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

[Foreign Language] Good morning. It's lovely to see so many familiar faces in the room. So thank you very much for attending today. And also to those online, it is great to have you with us as well. My name is Justine Smyth, and I am Chair of Spark. It's my pleasure to welcome you here today to hear more about Spark's strategy for this FY '24 to '26 period. I'd like to acknowledge my fellow directors that are with us today. We have Gordon MacLeod, Gordon sitting here. Gordon, thank you. And David Havercroft is -- David is over here. Thank you, David. And we also have Alison Barrass, who is joining us online today. So it's great to have you with us. I think I speak on behalf of the entire Board when I say that we're really pleased with Spark's growth and performance over the last 3 years. And the competitive advantage that we have -- that has been built over this current strategy period. The Board and I have been involved in the development of the new strategy, and we believe it provides an optimal mix if you like, of both ambition and resilience with investments that will continue to grow value for shareholders. Also, we think that we will continue to deliver better experiences for our customers, which is fundamentally important. I'm going to hand over to our CEO, Jolie, is known to you all. And I really look forward to spending more time and talking with you throughout the day when we have breaks and then lunch afterwards. So have a good session. Thank you very much.

Thanks, Justine. [Foreign Language] So welcome everyone. I'm Jolie Hodson, CEO of Spark, and I'm going to share with you an overview this morning of our 3-year plan. I'm then going to hand over to my leadership team, who will also update you on different parts in a bit more detail. We'll then finish with the component in relation to the financial ambitions, which [indiscernible] will lead, and then we'll join you back up on the stage for some Q&A in the room, which Alex has already given you some insight as to how that will work. So when I look back at the last 3 years and where we were -- when we created the strategy in 2020. We hadn't heard about a lockdown at that point. The world was very different. So this period of time that we've delivered for this strategy has really been a period of time where there's been enormous change. So we had to adapt to the environment, but we've also had to continue to execute and we've done that well through that period. So with one quarter to go, we're making good progress to our FY 2020 goals. So if I think about the two core foundations, better customer experience and also growth in people engagement. We're really focused on delivering those well. We look at our ambition for brand strength. We expect to have our ambition just past the end of the FY '23 year, and we've made a really significant difference in terms of digital equity in [indiscernible]. So when we stand back at the start of this period, there are around 10,000 homes with jump in their home. At the end of this period, there are now 26,000 homes that have access to that. And so it's made a big difference to closing that gap, the digital divide there. We've achieved our EBITDA margin in every year, and we're on track to do so FY '23. Our free cash flow growth has continued, and that's helping to fund the dividend, and we've delivered total shareholder returns that are at the top of our peer group when you look internationally. So we've built competitive advantage to a real capability-focused strategy. So if I start on the left, the simple intuitive customer experiences. So we've removed 350 legacy plans over this period. We've migrated 420,000 customers to new plans. We've seen a 50% increase in our digital journeys and a 20% reduction in our core volumes, which is really important when you think about efficiency as a business. Through deep customer insights, we've -- through the personalization, using data but also the work we've done around automation within our marketing teams. We've seen a real improvement both in the conversion of the plans and offer we're putting to customers, but also on the efficiency, so 17% year-on-year reduction there. And our smart automated network, we've rolled 5G to 66 locations, 95% of our voice traffic is now off the [indiscernible]. And we've better realized the proceeds of our tower assets through, and we'll talk a little bit more about what we're going to do with that shortly. The last pillar there is around growth mindsets. And it's really about growing our employee engagement because at the end of the day, it's our people that help deliver our strategy. So that's grown to 68%. Our Board, our leadership squad and our Water leader group is now sitting at our 40-40-20 gender representation target. If we look across our whole workforce, that sits at 33%. So we've got more work to do. We're really clear around our ambition there. We've reduced our median pay gap from 28% to 22% during that time. And again, we've got further ambition at 25 for that. When you think about these capabilities, collectively, they've improved our net -- our interaction Net Promoter Score by 9 points since FY '20. So these have supported us to be a more resilient, more customer-centric business and one that uses data much better than it did before. So the capabilities have supported our marketplace success. So #1 in mobile for connections and service revenue during that time, a CAGR of around about 5.5% growth, and that's really been driven by product innovation. It's been driven by the customer demand for greater data. It's also been driven by the personalization that we've been doing and the return of roaming. So we expect that in the second half to be almost up to that 100% of pre-COVID levels. Broadband is a harder market, but multi-brands have helped us meet the different competitive matters there, and the pricing refresh helped us retain our #1 share in base. We've used wireless broadband growth to both address a different market for our customers, but also to help us manage that cost to put and making sure that there's roughly about $100 million of savings that come every year from using wireless broadband. Our cloud market is changing significantly. So we've seen more public cloud capacity coming onshore and IS price pressure as well. But at the same time, we're seeing customers move more and more applications to the cloud. So that's increasing the demand and the workloads that are possible for us. We're going to talk more. So Mark is going to touch on more around our ambitions around both cloud, but also our data center strategy as we go through the rest of the session. Spark IT growth, 250,000 customers up to 1.2 million and a revenue CAGR of around 21.5% during that time. Spark Health revenue CAGR of around 17% through that 3-year period. And we also made the decision to exit the sports streaming market, which we announced in the first half of this financial year. This ensures a head, we've got a focus on the areas that we can get the highest return and the best ambition for our business overall. So with this growth in both established and future markets, combined with the disciplined cost reduction, we are on track to meet the financial aspirations we set at the start of the strategy. We've got cumulative revenue growth of between $250 million and $290 million and cost efficiencies of between $95 million and $115 million. So when I step back and look at the last 3 years, I'm really proud of what we've achieved as a team. Our customers are getting better experiences. Our people are more engaged. We have invested in the critical infrastructure that will support [indiscernible] growth. We are a more sustainable business, and we've delivered value to our shareholders with Spark continuing to outperform most telcos globally with a TSR growth of around about 12% over the last 3 years. And that's a really strong foundation to build from, and we're well positioned to take an advantage of a number of supportive tailwinds ahead of us. We're competition fit. We've got great momentum in our largest market of mobile with ongoing rising demand for data. The technologies that we've been investing in are maturing and converging. That opens up new amortization opportunities for us. Through our portfolio management and telco transaction, we have the ability to invest for growth, and we've proven for many years that we can execute with discipline. Same time, the world around us is changing rapidly, and we have to change with it. We expect immigration to return to New Zealand, and there will be a tailwind for both mobile and broadband. Out of the longer-term frame, our country will undergo more fundamental changes over the next decade that has implications for both the customers we serve, but also the people in our organizations. So our country is going to get bigger. About 6 million people over that period. Also, it's going to get older. We're going to become increasingly a more diverse nation with strong growth in [Almaty], Pacific and Asian populations. And we'll have many people exiting or more people exiting the workforce than entering, which is quite a different dynamic for us. And as we shape this strategy, we've taken cognizant of what we're seeing in those changing demographics to think about what we need to hit. So we think there's five key trends that are shaping our operating environment to hit. The first one is that exponential growth and data continuing. So that supports our investments in both digital infrastructure, but also in our key growth markets like mobile. Technology convergence is accelerating, and that opens up new monetization opportunities as we find new ways to solve business problems. Virtualization and automation of network and infrastructure is shifting the competitive landscape. But that means network is our foundation, but the new -- but data is our new strategic moat, and that's allowing us to differentiate through customer personalization. And you're going to hear more through the session around the work that Matt and the team have been doing in this space, both in consumer but also in SME and how we're looking to move that across our enterprise. With greater political volatility and economic uncertainty, we've got largely resilient products, services, and we provide choices through our multibrands. We're also able to leverage the productivity benefits of tech. And the bar on sustainability will continually rise and so it should. So keeping improving our performance and supporting our customers to decarbonize and to become more sustainable is a really important part of the strategy ahead. So for me, that drives a focus on resilience and growth. Businesses that will be successful in the future will be the ones that can adapt to change more quickly. Adaptability is a strength that we've had and one we can leverage ahead. We're also now in a strong position to invest in future growth. So the key question is how do we invest for growth in a way that also reinforces growth in our core that allows optionality and a future of greater uncertainty. So our strategy aims to position Spark for success in multiple potential features. Without differentiation, the market will move towards connectivity as a commodity comparing on price. So we see two key avenues for investment and differentiation. The first one is around holding customer relationships through the strength of our brands and our deep customer insights. We create competitive advantage by doing that. Secondly, through network and product capabilities, and it's about being positioned as the ideal partner to a range of businesses. Our ideal position is to be the central holder of both those customer relationships and aggregator of our own products, but also those are a range of local and global providers as well. And we believe we can hold this position and our investment in both forms of differentiation will underpin this. And that then guides how we invest in differentiation over the next 3 years. By effectively managing our portfolio, we can now invest for growth. And we'll be taking $350 million of the telco proceeds to reinvest into data center portfolio expansion and in new technologies, such as 5G stand-alone and multi-access edge compute, which we'll share more on today, and Matt Sheppard and Steve will touch more too in terms of those investment plans and returns that we're expecting. We'll also be supporting investment in growing sectors like digital identity and verification through [matter]. And so clear, we'll spend some time sharing with you the work we're doing there, but also there's a demonstration after the [indiscernible] as well in terms of the work there. So this all comes together on our new plan on a page. Our purpose and values are on the left and they're our constant. They're enduring and guide the decisions we make every day as a business. Our FY '24 to '26 focus will be on empowering the people and businesses creating our TROs tomorrow. I'm now going to step through each section of the plan, so you get a bit more of a sense for that. End consumer will be doing this by bringing New Zealand the best digital-first experiences here added to their needs. So that's again the deepening of the data-driven personalization for individuals and households and leveraging our technology investments to lead mobile and to optimize in broadband. We'll lead SME by delivering scalable, standardized technology solutions that meet the needs of our customers. And in business, we will accelerate simplification and portfolio focus to deliver both growth, but efficiency as well. We'll also be enabling our own customers to become more productive and sustainable through that as well. We will accelerate our investment in the high-growth data center market. And then we'll drive growth in high-tech solutions, leveraging these new capabilities and technology convergence to create innovation solutions to help customers solve problems and really unlock value. We need to continue to invest in the enablers of our marketplace success. So next evolution technology is all around highly secure, automated and resilient network that supports. What we need to do is also about investing in digital infrastructure that help our customers to grow. We will deploy 5G stand-alone during this period to enable the opportunity for us to provide fiber-like experiences. So accelerating our competitiveness and fueling new growth areas, particularly in wireless broadband. We unite our focus on simplification and data through our simple data-driven organization enabler. Here, the focus is going to be taking what we've done in the computer advantage we've created both in consumer and SME across them to enterprise and they're more into the overall business. Our innovation culture will fuel our future growth ambitions and differentiate Spark through top decile people engagement. How we do business will remain just as important as what we do. Our commitment to sustainability, weaving Te Ao Maori perspective into the way we do business is enduring. We'll continue to pursue growth that supports our TRO New Zealand's economic transformation, protects our natural environment and helps to close the digital divide. Our Maori strategy finds a shared space between Te Ao Maori and the corporate world with a particular focus on meaningful partnerships that increased Maori participation and progression in our sector and support the revitalization of [indiscernible]. So with this focus, we will deliver sustainable growth for our shareholders. We're an enabling business, and we will grow by enabling others. So our customers, our people and our TRO. We'll deliver top line revenue growth through reinvestment in the business and the new sources of growth we will touch on through this period. This, combined with sustained cost discipline will deliver EBITDA growth. And through capital management and free cash flow growth, we'll grow dividends for our shareholders and market-leading shareholder returns. So we believe this strategy delivers the appropriate balance of resilience and an increasingly uncertain operating environment and ambition for growth in an increasingly digital future. As we've proven when we have a clear plan, we can execute against that with commitment and passion. And I'm confident we've got the team around us to do that at Spark. To support our new strategy, I've made some changes to our leadership squad to reflect the outweigh to focus on the new high-tech solutions, digital infrastructure and a focus on SME. And that's by splitting the Customer Director role into two roles and realigning the network and ops role. So I'm now going to hand over to Tessa and the team to share more detail on each component of the strategy. [Foreign Language]

