholder and have been for quite some time. My question is to -- about the election of all directors that are seeking reelection. So I need to preface that, why? I am astounded that you've given away 70% of the means of the cell tower communications, giving it away for a short-term gain and long-term pain perhaps. I wonder about that. Despite your assurance in your address this morning, I'm not convinced that these people who have voted for the sale are worthy. I'd like to know who opposed it and who didn't, and who voted for it, because I am not going to vote for a person who's going to sell our infrastructure to an overseas organization.

Thank you very much for your question, sir, and I'm happy to respond to that. All directors unanimously voted for the sale of those telco tower assets. So that would mean all the elect directors that are up for reelection today made that vote. And just we might deal with the telco sale itself in the general business questions because there might be many other people that want to ask questions about that as well. But what I will say is when we sold the -- when we looked at that, we looked at an efficient use of our capital and the nature of what we sold was the passive tower only. And so none of the aspects of the tower that give us any competitive advantage to our business, which is the kind of the signaling and the mobile components on those towers, all of those are retained in our ownership. So we considered that the effective use of that capital, being that passive infrastructure, we could both return that value to shareholders and recycle that capital for other investments we want to make in our business, and we've retained $350 million for that in terms of the newer technologies and the other things that we think, over the longer term, will generate better value for our shareholders. But I'm happy to have more questions on the telco in general business. Is there any other questions that relate to this particular resolution? We have a question online, please?

This question comes from Stephen Mayne. Did any of the proxy advisers recommend to vote against any of today's resolutions, including Gordon's reelection? Which of the proxy advisers are covering us? And has there been a material proxy protest vote against any of today's resolutions? Why not disclose the proxy votes before the debate on each resolution, so shareholders can ask questions about the reasons if there have been any protest votes?

Thank you, Chante. This is a really good question. And what I would say is that we are covered by 3 -- someone will correct me if I'm wrong, but 3 proxy holders. Our proxy holder votes are in favor of every single resolution. So we had no dissenting views on any resolution from any of the proxy holder votes or proxy holders. They are CGI Lewis, ISS and Ownership Matters, and we might have one more. That covers it, I think, proxy advisers, yes. That's a good question. Are there any other questions? We think -- okay. Okay. I'll turn to the next resolution. The next resolution concerns the reelection of Sheridan Broadbent as a Director of Spark. Sheridan also joined the Board as a Non-Executive Director in August this year. In accordance with the NZX Listing Rules, she must retire and stand for election at this meeting. The Board recommends Sheridan to you as an Independent Director of Spark and unanimously supports her reelection. I invite Sheridan to address the meeting.

Justine, thank you. [Foreign Language]. So good morning to you all. My name is Sheridan Broadbent, and I'm -- it's my great pleasure to be standing before you today in support of my election as a Director of Spark Group. Before I give a brief summary of my credentials for the role, I'd like to reinforce my commitment to robust governance, engaged oversight, strong management of risk and upside and growth in innovation mindset. A bit about me. I'm a professional Director and Board advisor based here in Auckland, New Zealand. Presently, I serve as an Independent Director on publicly listed Manawa Energy, which many of you would have formally known as Trustpower; as Chair -- independent Chair of Pipeline and Civil Group; Director of tech company, SaferMe; and Deputy Chair of the Business Leaders Health & Safety Forum. I'm a member of Global Women and proudly [Foreign Language]. I'm also a Chartered Director with the New Zealand Institute of Directors, and a graduate member of the Australian Institute of Directors. And this year, I have also been part of the government 7-member Cybersecurity Advisory Committee. My executive background here in Australia and the Pacific over the last 25 years has been in ICT and infrastructure, working in a variety of senior and executive roles for organizations such as TechFin or Ericsson, for Telecom New Zealand itself for several years, Downer Group, Genesis Energy and Counties Power, the latter of which being my most recent executive role where I was Chief Executive. Previous governance roles include my recent role as Chair of ICT and broadcast group Kordia, and Director of organizations such as Transpower and Timberlands. I have worked with, for and around Telecom New Zealand and Spark for much of my senior career in a variety of roles, such as manager of the Payphones business, leader of the division of Downer that has constructed much of Telecom and Spark's mobile network over the years, as a competitor and collaborator in my 8 years on the Board of Kordia and, of course, as a customer. It is an organization I admire and one that matters enormously to its customers, its people and to the well-being and economy of New Zealand. Given my breadth of experience across the IT and telecommunications value chain, my background in technology and my executive experience leading large organizations, I think I bring strong strategic and operational skills to the Spark boardroom with a perspective and a lived experience that augments the many talents of the existing team. I am really grateful for your support and give you my commitment alongside my fellow directors to continue to govern and guide a high-trust, high-performance organization that enables its customers, its shareholders and its people to win big in a digital world. [Foreign Language] Thank you.