Thank you, Jolie. [Foreign Language] My name is Tessa Tierney, and I'm Spark's Product Director. Today, I'm going to share with you more detail on our consumer and SME strategy, which covers the mobile and broadband markets and how we'll approach growth in the small to medium business segment. First, let's start with mobile and broadband. In consumer, over the next 3 years, our aspiration is to bring New Zealand as the best digital experiences curated to their needs. We'll do this by leveraging three competitive advantages. First, our multi-brand market approach through Spark and Skinny, which enables us to play at both the value-added and price-conscious ends of the market. Second, our unique ability to target the right product to the right person through our data and AI capability, which means we are highly efficient in acquiring new customers and reducing churn. And third, our technology investment, which enables new product innovation while meeting the ever-growing needs of customer demand for data. Looking at the mobile market first. We have really strong momentum here and are well positioned for future growth. Customer demand for data continues to increase and will grow further as 5G applications drive higher usage, for example, in areas like gaming. When we look offshore, the average data usage in New Zealand still lags international markets. So we see more room for this to grow as 5G coverage densifies. We'll also benefit from the ongoing tailwind of high-value mobile roaming revenues. We expect to be back around 100% of pre-COVID levels by FY '24. And immigration is forecast to grow by about 76,000 people over the next 3 years. And mobile, we'll grow value, focusing on three core customer benefits. Firstly, that delivering just what I need. We know there's a huge divergence in our customer base today in terms of the data customers need, the services they want and the budget they have to work with. By leveraging our multi-brands, we ensure customers can choose a plan that meets their needs regardless of their budget. We'll continue to use in-demand services like Netflix and Spotify to maintain Spark's value-added position in the market while using lowest cost operator economics to lead on value with Skinny for price-conscious customers. We'll deliver direct-to-sale technology, [indiscernible] service as they mature in the next 3 years to ensure ongoing resiliency for our customers. This will insulate Spark against recessionary impacts while maintaining our momentum in what is a highly competitive market. Secondly, we'll expand personalization from the individual to now being the household. You heard Jolie earlier say how we significantly simplified our product portfolio and matured our data capability in consumer, which is enabling us to provide individual customers with personalized offices that's boosting our conversion rates. What we can do now is take that same approach and apply it to the whole household. This will grow our share of wallet by expanding penetration in our average revenue per user, or ARPU, and targeted upsell. Thirdly, we'll seek to monetize 5G latency and capacity by bringing our customers the latest digital experiences. We will accelerate our local and global partnerships to offer rich entertainment experiences, enabling high-volume, high-speed data consistency that supports applications of the future. We will put in place annual price reviews taking into consideration inflation as well as explore experience-based consumption plans that make the most of what 5G has to offer. This will enable us to grow our 5G base and ARPU through higher data use cases. So to summarize our approach in mobile, it's about leveraging our strong brands at different ends of the market, deep data capability and emerging technology to bring our customers personalized and cutting-edge mobile experiences that maintain our leadership position. Turning now to broadband. We will see the same tailwinds from immigration as we see in mobile. This is also a highly competitive market. But in contrast to mobile, there is a limited ability to differentiate and without owner's economics, ongoing cost increases put significant pressure on our margins. Despite these challenging conditions over the last 3 years, we've stabilized our broadband base and maintained our #1 position. And while it's a challenging market, broadband does enable us to build deeper connections into the household with a greater mix of products and supports cross-sell and upsell across our product portfolio. Within this context, the role of wireless broadband remains critical to our competitiveness. With our diverse customer base, having different broadband needs, if you're a single person in a household where you most use Internet to check e-mails, you probably don't want to pay a premium for fiber. If you're a larger family that likes the game or stream, then fiber is going to be your preference. During the last 3 years, we refreshed our broadband players to provide clarity to these customers on the suitability of wireless broadband and fiber for our customers based on these usage needs. And during this time, we've grown our wireless broadband base to 29% today and are on track to hit our 30% by the end of FY '23. By offering customers more choice and avoiding fiber input costs when they're not needed, we improve our overall broadband economics and are then able to offer more value to customers and compete more effectively in the marketplace. When we look ahead, there are two key tailwinds that we see we can leverage in the market and broadband. First is our data capability. This has significantly matured over the last 3 years and enables highly targeted and efficient acquisition and retention which is a unique competitive advantage in our marketplace. Second is 5G. As 5G densifies and particularly as we roll out 5G stand-alone, the competitiveness of wireless broadband is going to increase. Early 5G stand-alone trials are delivering download speeds of up to 700 megabits a second and single-digit millisecond latency, which gives you an idea of how much more competitive wireless broadband is going to be in the future. So we'll grow our broadband value by focusing on two core customer benefits. Just like in mobile, delivering just what my household needs by leveraging our multi-brands and mature data capability. Through this capability, we can better identify households with usage that would be well served by wireless broadband and then target those households with compelling offers. That delivers customers with a more personalized and relevant product or service in a highly efficient way of either acquiring, retaining or cross-selling a customer for Spark. We anticipate wireless broadband will grow towards 35% of our base by the end of FY '26. We'll then leverage our simple product lineup and our data capabilities to achieve broadband economics that enable us to offer the best value and market, improving acquisition rates and retention. This will ensure our customers get the most value for their money across Spark and Skinny brands, while also growing revenue and returns. So to summarize our approach in broadband, the focus on getting the right product to the right customer in a highly efficient way, leveraging our brands and data capability to serve all customer segments and our investment in 5G, increasing our addressable market for wireless broadband to make us more competitive and while supporting broadband economics that provide value for our customers. Now let's shift focus to small, medium businesses. Over the next 3 years, our aspiration is to enable SMEs to grow and become more productive and sustainable through technology. We'll do this by leveraging 3 competitive advantages that we have. First is our market-leading position and local IQ brand positioning. It has a strong resonance in our target market. Secondly is our data and AI capability, which is now extending from consumer into SME and improving our sales pipeline and conversion rates. And our 24 locally owned and operated business hubs that are complemented by our national IT partner channel and global partnerships that differentiate us in the market. The SME market in New Zealand is significant. If you define small, medium enterprises as a company with under 100 employees, the 99% of businesses in Altira are small medium. As you'd expect, the #1 concern for these businesses in the current environment is rising costs, which is driving an intense focus on productivity. While that might be the case, we know that SMEs lag enterprise on digitization despite the benefits it brings in terms of efficiency and productivity. Previous research has shown, there's an $8.5 billion value to our economy from SME digitization. We've seen the government recognize this through their digital boost program. So the opportunity to continue driving growth through SME digitization is substantial. But you've got to have the right model to reach them where they are. This is how we lead the market in telco. So when we look at the market in the years to come, we see the best way to drive additional value is by expanding our leadership position into IT. As you can see from the slide, on the screen is an anticipated $90 million of increase in the addressable IT services market from '21 to '26. While we already provide a level of IT services to SMEs, there's much more we can do to scale this and deliver it more efficiently. So we'll grow last year of IT by focusing on supporting SMEs to improve revenue generation and efficiency and more clearly tailoring our service approach to different segments of the market. For our customers who have under 20 employees, our approach will be to standardize our offerings and create digital-first channels. This means our most time-poor customers can easily access our products and services when and where they need to with frictionless journeys that don't add to their already heavy administrative burden. For our customers with more than 20 employees, who are most likely to be looking at IT options, this is where we can provide that curated IT and hybrid cloud solution that are underpinned by partnerships whether that's our local IT partner network or partnerships with global providers. This curated approach provides the best service fit for our customers while improving their efficiency. We have great momentum in SME, a solid customer base and great local partners. As we navigate a recessionary environment, we want to continue playing a supportive role to our customers by helping them harness the power of technology for their business. With that, I'll hand over to Mark.

[Foreign Language] My name is Mark Beder, I'm the Chief Operating Officer for Spark. I'm soon to be the Customer Director for Enterprise and Government. So we're going to shift gears now and talk about larger business and enterprise market. And our aspiration is the same as what it is for SME and it's to help our customers grow and become productive and sustainable through technology. And we believe there are three competitive advantages to this. The first one is end-to-end capability, and that means we're a one-stop shop for everything from connectivity all the way up to complex business solutions. And we're also a trusted partner with local knowledge and local expertise. And thirdly, we've got scale so we can invest in technology. And we've also got global partnerships. Looking to the future, the B2B market remains an attractive market for us. We've got projected growth across all our segments, and that's managed data, networks, collaboration, service management, security and cloud. But the [indiscernible] are changing from a competitive perspective with the entry of hyperscalers into the New Zealand market. And as a result, we've had to move and focus our shift more from our value chain perspective and we're also rightsizing our cost base. So if you look at the four key areas of our value chain, and we'll start at the bottom first, which is connectivity. And connectivity is really about copper, wireless and fiber. And the future focus for us is really moving away from traditional connectivity into things like software-defined networks. And it's also for having a focus on ownership economics. And what we mean by ownership economics is moving into our access and aggregation networks away from others. As we move up the sector infrastructure, we've got 16 data centers nationally. We've also got 35 exchanges, and we're currently investing to expand. So what we mean by that is we've completed a mere drive upgrade and we're also focusing on Takini as well. And as we look forward, we see considerable growth in the data center market, and we'll talk more about that a little bit later on. Thirdly, products, and we do everything from managed data, collaboration, security. And when we think about security, we're really thinking about security, but also we bundle that up with network services as well. And obviously, cloud and with cloud, we focus on IAEs, which is what we call our private cloud, and we resell public cloud. And as we look forward, where we see the biggest change is probably in cloud and that's with hybrid cloud. And what we mean by hybrid cloud is it's public cloud, distinct from private cloud, and it's basically got an overlay of a service low over the top. We can bind the two together. And that gives customers the opportunity to move between the two, whether it's moving customer data from private into public or the other way around. And we see that as a big growth market for us. In services and solutions, obviously, we do service management, which is basically an outsourced IT services capability, and we do cloud and data consulting. So for us, we see sort of that continuing on with our growth market there as well. As we look forward to cost, and obviously, we're looking at rightsizing our cost base, and that's all about accelerated simplification. And when we think about accelerated simplification, we think about four key things; consolidation, and consolidation is removing back-office duplication and it's also about moving away from our legacy technology products as well. So things like copper, which will start to move away from. Secondly, standardization and standardization, again, is moving away from our bespoke products and to more standardized products. And so that gives us the opportunity to be more efficient and more stable across our base. And thirdly, we'll drive efficiency through simplifying our operating model, and it's enhancing our data insights using common tools and also automation as well to get that consistency. And fourthly and finally, we'll focus on customer interactions through digital channels, which gives us more cost effectiveness and also provides customers with an ease of doing business with us. As we talked about data center growth, we still see data center growth as a big high-growth opportunity for us. And that we see data center build capacity is expected to grow by above 40% CAGR to 2026. And this is an investment that delivers a long-term, high-margin, high-revenue business for us. And we're also a logical choice for customers because we've got a big asset base as well. And we think about our asset base. We've got 35 exchanges. We've got lots of property. And the other thing also we have is that connectivity between those exchanges in data centers, which obviously gives us the ability to put services over the top of. And finally, we also -- we've invested heavily in Takanini . So we're about -- by mid this year, we'll have completed our Takanini stage to development, and we're also going to invest in a Stage 3 development as well and also look for other opportunities from a geographical perspective for that resilience and also for capacity as well. So I now move to high-tech solutions. And what we mean by high-tech solutions is effectively the layer that sits over a connectivity and NRICT. And that's things like Internet of Things, 5G, 5G stand-alone and 5G stand-alone for us is about 5G radio with 5G stand-alone core, which means we get that latency and also that speed. And it opens up other opportunities for us. And it's the same with [indiscernible] edge compute, and that's putting compute closer to the customer and what that enables is other types of use cases that really gives us the advantage of offering the -- solving different types of problems for customers. Data and AI and digital identity, which is what Claire will talk about. And with that, we see three big key opportunities. The first one is obviously our continued focus on digitization of the health sector. Secondly, it's on the digital identity, which is MATTR, which is what Claire will talk about in a minute. And thirdly, it's about converged solutions. And as Jolie said, it's about taking a lot of those high-tech capabilities and putting them into a converged solution. So I'll start with Health. And I think we can all appreciate that the health sector is under significant strain. Health care practitioners are dealing with complex patient needs, workforce shortages in an aging population. Then from a tech perspective, there's also a huge amount of manual paper-based processes, significant amount of legacy and technical debt, and that really opens up the opportunity for us to think about how technology can play in making patient care more efficient, personalized and accessible. So Spark Health has experienced significant growth in the last 3 years, as Jolie talked about. And it's really been in the key area of core services, which is from connectivity through to ICT, cloud and transformation. And we'll see that continue to grow as we move forward into the next 3 years. From a digital health perspective, we've obviously built some platforms, and we see that growing as well. And so we're going to have a focus on expanding that out as well. And that's examples of that would be something like Kete Waiora, which links health service providers and their patients and provides the patient more control over managing their records. And thirdly, digital hospitals. We see opportunity there with things like converged solutions in the edge compute, which can bring some other types of use cases to bear as well. Some examples also from an Internet of Things perspective, we start thinking about Internet of Medical Things. And that's things like putting IoT devices into hospital beds, and that helps us with utilization also understanding where those beds are. And secondly, things like if you think about equipment like defibrillators and how we might track those in real time. So those are the sorts of opportunities we see from a health perspective. I'll now hand over to Claire, who will talk about MATTR.

The Internet has changed how we live and work. And in doing so, it's created a huge amount of economic utility. Yet it's not without its challenges. Hello. My name is Claire Barber, I'm Chief Executive of MATTR, a stand-alone Spark subsidiary business. I'd like to take a moment to introduce you to our company and share how we've grown from a team of 4 people when we had 6 people, when we started 4 years ago to become a globally recognized leader in digital trust. At MATTR, we specialize in solving the historically difficult challenges of digital security, privacy and data verification. Today, we are well positioned to help our customers address the very real-world human impacting problems that they face. So what does that mean? Well, imagine a world where you could simply and confidently share information about yourself to prove entitlements and live your daily life. Imagine if you could do that without over sharing and leaving yourself vulnerable to honeypot attacks and identity theft. If you could hold your own digital credentials in the same way as you can hold your physical credentials today and carry them around and use them cross contextually with choice and control over who you share them with and what you share. Our identity attributes are critical to helping organizations to understand who is on the other end of the device. Imagine if we too could have the same high level of confidence that we were dealing with real organizations. If we could know the sender in the same way as organizations get to know the customer. If we could be confident we were dealing with the organizations that we trust and not phishers and scammers taking their place. When you think about the data breaches and cyber security incidents that we've seen in the last year alone, it's not hard to imagine the significant value in creating privacy respecting ways of working. This is the future that we are contributing to right now. So how do we do this? Our approach starts with the major global standards forums. If you want to change how the Internet works, you need to participate in the major forums where these conversations take place. At MATTR, we are a standards first company. By working at a deep tech level contributing to the design of protocols and standards, we help to inform the next generation of the Internet. With this deep tech understanding, we do two things. We work in the field with customers through MATTR labs, gaining insights from real-world implementations. And then we use these insights to do two things: firstly, to feed back into our work in the standards community to ensure that we have robust and solid standards; and secondly, to inform our product development. This has helped us to develop world-leading flexible infrastructure for verifiable data and digital trust. Our MATTR 7 API platform and our MATTR pie platform toolkits are built for enterprises, governments, OEMs and developers. Our products are informed by our early work with customers, including the U.S. Department of Homeland Security's Silicon Valley innovation program. At a very high level, our products allow individuals and organizations to do three things. Firstly, to break down data silos and share data in a way that allows assurance and integrity and authenticity of the information to be carried with it. Secondly, to build bridges between the physical and the digital worlds, ensuring that we can have paper-based digitally verified credentials and digital credentials for in-person and over the Internet exchange. And thirdly, we provide simple and convenient ways for people to hold their own data, manage consent and selective disclosure. So in short, MATTR has been busy helping to create a new market category. We've done this by helping potential clients identify and connect with the gravity of the digital trust problem and by working together on how to solve it. While the market is still evolving, global research shows its potential size. The decentralized identity industry is set to grow to a USD 28 billion market by 2031. This will show up in different ways as categories of customers innovating with this technology. We will see public and private sector verifiable credential ecosystems emerge with trusted organizations playing a role as ecosystem operator and onboarding different issuers and verifiers. We'll see value exchange networks where issuers monetize assurance as a service. We'll see verifiable supply chain solutions, including the use of verifiable data to do things like track carbon and digitize cross-border trade. And we'll see a range of other use cases such as next-generation notarization solutions, for example. By concentrating on providing world-class tools in a flexible architecture with security and compliance wraps, MATTR is well positioned to capture share in this emerging market. Given the decentralized nature of the technology architecture, we've put a huge amount of thought into developing tools that support full credential life cycle management across all role holders. This means that we have products to support issuers of credentials, digital wallets and toolkits for our customers to build their own applications that, in turn, will allow their customers to hold their credentials and verification infrastructure and toolkits for relying parties. All of our products are built standards first to support interoperability. And we're well positioned to meet the market as governments around the world start to show strong interest in setting reference frameworks for the profiles of standards that they will support and recognize. From the start at MATTR, we've designed with people in mind, having strong focus on usage journeys to ensure that credentials can be used in the places and spaces where they matter most. All of this is underpinned by the MATTR security framework, which provides an overarching security and compliance approach to meet the needs of governments and large enterprise buyers and is backed by independent audits. MATTR has secured several global clients across the public and private sectors in multiple territories, including the United States, Canada, Europe, Australia and here in New Zealand. In addition to our work in the United States, we're working in Canada with the association of the registrars of the universities and colleges of Canada on a pilot of digital, micro tech -- credentials for Canadian learners. This allows students to hold and share their verifiable credentials when seeking employment or signing up for new learning journeys. In Europe, we're working with a private sector company, who's building their own verifiable credential ecosystem in a service provider model and onboarding issuers and verifiers. And here in New Zealand, we have a contract with [ Tefatu Aura ] in the health sector. I'm also really pleased today to be able to share that we've recently secured another significant contract, this time in Australia with the New South Wales government, where MATTR is the technology partner on the digital identity and verifiable credentials program. In this project, we'll be providing products that enable digital credentials to be issued, made available by New South Wales government apps and independently verified by third parties. Over the next 3 years, MATTR will scale further as the market forms. To support our growth, we're committed to ongoing investment in our long-term product road map, which is prioritized by market maturity and product vision. Thank you for your time this morning. At the end of today's briefing, we'll be providing the opportunity for you to see a demo of MATTR's capabilities to bring our products to life and to help promote understanding of the market that we're operating in. So please come along, and we'd be really happy to answer your questions then.