Thank you very much, Sheridan. I now propose that Sheridan be elected as a Director of the company. Are there any questions concerning the motion relating to Sheridan's reelection? Thank you. And I can see we don't have any questions online or on the phone. The next resolution concerns the reelection of Warwick Bray as a Director of Spark. Warwick is retiring by rotation in accordance with the NZX Listing Rules and offers himself for reelection. The Board recommends Warwick to you as an Independent Director of Spark and unanimously supports his reelection. I now invite Warwick to address the meeting.

Thank you. Good morning. It's a great honor to serve on the Spark Board and to be put forward for reelection. I'll make some remarks now on my background and what I aim to bring to Spark. So some example experiences from my career are, during the 1990s, I was a partner in McKinsey Europe. And here, I helped mobile operators win licenses and then roll out networks. So in that role, I was involved in finance, business case, strategy, marketing, distribution and regulation. I also helped the large telecommunications companies in operational improvement. It was during that time that I developed one of my core interests and beliefs, and that is that the best way to get to a sound cost position in a telecommunications company is to offer superb customer service, meaning getting all of our processes right first time and low cycle times. During the 2000s, I was Managing Director and Head of Global Telecommunications Equity Research at JPMorgan. That was a valuable lesson in how telecommunications companies can create value for their shareholders and indeed the converse. During the last decade, I've held leadership positions at Telstra Australia, including Head of Strategy, leadership of the mobile and mass market fixed businesses and as Chief Financial Officer. My for-profit Board experience includes being a Board member of CSL, the largest mobile phone company in Hong Kong; the Chairman of the Australian Mobile Telecommunications Association; being on the GSMA Strategy Committee; and being a Board member of Foxtel, the largest pay TV provider in Australia and being Chairman of the Audit and Risk Committee there. For not for profit, I've served on the Advisory Board of the Smith Family charity and the Boards of Queens College at the University of Melbourne and the Victorian Art Center. I hold a Bachelor of Science with Honors and an MBA from the University of Melbourne. What I aim to bring and continue to bring to Spark is, firstly, my enthusiasm for continued improvement in customer service, including digitization, processes, store and call center service and business services; secondly, my background and experience in telecommunications to guide towards decisions that are in the interests of shareholders, customers, employees and New Zealand; and finally, my experience in strategy and finance, both for the main Board and my role on the Audit and Risk Committee. So I gain satisfaction from my role at Spark for a number of reasons, firstly, because Spark has a global reputation for innovation, agile and customer service; and secondly, I believe that telecommunications company like Spark has a greater good, increasing productivity and wealth for all New Zealanders and connecting families and people. Thank you.

Thank you, Warwick. I'm now going to propose that Warwick Bray be elected as a Director of the company. Are there any questions concerning the motion relating to Warwick's election? I see that I have an online question for Warwick.

This question comes from Stephen Mayne. Could Warwick please comment on his experience as a rare Australian-based Director on the Spark Board? His old employer, Telstra, suffered a huge loss of value when a labor government intervened and built a government-owned national broadband network. What are the key differences in risks in the Australian and New Zealand telco market?