Thanks, Claire. So now we're going to turn our focus to converge technologies. And we'll start by just recapping what we talk about -- when we talk about high-tech capabilities. And it's really about, again, putting that -- lay all those products and features over the top of things like ICT and connectivity. And as you can see, we've sort of started to rapidly mature some of these areas. So from a data and analytics perspective, we've got curious, which obviously is a company that's been growing significantly in the last few years. We've got -- in the 5G space, we've nationally rolled out 5G. We've got about over 60 locations now. We're starting to try things like 5G stand-alone mobile access edge compute. And we're going to start talking about that, and I'll show a video next. And thirdly, Internet of Things, and as Jolie said, we've grown from 200,000 connections sort of pre-COVID to over 1.2 million connections now. So that's quite significant growth in the last few years. And fourth as Claire talked about digital identity. And if you think about those 4 things separately, they're very independent of each other. And each of those different markets is rapidly growing as well. So when we think about converged solutions, we're starting to bring a lot of these capabilities together. So the video I'm about to show you now talks about bringing together curious multi-access edge compute and 5G each. You can sort of see how we can converge these solutions together to solve different types of problems for different types of businesses. So I'll get the video to play. [Presentation]

As you can sort of see, we've taken those different capabilities and converge them together for a health and safety example. But if you think about different businesses, it could be a port, could be a logistics or transport station, it could be manufacturing, it could really be anything. So you take a use case like that, and you could apply it across different sectors and industries. So as we start looking at these sorts of things, these are the sorts of different types of use cases that we're starting to think about and look at. And obviously, with those new sort of technology capabilities as well. So if you took an example like a port, we might have a network slice IoT, private network and you might have video analytics and you bring all that together into a converged solution. And that's really the benefits and things that we look at in terms of use cases and focus areas for us. And it starts to solve business problems like cost control, more efficiency, more automation and new ways to adapt to a low-carbon world as well. So we started to bring all these capabilities together to look for opportunities that may be there as well. So we're not starting from scratch. We've obviously done a lot with IoT. So again, we're over 1.2 million connections now. And what that really looks at is it gives us the opportunity to start thinking about different types of use cases across different types of sectors. And today, we're in agriculture, commercial construction health, public sector and transport logistics with IoT. So if you start thinking from a value perspective, about putting a board higher-value solutions over the top of things like IoT. And that's where we see the real opportunities in terms of things like the converged technology. So as we look ahead in terms of the enablers and we'll start with the next evolution of technology. And if we think about the next evolution of technology, as Jolie said, if you stand back from the last 3 years, we've really focused on the resilience, the automation, building out new technologies. And those are things like optical transport network, which gave us a lot more resilience up and down the country; access and aggregation, which obviously gave us those ownership-like economics; and automation, where we start to automate a lot of our network that we've got out there at the moment. So it helps us with provisioning times and also resilience. And as we look ahead, we're looking at resilience, adaptive and automated. And again, that's really about the resilience piece of about bringing in localizing issues when they happen and fixing them faster. And that gives us the opportunity to be a lot more resilient across the country. And the automation piece is very much about how do we automate things faster to improve speed to market and also get that scale and get to an unconstrained capability -- unconstrained capacity and capability as well, which we can spin up instances and capacity incredibly quickly across the country. Secondly, simplified and sustainable. And as we talked about, we're focused on coming out of PSTN and exiting 3G as well. And those obviously provide us with big opportunities to move customers or future-proof customers and move them to new services and products. And at the same time, also from a sustainability perspective to get out of some of the big energy consuming products as well that we've got. And thirdly, new technology and development. And again, that's focused on 5G stand-alone, edge compute and also looking at how we bring a lot of those sort of use cases together to help us with our customers in terms of the business challenges that might be out there as well. So if you play that out, we're looking at 3 key things. Obviously, more capacity across our network, which is obviously getting to the unconstrained capacity stage. And that's really about making sure our customers have got what they need and when they need it. Secondly, we're looking at making sure that we've got that automation right, so that we can roll out things faster, we can fix things quicker, and we've got that capability across the country. The second thing also is that we're obviously looking at satellite, and we've got some trials on enterprise satellite coming up in the next few months. Secondly, exiting PSTN and 3G. And as Jolie said, we've got 95% of our voice traffic off the PSTN in now. So we've only got that 5% to go, and we've commissioned over 50% of our actual PSTN switches as well. And from a 3G perspective, we've obviously made the announcement there. We're looking to be out by the end of 2025. And from a new technology development perspective, it's really about getting that 5G diversification done -- densification done. And also from a 5G edge or 5G stand-alone and edge perspective, really about getting to production I state with that as well over the course of the next couple of years. And obviously, preparing for things like 6G in the next few years. But we don't see 6G really happening until late 2028, 2030. Security. So from a security perspective, threats are always evolving, and they're always going to be out there. Spark, we believe we're well positioned to handle any security threats, and we break it into 3. So firstly, from a capability perspective. We've got over 180 subject matter experts in security today. So we're well positioned about make sure that we can handle security threats with the people that we've got. We train our people as well in terms of making sure that we can identify new threats as well. Operationally, we've got an incident response team that was focused on very much any incidents that do -- will potentially do come up. We obviously put security into all our design, build and operate processes. And the other thing also we look at for is global threats. So we're constantly looking at the market for global threats and how we can mitigate those. And it's obviously constantly evolving all the time. So we're very, very focused on making sure that we get that right. And from a governance perspective, we've got strong governance frameworks in place to ensure that we've got that oversight even at the highest level. So we're pretty much covered from the governance perspective, we've got an [indiscernible], which is very much about how we govern from an executive perspective. And then we've obviously got the RMC that governs at the Board level. So I'm now going to hand over to Matt.

[Foreign Language] I'm Matt Vance, Spark's Marketing Director. And Jason and I will take you through our next enabler: Simple, data-driven organization. So the first part of this is focused on our consumer business. We've already made a lot of progress in this area, particularly around using AI as Jolie has been spoken about before to target customers given better experiences. They've been largely focused around customers, individual customers. As we move forward, household will take a bigger role. So how do we identify and anticipate in these households and serve them with personalized experiences to drive cross-selling and upsell as mentioned before? Secondly, non-Spark customer, so we've again focused largely on our own base and insights around that as we move forward. look at applying the same sort of insights to our acquisition activity. So when we advertise to people how can we anticipate their needs better and drop them into personalized experiences rather than a generic acquisition journey. We'll be looking to also move from focus within channels to integrating across channels more. So customers don't start and finish and experience in a channel necessarily. A lot of the time, they'll start in digital move into a store. So the omnichannel recognition of a customer and channel, understanding the context is going to be important to start to move the dial on that. And then finally, moving from sales and marketing into service. So how do you provide them personalized context via service solutions and even predictive service capabilities, so that we identify potential issue before it occurs. The second area here is B2B. As referenced, we've made a lot of progress in the SME market with this capability. There's a lot of overlap between large SME and small enterprises. We're starting to move that capability up into the enterprise space to start to generate the same sort of outcomes in decisioning in enterprise that we've achieved in the SME and consumer space that will be supported by simplification of product portfolios and digital first, right? Our customers love digital channels, that involves them quickly. So what you see is this are coming together of 2 previous capabilities that we had, simple intuitive customer experiences and deep customer insights. The simple intuitive customer experience, but there's a modular product set, so you can mix the [indiscernible] products and services. And the deep customer insights tells you how you mix and match those products and services, a specific customer or business. And then the final piece is, this is great. It's working really well in marketing, but we've got bigger ambitions on that for this platform. It's been built to scale beyond that. So how do we start to identify other parts of the organization where we can take this large data decisioning capability to make decisions more quickly and more accurately? Now this capability, we call [ BRAIN ] internally. BRAIN was the name of the squad that initially built this. It stands for Build Robust AI for the next best action. So we didn't name it as a squad, but it stuck. And [ BRAIN ] a large at scale decisioning engine that self-learns. So here's a short video just to describe it to you and we'll pick it up after. [Presentation]

So this capability creates a rails for us to extend beyond the areas we're currently operating. This is how we're thinking about this. I think I'll start with the data governance piece. It's a big topic. We've built [ AIFX ] in from day 1 to 3 years ago, with privacy in mind. We had the way we would govern AI models, understanding of transparency and how we manage bias in these models. And we've built that in from the start, and we'll continue to scale there. So this block represents the fact that there's continued investment as we scale across the business into the infrastructure and capability. Flipping to the other side of that personalized marketing, I think we've spoken about that. We are, that's consumer in SME area. We're moving down into B2B. We have our first use cases in B2B now. We'll continue to scale those out coming years. Smart networking technology. Again, we have our first use cases in the market connected to the supply side, the network, wireless broadband, for example, with demand side. What's the real-time demand for wireless broadband at a local level right now and the ability to start to match in real time, that demand creates significant improvements and outcomes. When we think about retail, we spoke about that. This capability can drive next best action across all of our channels in real time. Again, we've got our first use cases already in market; in our call centers and our stores. Next best action recommendations is applied by [ BRAIN ] where a customer comes in store case or calls in. And then finally, operations across the enterprise, can be made more efficient through this capability and our workforce management can be more efficient as well. So that's BRAIN. We are doing a demo with Claire. We've got a BRAIN session after this. So if you want to see a demand BRAIN here a bit more. Please come to that. But I'll now hand over to [indiscernible].

Thank you, Matt. So as Matt said, enabling capabilities like BRAIN, we're going to need to invest in future business systems. Seven years ago, Spark completed a significant IT project to reengineer IT systems, and that has served us incredibly well. However, a lot has changed in our business in IT landscape in 7 years. In the last 3 years, as you know, the world faced an unprecedented pandemic, which drastically accelerated digital transformation across nearly all industries. McKinsey Research found that in Asia Pacific, the crisis accelerated the digitization of customer directions by 4 years. Alongside this, the average share of products and services that are partially or fully digitized in our region has accelerated by 10 years. Therefore, over the next 4 years, we want to invest in our future business systems that modernize our customer management capabilities and build a modern open ecosystem architecture that will surpass our customer expectations of seamless experiences and support our future growth aspirations, particularly as an aggregator in the market. And keeping with our approach to capability delivery and the FY '23 strategic plan, progress towards this goal will be delivered within the capital plan and tracked annually to ensure we release benefits for our people and our customers throughout the next 3 years. So what does that mean Spark's going to look like in the future? Well, as someone working in one of our stores, our hubs or call centers, it means they use the same digital journeys that our customers do. This allows me to act on customer insights in real time, ensuring I'm better able to anticipate and serve the needs of our customers as BRAIN services up in front of me. And as a customer walking into our store or logging into our app, my experience will be personalized. I'll be able to start and finish that journey or task anywhere, any time, any place. As a B2B customer, as you've seen our business customers are incredibly important to us going forward, our Spark Systems will integrate easily into my own IT systems, automating telco and IT fulfillment processes and creating efficiency in my own operational teams. As a partner of Spark, Spark will be my obvious choice in the market because they can seamlessly integrate with our systems, bundle product inventories together and scale offerings -- scale the partner offerings to our customers at pace, making it much easier to sell through Spark than to go direct. And as an employee, you can innovate prototype and scale new ideas rapidly with confidence through automated development and security control processes. This is the Spark of the future we can't wait to create. We're now going to take a 10-minute break. After the break, Heather Polglase, our People and Culture Director, will talk to us about our innovation culture going forward.

[Foreign Language] and I'm the People and Culture Director here at Spark. I'm excited today to be talking to you about our innovation culture of pillar, the third of our 3 enabler pillars. The excitement around the vision for the future is predicated on the back that as you'll see through the course of this morning and through what I'm about to share with you, it revolves on some very strong people and culture foundations that we've been building over the last few years. And also because when we look ahead, we believe that this strategy and our innovation culture will not only serve our own business needs, but equally serve the needs of our people into the future and our [indiscernible] more broadly. As Jolie shared earlier, our [indiscernible] is changing. And as someone who spent their life thinking about people, and how to put the best into them to get the best out of them. I'm very aware that this means we need to think differently and continuously evolve and adapt how we best equip our people and our future talent to achieve into the future. We've taken what we've learned over the last 3 years and considered what our future is going to look like and require of us. And we've honed in on 4 key focus areas that you can see on the slide here. We believe that these 4 key areas of focus will build our enabling innovation culture and drive us to our top decile engagement ambition. And that, in turn, fuels our strategy and our growth ambitions more broadly that we're sharing today. The 4 key focus areas are: advanced talent, skill development and inclusive progression; future ways of working and insight-led people experiences; healthy lives and safe environments; and obviously diverse and inclusive culture. So let's explore what these look like in a more practical way. I'm now going to take you through the 4 streams in a little more detail, color and context as to how they're going to fuel this top decile engagement, innovation culture, that's a mouthful, and our strategic ambitions. Starting with advanced talent, skill development, and inclusive progression. This is all about our very purposeful responses to the inherent challenges of the labor market that we're all well versed on and also about taking matters more into our own hands for future scaling. There are 2 key compartments to this pillar of focus. The first is focused learning and development investment to really build those growth creation skills and mindsets that unlock innovation. [indiscernible] test and learn capacity, prototyping, experimentation, customer experience and design thinking skills. Alongside these and complementary to are the other focus areas of building skill for performance muscle and adaptability. As Jolie shared earlier, these have been critical to our success in an either changing operating environment, and will continue to be highly relevant in a culture that's focusing on both, growth and resilience. The second part in this first stream is about committed new action for greater ownership by us of reskilling, progression and talent pipeline development. We will be doing this through building our very own internal skill development incubator. Think of this as Spark's mini university within Spark. We will feed our own and external talent of the future into the system of learning and development and intentionally develop and build out the hard-to-access skills that we need to increasingly focus on, and at the same time, concurrently building a greater diverse talent pool for our future. The secondary area, future ways of working and insight-led people experiences. This is about supporting our own people with both, flexibility but also importantly, as Matt talked about, using data-insight capabilities to really deeply understand and then curate leading people experiences the future. Think of this as building people experiences with the same rigor that we build our customer experiences today. We've already done some great work here, experimenting with our own people to see how building diverse teams, a bottom-up approach and taking a CX design approach can actually create some differentiated experiences. Two examples of these are Aotearoa tomorrow culture and engagement program, which was built by our people, for our people, and Whakapuawai, our reinvigorated parental leave policy and guidelines. Healthy lives and safe environments. This is critical in order to support our people ahead through both continued physical health and safety excellence, but to go beyond this with environments and ways of working that really include well-being for that sustained performance muscle and growth that people need individually, as teams and as a whole business. Mahi Tahi, our well-being strategy that Jolie had on the slide earlier, has already seen us come a very long way in terms of looking after people in a more holistic way. However, we need to continue to uplift and integrate both physical and psychological wellness into our environments through the ways that we work with specialist support services and most importantly, through skilling our leaders continuously to ensure we send each of our team members home every day, the healthiest and highest performance version of themselves. And lastly, diverse and inclusive culture. As many of you will be aware, this has been a focus of ours for several years, and it requires ongoing continuous focus and broader ambition. Our success so far has been evident through the ability of us to set clear goals, standards, integrate them deeply into our business and continuously track our performance against those. We remain committed in this way to our 40:40:20 gender representation, as Jolie talked about, and also to reducing our median pay gap by 10 percentage points by 2025. Alongside this, we are developing Maori and Pasifika participation and progression goals. And we're establishing an ambition here to increase that participation by 5 percentage points by the end of the strategy period. The focus ahead is also about ensuring that diversity, equity and inclusion is more than just a vertical pillar. It needs to be a horizontal enabler in our business. That means it's woven into how we attract, build experiences, develop and retain our talent into the future. This element of focus is also clearly integrated with our Maori strategy Te Korowai Tupu. This means that we will continue as we have started to meaningfully weave our values and the principles of Te Tiriti and two, how we show up every day and how we achieve and partner through Spark. Leela is going to share more with you about Te Korowai Tupu, in the next session. So you'll be able to see not only how our ambitions here are integrated through innovation and culture pillar but also how our plans inside this pillar are such a pivotal feature of Toitu Sustainability at Spark. [indiscernible], and I'll hand you to Leela.

[Foreign Language] Hello, everybody. My name is Leela Gantman, and I'm Spark's Corporate Relations and Sustainability Director. And I'm here to share with you what our commitments are as part of this 3-year strategy. Our commitment to sustainability and to our Maori strategy, Te Korowai Tupu., and that is where I'll start today. [Foreign Language] What that means is that we want our culture here at Spark to both reflect and uplift the unique cultural heritage that we have here in [ Aotearoa ] New Zealand. And that is what Te Korowai Tupu is designed to achieve. So what this strategy does is take a tangata whenua or indigenous world view and weave that through our business because we think that's how we can deliver this kind of long-term change. By integrating te ao Maori perspectives into the way we do business, our strategies, our values, one day, it will just become how we do things around here and part of our DNA. Te Korowai Tupu. is kaupapa Maori, so I want to recognize the people who lead it in our business. Riki Hollings, our Maori strategy lead; Rhonda Koroheke, who leads diversity and inclusion, and we have a group of very talented Maori leaders, our [indiscernible], who guide and support this Mahi day to day. There's 4 key focus areas that we have for the 3 years ahead, continuing to build meaningful partnerships that deliver great outcomes for Maori, increasing representation in our sector and our business, as Heather just spoke to, focusing on how we continue to uphold and reflect the principles of Te Tiriti o Waitangi in the work that we do, being partnership participation and protection and continuing the work we've done at Spark for many years now to normalize the use of te reo and also tikanga Maori. That is obviously a very high-level view of what is a much more detailed plan, but hopefully, it gives you an idea about our ambitions in this space. So Te Korowai Tupu sits alongside Toitu Sustainability at Spark. And here, we have 3 key focus areas: supporting Aotearoa's economic transformation, championing digital equity and also ensuring that we have a sustainable business as well. We chose those 3 focus areas because they have the highest materiality to Spark and to our stakeholders. And we've made significant progress since we started out in FY '21. In economic transformation, we have invested in the technologies and the infrastructure that our country and the businesses within it need to grow and become more productive and sustainable, including 5G and also the rural connectivity that we've invested in through the Rural Connectivity group. They recently reached 416 cell sites in rural areas. And at the end of last year, we launched new research into the role that technology can play specifically in New Zealand, sector by sector to help us mitigate and adapt to climate change. In digital equity, we continue to work at the [indiscernible] through Spark Foundation. They have a number of long-term community partnerships, people driving real change in our communities. As Jolie mentioned, we scaled Skinny Jump, 150%. And when we look at all the things we do in this space beyond those 2 I've mentioned, it puts us in the top quartile of the Worldwide Benchmarking Alliance's digital inclusion benchmark. And within our own business, we've done quite a bit of work to set our science-based emissions reduction target, which is now in place and approved. And we have a reduction and efficiency plan that sits alongside that. We've now integrated that into our financing funding. We've enhanced our ethical supply chain processes, including joining the Joint Audit Corporation, which allows us to more effectively audit our big global suppliers annually. And we have a new human rights policy, which is now being integrated into the business. So when you look at all of that progress, we measure ourselves using the Corporate Sustainability Assessment, which feeds the Dow Jones Sustainability Index. And when we started, we're in the 13th percentile we're now in the 78th. So we're happy with the progress we're making, but there's always so much more to do. And over the next 3 years, what we've tried to do is mature our approach so that there's more transparency and accountability to you, our investors and also our stakeholders more broadly. So let me talk you through that quickly now. The 3 focus areas are enduring. In economic transformation, we continue to see the biggest impact we can make is investing in those technologies and infrastructure that supports others to grow. We're going to measure ourselves by delivering 5G stand-alone nationwide by the end of our strategy period. You heard Mark talk about converged technologies and the opportunities that, that opens up to solve business problems. Well, a lot of those business problems are connected to sustainability. Even looking at IoT alone in FY '22, over half our revenues were connected to sustainability solutions. We know we need to continue investing to ensure that our connectivity is in more of the places that New Zealanders live and work, and we'll measure ourselves by having 5G rolled out to all towns with a population over 1,500 in the same time period. And that research that I mentioned, we see it as our role to ensure that, that is integrated into the country's climate change plans ahead. If you think of how the economy is going to transform to become more high tech and more high productive, we need to ensure that transition is a just one, and that's where digital equity comes in. We've done a lot of work on access in the past 3 years, ensuring people can access the Internet. We want to upweight our focus on skills and pathways, which is another big barrier to digital equity. And that's where we're going to focus Spark and Spark Foundation investment behind increasing Maori and Pasifika participation in our sector because we believe if participation in our sector was equitable, that would be the ultimate expression of digital equity. And as Heather mentioned just now, we're going to measure that with an ambition to increase representation of Maori and Pasifika in our own business by 5 percentage points by the end of the strategy period. We'll continue to support low-income households to access the digital world by continuing to scale Skinny Jump with year-on-year growth and continue to make our own products and services more accessible as well and measuring ourselves with maintaining that top quartile benchmarking position. In our own business, as you would have just heard from Heather, we have a significant work program to continue investing in our people, in their capabilities, diversity and well-being. We have a 40:40:20 target, which we're committed to meeting and we're going to measure ourselves as well by having a top decile innovation culture by FY '26. In the environmental space, our big focus is our science-based target. That's a 56% reduction in Scope 1 and 2 by 2030. And having 70% of our suppliers by spend with a science aligned target by 2026. There's more work we can do in our business to drive more efficiency and reductions. But ultimately, when 80% of your emissions come from electricity, the key path to achieving this target is to decouple our growth from emissions growth. So what we're looking at with our energy provider is how can we use our procurement of electricity to support and incentivize the creation of new renewable energy capacity in our Toitu. And then from a governance perspective, we continue to focus on improving and enhancing our ethical supply chain practices and conducting 5 local and global supplier audits every year. So when we look at that as a whole, we believe it's an ambitious work plan, but it targets our focus and our investment in the areas where we can make the biggest difference. But as always, we invite you not only to judge us on our aspirations, but on what we actually deliver. And we look forward to sharing that progress with you in the years ahead. I'll now hand you over to Stef, who's going to talk through our financial aspirations.