Yes. Thank you. So look, I won't comment too much about the causes and effects behind that question. I think the main question was about regulation. And what I would say is that it's very important for the largest telecommunications company in any country, particularly Spark, to have a vision for telecommunications in the country and to work very closely with the governments, the civil service, in making sure that, that vision is enabled. And I truly believe that Spark has such a vision, as you've heard from Justine and Jolie, and thus appropriately work very closely with government and civil service to make that a reality.

Thank you, Warwick. Do we have any other questions concerning this resolution? Great. The next resolution concerns my reelection as a Director of Spark New Zealand. I've asked Charles Sitch, the Chairman of the Audit and Risk Committee, to chair this part of the meeting. Thank you.

Thank you, Justine. As mentioned, Justine's retiring by rotation in accordance with the New Zealand Listing Rules and offers herself for reelection. The Board recommends Justine to you as an Independent Director of Spark and unanimously supports her reelection. You have already heard from Justine as our Chair. I now propose that Justine Smyth be elected as a Director of the company. Are there any questions concerning the motion relating to Justine's reelection? Questions from the floor? Are there any questions online?

We have a question from Stephen Mayne. The Chair has been in the role for 5 years, does she believe her successor is currently on the Board? And what is the process in terms of her annual performance reform? Do we have a Deputy Chair who leads that? Are there multiple viable successors on the Board? And is Justine intending to serve a full 3-year term if reelected today?

Thank you for the question. I think there were many questions in there. So I've got to try and remember them all. Firstly, do I plan to serve out the next 3 years if I'm elected today? Yes, I do. Do I believe that we have a successor on the Board when I retire from the Board that are currently here? Yes, I do. Do I -- in terms of annual review performance, so we have -- obviously, we have a Nominations Committee and also an HR Committee. The way we actually do an annual performance review of the Board itself, so -- and the Board does that of each other, and together, we do an internal base review every 2 years, and we have an external adviser that comes in and helps us for a more fulsome review every 3 years. And we collectively discuss that feedback of each other and in our roles of each other. So that's how we do that process. There is no -- we don't have a Deputy Chair on our Board. But obviously, we do have the Chair of the [ Nominations ] Committee and the Chair of the HR Committee, which is Alison Barrass. So I hope I answered everything in that.

Okay. Are there any questions on the phone?

There are no questions on the phone at this time.

Are there any more questions concerning the motion? No? Okay. I'll hand it back to you, Justine.

Thank you, Charles. So the next resolution concerns the reelection of Jolie Hodson as a Director of Spark. Jolie is retiring by rotation in accordance with the NZX Listing Rules and offers herself for reelection. The Board recommends Jolie to you as a Non-Independent Director of Spark and unanimously supports her reelection. You've already heard from Jolie. I now propose that Jolie Hodson be elected as a Director of the company. Are there any questions concerning the motion relating to Jolie's reelection? I can see that we have a question online.

The question comes from Stephen Mayne. If Jolie was CEO of a public company, she would be exempt from the annual election cycle. What does she think about Kiwi CEOs joining the other directors in the regulation election cycle? Also, some Australian companies have voluntarily moved to annual elections of directors, matching the system in the U.K. and the U.S. Will the Chair consider introducing this model at the 2023 AGM?

Perhaps I'll take the last question, it seemed for me. The rules require us only to be reelected every 3 years. And so that is the basis we will continue on. There's no -- we're not going to change the -- what the requirements are, legal requirements are, to go up every annual meeting. That would take for a very long meeting every year. So yes, 3 is where we'll be staying on that. Jolie, do you want to answer the first question?

Yes. In relation to Spark is a publicly listed company, but from a perspective of the question being asked around how do I feel about reelection, I think executive directors should be under the same governance rules as nonexecutive, and I support the fact that we come up if periodically for reelection like others do as well.