Good morning, everyone. My name is Stefan Knight, I'm Spark's CFO. I'm going to talk to you today about how the strategy the team has outlined and will deliver long-term value and grow shareholder returns. So there's 5 key pillars to our approach to value creation. First of all, revenue growth, an absolutely critical part of what we need to do. It tells us that the products and services we offer are really resonating with our customers and that we're remaining relevant. Operating efficiency once again, it's really critical for a business like ours, which has parts of the portfolio that are in -- that are maturing, but also parts of the portfolio that are in growth. We always need to be driving efficiency so that we can take the cost out of those areas that are maturing and reinvest it back into growth, but also return some of that to the bottom line. We'll be investing for long-term growth, and I'll talk more about that shortly. The combination of revenue growth with the operating efficiency, the investments we make will drive free cash flow. And when you combine that with disciplined capital management, that creates the opportunity for long-term dividend growth. And so what I'll do now is I'm going to step through each of those pillars and elaborate on a little bit more so that you can understand exactly where those opportunities might lie. So let's start with revenues. We're targeting revenue growth of 2% to 4% over the period through to FY '26. Looking first at wireless. As Tessa talked about earlier, our data usage for New Zealand customers is actually relatively low compared to international peers. We've seen growth of around 30% over the last few years. We expect that to continue, and that provides a really strong tailwind for this part of our business. When you then overlay the fact that we're going to be deploying 5G, faster speeds, more data usage, that creates the opportunity for ongoing upsell. And as Mark talked about, there's a whole lot of new use cases that come out of 5G, things like that network slicing, private networks, and that creates a whole new revenue stream for us. So there's some really exciting opportunities we see playing out in the wireless market. In SME and in business, as Tessa talked to, that opportunity to grow our share of the wallet by moving more into that IT services space. We have a really strong foundation there. That hub model gives us a really great start in place and something in which we can build on. And then in the Business space, data centers is a new and emerging area. We've made some good progress, but we've got -- we see a lot more opportunity and I'll talk to that shortly. The next 3 areas or what we're calling high tech, and Max talked to those. But we see really strong opportunities for new revenue streams in this space. Converged technologies are a great example. So this is really where we're bringing together 5G, data, AI to create those solutions for our customers that solve their real-world problems and in turn there opens up new revenue streams. In digital health, this is already a big business for us, but we see lots of ongoing opportunity here. The New Zealand health care sector is one of the least digitized and is going through significant reform. As a key partner to the sector, we see a lot of opportunity to continue to grow in this space. We then have platforms we've been investing in, that provide both integration services, but also electronic patient records. And as those grow further, that will create new revenue streams. And then when combined with Internet of Medical Things, as Mark talked to, things like the monitoring of patient beds or defibrillators, once again, new revenue streams in that space. And then Claire talked to digital identity, which is a new and quite an exciting place for us to be operating. So collectively, these 5 areas, we believe, will drive growth in our revenues that will more than offset the declines in the other parts of the business. And that will support that 2% to 4% per annum revenue growth target. If we now look at our operating efficiency, we're targeting gross cost reductions of $125 million to $175 million by FY '26. And it comes from 4 main areas. So firstly, around simplifying what we do. As I said, some of our products mature. Things like the PSTN, we've announced we're exiting some of our legacy managed data products, 3G. The exit of those products means we can reduce our support and our maintenance costs and redeploy those funds. We're also looking to standardize and simplify the number of products we offer so that we have all parts of the business using the same products and the same platforms, once again, reducing the cost to support them. There's opportunities to automate our core services, things like virtual telco cloud, but also our network deployment. And a good example here is as we deploy network, we require less truck rolls because more configuration can be done from central locations. It's both a good thing for our cost base but also for our people because our people actually get to do higher value activity and spend less time on the lower-value manual type work. Digitizing our customer experiences. So we know that our customers have seen -- we're seeing strong growth in the interactions through digital channels. And we think there's more we can do here. Really developing both the app, the website and making those journeys best-in-class will help drive more interactions into cheaper and more efficient digital channels. And lastly, the creation of owner's economics, and this is very closely linked to our capital investment profile. So the investment we've been making in 5G that will ultimately lower our cost per gigabyte. Now if you think about a world where customers are using more data, driving down the cost per gig is really a central part of what we do. We've been investing in our networks. So access and aggregation, as Mark talked to, but what ultimately that is about is deploying more fiber, which enables us to use more of our own network and lower input costs. And then obviously, with the rollout of 5G, that creates the opportunity for us to grow our wireless broadband base, currently 29%, getting close to that 30% mark, up towards 35%. And once again, that will lower our input costs, which is a significant driver of value for us. And so as I said at the start, collectively, those activities, we see that will drive $125 million to $175 million of gross cost reduction by FY '26. The third pillar of value creation is investing for growth. So as you know, we've set aside $350 million to generate incremental growth opportunities. And so what we've done here is laid out, where we expect to spend those proceeds with those funds. $250 million to $300 million of that, we're going to invest into data centers. Now we see the data center play has been quite different to cloud. It's much more about long-term customer relationships with long-term secure returns. We expect to deliver an incremental 13 megawatts to 17 megawatts of additional capacity out of that funding, and about 20% of that will also be used to buy additional land to give us greater choice about where those sites can be. We're targeting a return of investment on that of around that 9% to 10% mark. And we expect the revenues to come online, obviously, as the sites complete. So a good example is Takanini. We've got 11 megawatts that comes online in June of this year. We see a small amount of revenue at the end of FY '23, but that will really start to build into FY '24. If you then look at the additional 13 megawatts to 17 megawatts that we've announced here, well that actually still requires some time. We've got to go out and we've got to build those sites. And so we're not expecting that to come online really until FY '26. We've also allocated $40 million to $60 million for investment in mobile and edge technologies. We're targeting 9% to 10% returns in this space. And we see revenues coming on from late FY '25, but building into FY '26. So that's the capital that we've allocated from the TowerCo proceeds. In our underlying CapEx, we expect to remain in a fairly consistent position where we've been operating previously, which is in that 10% to 11% CapEx to sales ratio. So that 10% to 11% will cover both our maintenance CapEx and our growth CapEx. And once the TowerCo proceeds have been invested, we would expect our long run CapEx to return back and set a net envelope. But obviously, we'll sit higher while we invest the TowerCo proceeds. So looking at the fourth pillar of our value creation is our capital management framework. We laid this out at our full year results. It hasn't changed since that point in time, and it still focuses on maximizing shareholder value by growing dividends over time by investing for growth and maintaining financial strength and flexibility. So I'll just step through each of those areas just to elaborate a bit more. The investments we make will obviously be aligned to this framework. So our strategy maximizes shareholder value by growing revenue, driving operating efficiency, growing EBITDA and that, in turn, will grow free cash flow and dividends. We're investing for growth. So we've prioritized our capital to make sure that it supports the strategy that we've outlined today, but we've also got incremental investment to generate incremental returns. We'll continue to evaluate M&A opportunities as they arise. And we've laid out here some criteria for you, just so that you can see how we think about them. They're consistent with our capital management framework. So we're targeting investments that would be EPS accretive over time, that provide new or enhanced capabilities, accelerate growth in existing businesses or open new opportunities as well. We're committed to an investment-grade credit rating. And as a result, we'll continue to operate the business within the parameters of the A- and net debt-to-EBITDA of 1.7x. So how does that all come together? What we've laid out here is our aspirations for FY '26, which we will continue to update you on as we go. So as I said, top line revenue growth of 2% to 4% per annum. We're looking at $100 million to $150 million of revenue growth to come from those new high-tech solutions by FY '26. We're targeting growth in EBITDA and we're looking for a low to mid-single-digit EBITDA growth CAGR out to FY '26, which is driven through a combination of the revenue growth we've talked about, but the ongoing operating efficiencies will drive. Our CapEx stays in that 10% to 11% of revenues with obviously then the additional $350 million sitting on top of that, but reverting back to that afterwards. And a result of those brings together free cash flow where we're targeting growth of 10% by FY '26. The growth in free cash flow creates the opportunities to grow the dividend over time and, therefore, deliver top decile shareholder returns. So that gives you a flavor for the financials and how the strategy will deliver against that. And I will now hand back to Jolie. Thank you.

Thanks, Stef. So I trust the presentations today have given you a little bit more insight into not only our ambitions for the next 3 years, but also the plans that sit behind it and how we're going to execute that and the financial ambitions we have to match that. When we stand back, our aspiration for FY '26 with Spark is to be digital and data-driven everywhere, the home of those high-tech solutions to have our digital infrastructure fueling growth in our key markets, and to be an innovative, diverse and sustainable business. And if we've achieved that, we'll have highly engaged customers and people, profitable growth and top decile shareholder returns. And so when you think about the value proposition for investing in Spark, our largest market of mobile has really strong tailwinds with increasing customer demand for data. We have a clear plan for further revenue growth in our high-tech segments and also in data centers, competitive advantage in our data insight capability, and Matt's talked to you about that in terms of the Brain and the investments we're making in resilient digital infrastructure. We've demonstrated over many years that we have a very strong cost control focus, which also helps us deliver those high EBITDA margins. We've effectively managed our portfolio to grow shareholder returns and to invest in growth. And we've achieved sustainable EBITDA and free cash flow growth, which has supported a rising dividend over time. Now look, we've delivered all of this without wavering from our purpose, which is to help all of New Zealand win big in a digital world, and by consistently showing up for our customers and our shareholders by doing what we say we will. So with that, that is the plan that we have in place, and we're now going to move to Q&A. [Operator Instructions] With that, we're now going to have a short break and set up the stage for Q&A. Thank you. [Break]

Okay. Thank you, everyone. So we're now going to open to questions from the floor. Please put your hand up, and I think one of the team will come and bring a microphone.

Just first one on the growth investment. Obviously, not surprising that it's heavily weighted to data infrastructure. Could you just give a little bit of, I guess, visibility into what you're thinking in terms of timing for that spend there? And also what the gating items are? I mean is the -- are you planning on much spec build? Or will it be backed by long-term contracts?

I think if you break that question into a number of different parts. So the first piece is around if you look at the expansion, we've already done in Takanini that's 100% contracted already. So as we look at further expansion, we'll be looking at contractual commitments alongside that. There's a component, obviously, though, of land acquisition and other spaces that we want to make sure we are ahead of. So -- and then in terms of the time frames, we see Takanini, the first expansion come online in mid-'23, so in the next few months. And then from there, further expansions will be over that period of time through to the '26, I think, in terms of the -- for the further expansion beyond that.

You're investing sort of through the period?

Yes, that's right. So from a -- if your question is more around the cash flow in terms of how that investment each year will set out, what that looks like, but it will be throughout the period of that time.

Great. Just on -- I guess, just at a high level, you've covered off, I guess, your focus in some high-level financial sort of metrics. But I guess if we sort of look at it, the voice headwinds a lot smaller now than it was, say, 3 years ago. You're investing sort of 25%, 30% over and above your ordinary envelope. You've got sort of incremental fixed wireless still. And I guess there's some cost benefit from sport. There's a level of maturity in some of your future area future growth initiatives that you may start to leverage off. So where are sort of the key areas where you're sort of fighting -- you don't have sort of -- you haven't provided that sort of mix in terms of where you sort of see some contraction. I'm sort of thinking non-infrastructure cloud, for example, what's the outlook for that over the next few years?

[indiscernible] you want to touch on it?

Yes, sure. So I think there's a couple of areas where you would expect to see that. So we know the broadband market is very competitive. And while we're seeing it stabilize, it's still going to be under a level of pressure, I would imagine, we know. The cloud market is the next one. So in private cloud, we have seen that the revenue was down in the half. And that's a market that we expect to be continuing to be quite competitive. And as a result, I think you'll see pressure in that private cloud space for a while. So we're not anticipating that, that trend slows. And instead, the way we think about that is private cloud becomes a shift from a growth business to a more mature business, and therefore, we start to manage it for margin. So we start adjusting our cost profile accordingly and shifting our CapEx into the things like data centers, as we talked about.