All right. Thank you. Are there any other questions concerning that motion? Great. So can you please now submit your vote for each resolution on your electronic voting form. Or for shareholders attending in person, you have a ballot paper, which is given to you when you registered. Please select for, against or abstain. Representatives from Link Market Services will now collect your voting cards. If you require further information and guidance on the voting process, please refer to the Notice of Meeting. Please note that the company's auditors will act as scrutineers for the polls. Thank you for your participation. Voting will open -- be open until the conclusion of the meeting, and the results will be released to the NZX and ASX following the meeting. Before we take general questions from shareholders, we need a few short minutes to ensure we've captured all the questions relating to the resolution submitted by shareholders participating on the phone and online. So I'd like -- I think we're going to play a little short video for those few minutes. [Presentation]

I would now like to offer shareholders the opportunity to raise general questions.

As previously mentioned, any customer-related matters will be directed to Investor Relations team and address following the meeting. Any person in the room wishing to speak should move to the microphone nearest to them and clearly state their name. [Operator Instructions] So any questions from the floor?

Yes. And so my question is, can Spark today give a commitment to maintain landlines for those that want them? And I note that mobile networks do have a habit of going down. And just in one particular case, WhatsApp went down globally recently. So my question is about the maintenance of landlines.

So the issue is that the historic landline that was on the PSTN network, which is the copper network, there is no availability of those parts to sustain that network anymore. We can't even buy them to do so. So we are transitioning off that copper network, as we've said over the last couple of meetings, to the use of mobile technology and mobile technology over wireless and fiber connections. So is there anything you want to add to that, Jolie?

No, the only thing I would say to that in addition is that we're obviously working with customers as we make that transition to make sure things like device -- medical devices and alarms are managed as well, and we provide alternates. But mobile is the most likely alternative for that.

[ Janet Pallah ], shareholder. I live in a rural...

Sorry, just to -- thank you. There's someone turning off their phone. Thank you very much. Sorry.

[ Janet Pallah ], shareholder. I live in a rural dead zone, and I have been on copper wire ever since. I have never ever moved copper wire and I refuse move copper wire off it, simply because I cannot receive mobile reception. I also have a problem of an occasional power failure. And I live in Kumeu, all right, just outside Auckland. It's not very far away. So my question to the Board and to Spark, how long can I maintain my copper wire connection before I am forced to go to mobile and lose connectivity almost forever. Unless, of course, more cell towers are built in my area.

Thank you for your question. So on the copper network, that is being progressively removed by Chorus, who owns the copper network. At the same time, you will have seen the most recent spectrum or may have seen the most recent spectrum announcement that has come around about 3,500, which looks at how we continue to increase our mobile coverage and capacity in rural and provincial towns in mobile hotspots. So that's part of our own investment but also as a collective with the 3 mobile providers in the Crown. So we've -- through that spectrum announcement, there's $72 million more going in over the next between 2023 and '25 to increase that capacity from a mobile line perspective.

[ Carly Denkemp ], shareholder. It's been a pleasure coming to this meeting today, unlike the Sky TV one on Wednesday. I want to query your plan, which is still obviously in a state of flux about a share buyback on the market. Sky TV took 90% of my shares. They canceled them without any recompense. And now they are proposing, which means that I could never sell them and get my money back for them. Their argument is I'm still in the same position percentage-wise as I was before. But of course, the value has been destroyed in the resale of those shares. Now they want to do a 1 for 6 and return capital to Sky shareholders, which would leave me with a tiny little proportion of shares for chicken feed recompense. Now I just want to flag, in advance, please do not take that as a good trend for future share -- for returning capital to shareholders. And I just want an assurance that you won't do that because I don't even know how it was legal.

So thanks very much, Carly. I don't -- I'm not obviously going to comment on Sky's situation or their AGM. But I'm glad you're here at our AGM today. We -- so with our buyback that we've announced, so of the -- and this might go to some of the other questions on the tower transaction. So of the $911 million that we received, we are going to take $350 million of that to return to shareholders. And so we, as a Board, have to say, okay, so how -- what is the best, most effective way for all shareholders to get value for that feedback, all of us, that $350 million? And what we decided was that a share buyback was the most effective means. And it's -- and the reason being -- other forms we could have considered would have been a special dividend or maybe an increase in ordinary dividend. But we don't have sufficient imputation credits for that. So then you would have been subject to tax on that money. So what happens with the buyback in our case, and once again, I can't comment on Sky. But in our case, that buyback, we buy back the shares, we don't sell them, we buy back the shares, and the shares get canceled. So what it means is the shares you are left with are a greater proportion of the pie. So the assets of the company remain the same, but there's less shares on issue because we have bought back your shares. So you have a bigger percentage of the equity on issue. Did I explain that very well?

But will it be voluntary?

Yes, you...

Because with Sky, it is not. It's still going to take another 1 and 6, and it is not voluntary.

No, no, no. We're not doing that. So we will go -- when the time and market conditions are appropriate, we will go in the market and buy back shares of whoever wants to participate. Yes, sorry. I could have probably shortened my whole answer on that by just getting straight to the end, couldn't I? Oh, well.

Yes. [ Haley Cheng ], I'm a shareholder of Spark. And just I feel worth to let this shareholder be more happy. It's just that Sky TV, when they are nearly losing all the revenue, they raised funds at $0.12, and I supported the company. And from the shareholder meeting on Wednesday, because of your disclosure of your shares amount, how much do you pay, et cetera, then that means that you haven't supported the money when raising funds. And because when raising funds at $0.12, then you leverage your buying price. Yes. So don't worry, it will pick up, just be -- what should I say, be patient. You think that "Oh, I'm going to live long so as to see the share price going up." That's my principle.

Stop it. Stop it.

No, please be optimistic.

Thank you very much. This is not the meeting to discuss what's happening at Sky. Thank you very much.

And then another word, who will see the former CEO, Theresa, for work because from your annual report, you have the, what should I say, the job, the charity job, with Theresa as well, yes, and any job with her foundation. She has a foundation.

So are you referring to Theresa Gattung's foundation?

No. I just wish to advise her. I don't want to embarrass her here just to advise at her medical condition because there was -- I think in March 2020 when she turned around and see me in Dominion Road, I'm the only person there. I'm just after another shareholder meeting, she screamed at the top of her voice when she saw me and then she just ran away. Oh, dear. I wish to advise her health because since my grandpa, granduncle, et cetera, et cetera, 3 generations of surgeons and medical, et cetera. I want to give her some medical advice.

Oh, okay. Thank you.

Whom should I speak to?

We'll probably -- I mean, Theresa Gattung hasn't been involved with this company or a CEO for over 12 years. So perhaps you can take any queries you have with her. But this is not the meeting for that but thank you.

Yes. Thank you. I heard mention, from Carly's question, and your answer was that if you returned capital to the shareholders, you'll be buying shares.

Correct. It's a share buyback.

Is that where the money from the sale of the towers is going?

Yes. So there's 2 aspects to the proceeds. One is a $350 million return to shareholders. And for us, we've decided that's most likely to be -- or signal that's going to be in a share buyback, so that's our return to shareholders.

Right. I'd like to challenge you on that.

And the other $350 million, as I said before, to be reinvested in other growth aspects of our business in technology -- digital technologies, IoT -- growing IoT, Spark IoT and growing Health.

When you answered my question originally earlier in the meeting, you said it was being used in the more strategic places of the company, not buyback.

Yes. So that's the -- there's 2 aspects. No, no, there's 2 aspects. There's the return to the shareholders...

What it is now?

Now it's been very clear from what I said earlier in my speech.

No, it wasn't.

Wasn't it?

I still want to raise this question. You haven't convinced me one iota why you would sell the towers to an overseas organization who are going to have a stranglehold on that whether you use it or not and how you use it and/or cost of using it. So why would you want to sell the infrastructure? Vital part. It's the same as Spark controlling the underground fiber. You have to pay Spark to use it, and you want to sell that through that -- to the customer. So where is the customer servicing it?

So I think we need to just separate which of the assets we're actually selling. So from -- when we completed the strategic asset review, what we looked at and what components of the assets that we hold in the infrastructure are strategic for a delivery of our service ongoing, and which of those could we own in a joint ownership element. So when you think about the mobile tower sale, it's the piece of metal, the pole or the light pole. It's not the electronics. It's not the spectrum, it's not the radioactive, which is all of what delivers the mobile service to customers. It's the piece of metal that sits in there. So that is the part that we have sold and retain a shareholding interest in the telco company.