But at the same time, investing in the hybrid cloud, which Mark talked about in terms of the orchestration and the new product innovation. So a better cost base associated, but also a product that better serve customer needs ahead.

And last one for me. I mean, obviously, one of the dominant features of the last 3-year period was the Tower transaction. Just wondering whether in terms of there's any consideration of co-investment into some of those other asset classes that you previously identified in Class II and III. And also, I guess, second to that, just within the 3-year plan period ahead whether any intention that maybe data center moves into the classification 2 or 3?

So maybe to break that into the few questions that it was. In terms of the other asset classes, we have looked at those and the system. And when you look at them individually, we don't see any that in their own right are significant enough to want to break out. So for example, if you put [indiscernible] sort of InfraCo, they own a lot more of their [indiscernible] in their own right at a scale than we do here. On the second part of that question around data centers, we see data centers as a high-growth market ahead where we can get a good return. But obviously, over time, we will always continue to assess, are we the right owner stand-alone? Or would we have a combination of ownership within that, but we don't have anything to share on that right now.

Jolie, Stefan, it's Aaron here from Forsyth Barr. A couple of questions. One, just to follow up, I guess, a broader question on [indiscernible] question. I think I think it accounted to 108 times that you mentioned growth in your presentation, but your central scenario of 2% to 4% is sort of very similar to RBN said central scenario for CPI over the next 3 years. So if you're thinking about sort of real growth in telco, and I guess across the ditch in Australia and more broadly, there's been a general talk about telco sort of moving away from deflationary pricing and potentially being -- even CPI plus, you've got some really interesting growth initiatives that you've highlighted today, but sort of yet the output is barely any real growth. So if you think slightly longer than maybe the '26. Do you see a potential that we will start to see some real growth? Or is telco, still telco, and we should sort of assume that largely sticking with inflationary growth overall?

I think when you look at the 5G and you start to get toward stand-alone, and that's we're talking about at the sort of the latter part of the strategy, I think this will be the fifth generation that I do think you can look at growth beyond, as you say, beyond inflation, both from a revenue perspective and also looking at how we look at pricing review as well ahead. So I think Tessa touched on when she was talking around the annual price review and bringing that more into a place in terms of how we assess the value that we're giving to customers, but also the opportunity to grow beyond that. In terms of the new businesses that we're scaling, so we've obviously talked about matter of digital identity. So that's in the early stages as the market commercializes, but that's an opportunity as we look past the FY '26 for greater growth opportunity there as well. I don't know if there's anything else. Stef, you...

The only thing I'd add to that would be data centers. Obviously, while the big investments, they take a period of time. So we see Takanini, the 11 megawatts there come online. It doesn't come online at 100% utilization from day 1. It takes a number of years to build. And then if you think about the investments we're making now, they actually -- the additional $250 million to $300 million that won't even be really until FY '26. So that could be the growth catalyst that takes -- that gives that next wave of opportunity kind of in that longer-term horizon, but not necessarily in that current 3-year window.

Thank you. Very clear. And then I had a question for Claire, just on MATTR. And 2 questions, if I may. So First of all, you provided one of few but a really interesting number on the first part of the presentation. So that $28 billion number you put out there. Is there any chance you want to share with us what your hopes for MATTR are when it comes to what proportion of that you could capture or at least address? And then secondly, I think one of your first sentences was that you were independent part of Sparks. I'm just curious if you would be willing to elaborate a little bit of what that means and what the benefits of working under the Spark umbrella is versus stand-alone, if you have experience from that?

On the first question, I'll just pick that up . So we haven't disclosed separately, obviously, the MATTR revenues. As it scales and becomes a bigger part of our business, we'd look to do that like we've done with other businesses over time. So we don't have an answer to that. What I would say though is MATTR is an international business, export services, much greater scale and opportunity across a number of different sectors that are being disrupted right now. And so it creates the opportunity for greater growth than you would see if it was just onshore. But I'll then hand to clear to answer the second part of that question.

So stand-alone for us has been super helpful, with the full support of Spark. And I think one of the things to recognize is when you start a business like MATTR, you're working in deep tech, you're doing a lot of R&D and your cycles are quite different from an operating business of the size and scale of Spark. So we've had the freedom to explore the territory at a technology level, and that's borne fruit. So over that period of time, we've established a reputation in the global standards community, and that's led to our first customers who weren't actually in New Zealand at all. So our businesses are quite different, but in many ways, also very complementary. So we've had the benefits of a really strong backer that we're very grateful for from day 1, which has given us the freedom to do the work that we've set out to do. And I personally I am really delighted with where we've got to in the time that we've had so far. I'm very excited about what's going to come next.

So I had one final question just on the gross cost reductions. $125 million to $175 million, call it $50 million a year, 2% of your cost base, that sounds sort of like business as usual, if I'm totally honest, most corporate sort of cost on a like-for-like basis, general productivity gains. Are you trying to say something else? If I look at your guidance of EBITDA and revenues, it looks like your costs are going to increase by, let's call it, $50 million, $60 million a year. Is this something we're going to be able to follow? Is it a specific cost initiative? Or is it just highlighting that you're continuing to be focused on costs?

So what it's picking up is the fact that cost and operating efficiency is an important part of our operation, as I mentioned earlier. Parts of our business mature, we have to be continually weakening at our cost base so that we can reinvest into other areas. The way we actually operate it is we're very specific and quite detailed about where that $125 million to $175 million sets. We go through kind of product by product, and we take it out of or we allocate it to the very specific areas. And then we have a detailed program which drives those reductions on an ongoing basis. So I think that's probably the best way you should think about it.

Phil Campbell from UBS. Jolie, I was just wondering if you could give us a bit of an update on where we are in terms of the 5G kind of spectrum negotiations with the government and the commitments. And then the second question on that is just when we start launching kind of 5G more aggressively, like is there any kind of capacity issues we need to think about? Or we just have so much spectrum in New Zealand [indiscernible] that it's not really going to be such a major issue.

So to break it into the 2 parts, in terms of the spectrum allocation discussions. We are coming to the end of that process and are very close, of course, until it's done, I cannot give you that final sign-off, but I would think it's more in months, weeks rather than on any length of time beyond that. The second question around spectrum in New Zealand, we continue to look at the different spectrums that will be most applicable for us ahead with 5G. So we still obviously haven't had millimeter wave [ reach ]. 600 megahertz, we think, is also helpful for us in rural because of the topography of New Zealand. So they are the ones that we need to speak to see to come up. But as a general rule, when you look at New Zealand versus other countries, we are more spectrum-rich than most are. And we don't have a lack of spectrum in terms of that. I don't know, Mark, if there's anything I should say.

I think it's right. The other thing with coming out of 3G as well, we've got the ability to reform our 850 spectrum as well. And from a capacity perspective, no, we don't have any concerns around 5G. We constantly densify our network specifically for that reason. And 5G will be one of the things that will densify over time as well.

Okay. No more questions from -- oh, sorry. Oliver?

Oliver Mander from the NZSA. It's probably a question for Claire, and it's probably a bit of a follow-up for the earlier question. Look, the cyber identity market globally is extremely fragmented, and there's probably quite a lot of ambiguity still in that market, as I'm sure you'll much more aware than I am. Just from almost a cultural perspective, I guess I'm curious to see how Spark as a more mature organization within New Zealand certainly is able to cope with that ongoing incubation of MATTR's development? And what risks might that pose for investors down the track in terms of additional unexpected CapEx or investment required.

Look, I think so far, we've been very considered in how we've made -- place the investments that we've placed. As I said, when we talked earlier, we started with just 6 of us 4 years ago. And we continue to be very mindful that the market itself is still evolving. And we know this because we're involved at the very fabric level itself in designing the protocols and standards that we're building on top of. So, in all these things, timing is a great thing, and we believe that we are well paced to meet the market as it starts to evolve, but we don't want to be so far ahead of it that the technologies that we invest in today are out of date before we reach market. And I think the pace that we've got at the moment is entirely appropriate for the level of market maturity. I believe that we can take a leadership position and have done so to date. I am confident that we will sustain that leadership position as the market starts to form and be ready to capture a share of it. So I think today our needs have been well met, and we appreciate that support from Spark.

I think the other thing to say is a lot of the focus that Claire has done is on interoperability. So between different forms of technology, how this creates a bridge, and I think you touched on that in your presentation, which makes it more applicable across a number of different cases. So that also helps in terms of to your earlier part of the point around there's a number of competitors in this space. Are they all doing the same thing? I think one of the key differentiators is probably the interoperability.

Yes, that's true. I think one of the things you think about when you try and design for change on scale is how do you get people to start adopting? And you can take the perspective that we'll build a Utopian future and everybody is going to magically migrate into it, but that's not the way I grew up, it's not my technology heritage. And as a team, I think we've been very pragmatic in thinking those issues through. Having had a lot of years of enterprise experience ourselves, we know that people don't just abandon all of their existing investments to jump into the future. So we've built bridges. One of them, for those who are more technology-minded is called the OpenID for verifiable credential issuance specification at the Open ID Foundation, which is just a natural effect being noted in the EU digital identity architectural reference framework as the issuance protocol that they will be advocating for moving forward. So by building these bridges into existing systems of record that can be adopted at scale by governments and enterprises, we think that we're well positioned to support the market in that regard. And we've been involved in that work from its very outset. So we're right in the middle of it, as they say.

Okay. Wade, last one?

I'm just interested in the addressable market for the wireless broader and in the package, you talked about it going to 35%. But how should we view that sort of longer term given the changing data use versus sort of changing tech?

Jus, do you want to take that on?

Yes. So I think -- as we look out to the 35% as a first pass, there's a couple of key things that we're really confident in driving that. The first one, of course, is 5G and the opportunity that will bring to addressable market and what that looks like over time. The second, we've talked a lot today about our data capability, and that's our ability to understand those households that are the right fit for wireless broadband moving forward and target them appropriately and efficiently with the offers that come. I think also when we look out to -- for New Zealand, at the moment, going through one of those once in a generation technology change outs with the retirement of copper. And that gives us an opportunity to look out and say, actually, as people make the decision or are forced to make the decision over time, of what technology to do next to set their home up for a modern future, wireless becomes in that consideration set quite front and center, both across its capabilities as we move into stand-alone from an addressable market point of view on those kind of fiber-like experiences, 700 megabits down, but also into those homes that actually it's more about just checking my e-mails over the Internet. So that gives us confidence around that 35%. I think out beyond that, we wouldn't be in a position to say yet until we understand the competitive market dynamics, how they roll out over the next 3 years?