It's like a power company selling the dam, but not the machinery unit.

Well, I think it's about making sure that we are able to reinvest capital to the best purpose for our shareholders, and that means behind the strategic initiatives. So as Justine outlined, a component has been returned to shareholders, a component has been invested in those new strategic initiatives and a component will be used also to repay debt as well.

But that's only part of the story. The other part is that you're giving money back to the shareholders. We don't need it. We don't want it. We want it invested in the company. So that in the future, this output overseas who owns 70% of the company that you formed to own the pole, as it were, is going to clip the ticket and that's going to go offshore and it's not going to come to us.

I mean we got an incredibly strong value for those tower assets and as...

Short-term gain.

No, through long-term...

Short-term gain for long-term value.

No, it's not, it's not -- sorry, from our perspective, you're entitled to your -- but from our perspective, it's not for short-term gain. We did it for the long-term value of shareholders. And what we did with those proceeds was, one, is we see it partly to return some to shareholders now but to invest a significant portion of that -- those proceeds, into other aspects of our business, which we think actually are more productive and effective in terms of creating shareholder value. Because owning the physical pipe itself doesn't of itself create any value for us. So if we can invest that money as we intend to do wisely in growing our business in more digital technologies and all the other things we've talked about, we think there will be much more long-term value for shareholders. But you are entitled to your opinion.

You're going to have the pay for the use of that pole.

Yes, we are. And we know what we're going to have to pay because that's all part of the agreement. Yes, we do. The terms of how we sell it and what we have to pay in the future are all very clear, all very contracted. Yes.

My name is Neil Anderson. I'm a shareholder in my own right, but I'm also representing the New Zealand Shareholders' Association. During the presentations, you alluded to what was happening with retraining and training staff. And we all know that the labor market is extremely tight, and immigration is not going to resolve all of the problems of the labor market. Some of your competitors in recent annual meetings as well have asked the same sort of question of, and they're relying on immigration to deal with the shortage of technical people. And as an ex-telecom technician myself, this company was built on people who were trained and put their work into the telecom industry and not just -- there were a lot of immigrant labor as well, but not just immigrant labor. So I need to know what you are doing as a company because it wasn't really clear in the presentations about what you're doing to develop your own talent. Yes.

Yes. So very supportive of your question and the work that we are doing within our own organization is looking at mobility of our people. So we have a lot of people into our business at different levels. We're looking at how we train and reskill to make sure that we can move people into roles. Because you're right, the labor shortage is global. So there isn't any silver bullet. At different times, we may use offshore capacity, but we believe the strength of our organization is the people that are in it and, therefore, making sure that they have careers they continue to develop. But it also -- if you move people within our organization, they understand our customers well, they understand different parts of the business well and, in some ways, lift the boat altogether. So that is our focus. We're also working right back at the start, too, to look at how do we work with universities and other organizations to make sure that the pipeline is coming through, and we're clear about the types of needs that we need into the future, the types of skills and behaviors we'll look for. So it's multifaceted in terms of how we think about that.

It's not really clear from the annual report how much money you're spending on that either.

Okay. But we do invest quite an amount in leadership and development within our organization, but we can think about that for next year in terms of adding it. Thank you.

Are there any other questions from the room?

My name is [ Betha McDevitt ], shareholder and former telecom employee.

Welcome.

So I've got 4 different points. One of you already answered about I'm keen to have my dividend reinvested. Through the explanations, I understand what you're doing with the buyback. So okay, suck it up. The next one is a recommendation that you reconsider older workers in your workforce. I've been trying for a number of years to get back into telecom, and I simply can't. And I think I've got a few years to contribute. The other one is I actually living up north in an area called Taipa. And there is no coverage at all in the area of Taipa, and it's really, really difficult to work with. And the last one was about bullying. So I just wonder what you're currently doing to address bullying within the organization, particularly the use of PIPs, or performance improvement plans, as a bullying tool, that's something for you to think about.

Okay. So in terms of reconsidering old workers, definitely, a consideration for us. And perhaps after the meeting, happy to get you to meet with one of our people to get that information to talk about that. But when we talked about the earlier question around labor and skill shortage, it's clear we need to look at all forms of the workforce to make sure that we continue to have experience within our organization. And we do celebrate our people who've been with us for a long period of time. In fact, last week, we had a 40-year dinner for a number of people who've been with us that length of time, so we will pick that up. In terms of coverage, I can look into your particular situation, and I touched on before around the rural connectivity group and the work we're doing to make sure that we spread our coverage across -- both on our own networks but also the Rural Connectivity Group looks at how we share that capacity where it doesn't make necessary sense to go alone as an individual provider from a commercial...

You can go in there anytime.

Yes. So we -- yes. But Rural Connectivity Group invests, we will build a tower and all 3 providers will come on it. That's how that approach works. In terms of bullying, we take that very seriously in our organization. And so we have a number of processes around that in terms of both training with our people, understanding what is bullying and what is not and a process that we work through if anyone does have concerns that are raised in relation to that.

Okay. I don't think there's any other questions in the room. Do we have any online questions? I think we do, yes.

We have a question from [ Stephen Hart ]. Several companies in Australia have experienced hacking or cybercrime that has disclosed private customer details such as driver's license numbers and passport numbers. This information can be used for identity theft. One of the companies was a large telecommunications company. What assurance can Spark give that it is secured against such cybercrime attacks? Does Spark have links using the infrastructure of other communication companies that could expose back the weaknesses in the other companies' systems?

So I'll respond to that. So cybersecurity is obviously at the highest level of our business, our Board and RMC review that. We have over 180 cybersecurity specialists within our organization. So we secure not only our own networks but also our customers. We've made significant investment and capability, both from a threat detection and protection, and we use different platforms. We also have the work that we do periodically reviewed by external experts, both from the maturity of our cybersecurity frameworks, but also in terms of testing our systems. Where we do have any links or any data that may, in the normal course of business, be transitioned across to another provider or shared with another provider, we have all of those security measures around that to make sure that we are comfortable that the same quality and the same level of security protection that we'd have in our own organization is observed there as well.

And I think the only thing I'd add to that is, rest assured, we take the security of our network and our customer data very, very, very seriously. And it is -- takes time and consideration at the Board to make sure that we are doing absolutely everything we can to make sure that we have -- we provide that secure environment. So thank you for the question.

Is there another -- any other questions online?

We have a question from [ Ian Chung Lim ]. Spark has higher debt-to-equity levels now compared with historic levels. And with debt becoming increasingly more expensive due to interest levels going higher, are there any plans other than moving some of the capital from the sale of tower business to pay off more of this debt?

I think when you look at -- as you noted, with the transaction, there will be a component of that. So those funds go to repay debt. When we look at our actual leverage and gearing versus relative to other telcos, we are actually quite lowly geared. And we continue to monitor. We have a Standard & Poor's rating A1, which we focus on in making sure we're within our covenants. I'm not sure if Steph is in here. No.

So we have another question online.

Question comes from [ Craig Eshtren Krale ]. The dividend for shareholders has not increased in many years, yet inflation keeps marching on. This means effectively a year-on-year reduction in effective dividend. Is there any review of the dividend amount being increased planned? And if not, then why?

I'm happy to say, as I spoke to earlier in the presentation, that we are planning to lift our FY '23 dividend to $0.27. So we are increasing our dividend. Thank you. Is there any other questions online or on the phone?

We have no more questions at this time.

All right. Ladies and gentlemen, thank you all for coming today and also to those of you who have attended virtually, we value your input as shareholders. On behalf of the Board, I'd like to once again thank you for joining us today and for engaging in these important matters of business and for your support over the year. For those of you attending the meeting here at Spark City, I invite you to join us for morning tea in the function rooms at the back. The meeting will close on completion of the voting procedures. I hope you have a lovely day. [Foreign Language]