I think also, as you think a hit around the technology that will come, Mark touched on briefly 6 years, probably 2030, so a while away. But every new form of or new generation has led to greater capacity. So to the point of exponential growth and data but exponential sort of shift in what we can do with that. So I think that will also then open that opportunity around addressable base as well, but we've still got to get here to see that a little bit more. Well now, perhaps [indiscernible].

[indiscernible] from NZ Funds. I was just hoping if you could please give some color around your 5G monetization strategy. You mentioned experience-based consumption plans. Just some color around what that could look like and how that could drive ARPU uplift.

Sure. Tess, do you want to take that?

Yes, sure. So yes, experience based, if you think about it in the context of applications like gaming, what does that look like for customers moving forward? What type of experience will they want and how do we monetize that as they start to really utilize that low latency, that thing that will come with 5G stand-alone in particular. I think there are opportunities for us there. But out beyond that, if you think about entertainment more broadly, actually, where are the opportunities, the same as there was with 4G. When you started to see more entertainment or over the top applications really drive new use cases in market. What's our opportunity to build that in going forward? Annual price reviews allow us to take into consideration both the CPI considerations, but also balance that with our customers, cost pressures, they might see in inflation environments but help us set a marker for that sustainable business investment going forward. And then, of course, you've got wireless broadband, the natural monetization opportunity we have with that. And finally, the enterprise market. We've talked a lot today around those opportunities that 5G will bring into the enterprise market, particularly around converged technologies. So there's a number of avenues for us where we see potential in 5G monetization.

Okay. And Phil, did I see your hand up? Last one from the floor and then we'll go to the phone.

Maybe just a follow-up one for Tess on the 5G wireless broadband again. I suppose the other affect of feeding into that potentially the 35% is obviously you're seeing fiber prices at the retail level continue to rise. So I'd just be interested in your views in terms of if that gap widens versus 5G wireless broadband, what is that in terms of a driver for that 35% target?

Yes. So I think what you're putting out there is sort of a regulated cost input increase every year in terms of those fiber input prices and wireless, we own the mobile network, and we own the economics that go around that. So it gives us options to think around both across our multi-brand but also in our own -- in our Spark wireless broadband about how we incentivize customers and put great offers in front of them. So there's an opportunity there within it in this area to monetize more, which is really what you're indicating because each year that it happens that the delta grows even further.

Yes, I think we talked -- when I spoke earlier, just those owners economic give us the ability to place more value back in the hands of the consumers. So it's definitely a tailwind for us.

Okay. We will now go to the phone for any questions.

[Operator Instructions] Your first question comes from Kane Hannan with Goldman Sachs.

Maybe just around the incremental DC investment. And just as a starting point, I mean I hope -- could you just kind of remind me, I suppose, why Spark has the right to play in the data center space. I mean, globally, this is something that's generally done by the carrier neutral operators or by the [indiscernible] clouds themselves. So just keen to hear your thoughts around why Spark has a right to play here, whether that's something specific to the New Zealand market? Or -- just any thoughts would be helpful.

I guess from our perspective, we have 16 data centers. We have been in this market for a long period of time. We established ourselves as the leader in this market. Obviously, it is changing as we see more hyperscalers come onshore, then that's an opportunity for us to partner with them. We also have a lot of the services that go into that. So we are there from a connectivity point of view that Mark touched on. And then we have a product level. So we have a skill and capability in this area. We have customer relationships within this area, but we also have partnerships, too, with the hyperscalers. So from our perspective, this is a form of digital infrastructure that we have every right to play in and be successful in. Mark, I don't know if there's anything else you want to add?

No. I think you've covered it. I mean the other thing also is that we operated 35 exchanges as well. So to Jolie's point, we've also got that added value of understanding how exchanges work and also how data centers work.

Yes. Perfect. Just the 9% to 10% return on investment on that data center investment. Can you remind me how you define returns for that investment? And then just interested in how you see those returns evolving over time as the New Zealand market scales up, still seeing NextDC, Microsoft [ requiring ] land. So I mean it's a reason we think there's going to be fair bit of supply coming online over time. And typically, we see that drive returns down in DC land?

Kane, so from a returns perspective, clearly, we look at the incremental returns that those data centers generate on an effectively post-tax basis. And then we look at the invested capital that goes in to support that, and that's where we're targeting that 9% to 10%. The second part of your question, I believe, was what's the changing dynamic of the market?

How that return profile evolves -- how your return evolves over time as the market scales?

Yes. I mean I think the thing you've got to remember is that with these contracts, they are very long term. So if you look at, for example, the tech in any one that's due to complete in June. As we've mentioned previously, I think it's 85% contract that are 100% committed. Those returns are locked in over that period. These are 10-year plus return. So we're going into them with our -- with a high degree of certainty as to what those return profiles will be.

Yes. I appreciate that. And then so if I think about -- obviously, you've got some healthy financial aspirations at the group level today. I mean how do you think the group returns trend over the 3-year period, given there's that upfront data center CapEx coming on, but I suppose the earnings associated with that sounds quite long dated FY '26 and for FY '27. I mean do you think you'll grow group returns over that period?

I think when you think about the investments we've already made, so we've got Takanini comes online pretty much at the start of FY '24. So you'll see that the other areas we've already been investing in things like MATTR for a period of time, 3 to 4 years. So we're seeing that come into commercialization. If we look at the high-tech solutions, again, we've been working with customers on that. So again, this is stuff that is very close to market ready, if not already in market. So they're all pieces of -- the key pieces of revenue growth that are coming, while there are some lumpier investments, they pretty much are coming online relatively quickly over the next 3 years, and they'll be there for the longer term. I mean the thing to remember with this, we're investing in digital infrastructure that is resilient and will help to power, I guess, the data growth that we're going to see in this country over a number of years, and we think we're on the right side of that in terms of the investments we're making.

So what sort of utilization rates do you assume in that '26 number for that incremental data center investment, the 13 megawatt to 17 megawatts?

I think if you -- well, if you go back to the -- its committed, contracted. We have our revenue turns laid out. So it's not like we're looking to then go and sell it to people that are past the time of being built in terms of expanding and building on those, they will be with committed contractual and therefore, utilization goes over that period associated with it.

Yes. I mean it makes sense in terms of being committed and utilized. I'm just trying to work out, you said you'll build the 13 megawatts to 17 megawatts by FY '27, but it doesn't necessarily -- FY'26, but it's not necessarily billing in FY '26...

No, you're right. The full capacity won't be billing a new one, and that's right. It builds over a period of time, but we have a good understanding of that contracted -- our return profile, and therefore, we're comfortable with what that looks like from a...

I think if you look at the...

Mind if we take [indiscernible] and come back to you off-line and with a bit more detail with that. Okay? Thanks, Kane.

Your next question comes from Brian Han, a Private Investor (sic) [ from Morningstar ].

I am from Morningstar. Just 2 questions, if I may. My first question is in cloud, do you have a sense as to the market size of public versus private cloud? And I know you guys are shifting to a hybrid cloud model, but just out of interest, does one need to be in public cloud to make inroads into private cloud or can a company focus just on private cloud? And sorry, I don't know how many times I said cloud in that question.

I think to break some things, you can be in all forms of public and private cloud, one of them in private cloud , you are more likely to own your own infrastructure, not always, but you can do. That means that you've got higher returns, but you also have the capital invested. In public cloud, you don't tend to own the infrastructure with a slower margin. But when we look at what customers are doing in terms of the workloads and the things that they want to do with it, it's important that you offer all of those services. If you were to think about New Zealand and where we are right now, private cloud would have played a bigger part onshore. Remembering, of course, that public cloud hasn't really existed on -- generally going over a Sydney region or something like that. So the opportunity hits, it's more in that hybrid which is allowing customers to be able to move workloads between different cloud forms based on what their needs are, their security needs, their latency needs. And so what we're looking to do -- if you break it into the 2 parts, one is around a product and what we offer in terms of the cloud products across that hybrid and other is around the data center play, which is much more around -- more akin to like a property investment, in a way.

Okay. Got you. My second question is in cybersecurity, has Spark looked at how long you guys keep customer records and how often you destroy them in case the systems get hacked into? And my apologies for being ignorant here, but do changes in customer record keeping impinge in any way on your data-driven personalization strategy?

So why don't we break that into -- there's a few questions in that question. We might start with just a general on our cybersecurity and where we're at, Mark, and then we might head over.

Yes. So as I talked about in my presentation with cybersecurity, we've got a large team of 180 subject matter experts in the cybersecurity. We're constantly looking for global threats and how we mitigate those global threats. Everything we do from a design, build and operate perspective goes -- we put security across all of those phases to make sure that we take security right at the forefront of our business. So from that perspective, we think we're well versed in how we protect customer data.

Yes. And then maybe, Matt, do you want to talk to...

The two parts of the second question. The first one is around the data we keep and how we store it and how long we store for it. I think the -- for us, what we're seeing is where we have the right technology and capability, we can really improve the customer experience by using the data that customers provide us. We've been very careful to ensure that our privacy policy is explicit about what data we collect and keep in use. And we think that as long as we're ahead of the curve on this, i.e., we're building the guidelines and got the -- we've got privacy built into our processes and systems, and use our data responsibly, client -- customers will be happy to continue to share it with us because they see the benefit. There are a lot of different data, so we can't really go into every individual data point and type and how long we keep it for. But we only hold what's necessary. And when we look at our AI models, for example, we will delete data, which is not necessary. So we don't hold gender data because we know that we don't need it, and it can create bias. So we have a very clear set of guidelines and policies on that. And we have a team that watch it quite closely. [indiscernible]. And Melissa also has a digital trust team, which we stood up 3 years ago to ensure that we build the pipeline for this early on, as I mentioned in my presentation. So I hope that answers the question.

That's very useful. But when you say you have 100 -- I think it's 180 people working in the team, most of them hackers?

No.

Some have a background.

No, when we talk about the 180, it's across our business. We've got things like security operations, which looks 24/7 at -- for things like DDoS attacks. We've got people who work in security response. We've got people who work in governance. We've got people who work in security infrastructure. So they're all in different parts of the business.

And really, when you stand back and look at kind of the threats that have happened around data breaches and looking at that, we spend a lot of time looking at what's happened, how did it happen, what could we learn from that? What do we need to? Because this is a constantly evolving space. There isn't one solution for this. You need to keep up with that. That means our security teams are very connected to the international market because often these things happen offshore first before they happen here. And also with certain GCSB as well, we do quite a bit of work across that. So we take our role very seriously around how we manage data minimization and also the -- how we protect and detect if there was anything happening.

Yes. So we have a framework in place, and we also have -- we use obviously frameworks, global frameworks to make sure we're managing to the best we can. The other key thing, just to Jolie's point, you know, if you look at the international incidents that are happening, we take those and make sure that we've got the right mitigations in place to protect because they're all quite different in construct. So the way we think about it is every single thing that we see globally, we bring into our business. And we pushed it up through governance as well to make sure that we give both executives and Board an understanding of what's going on from a global perspective as well.

Okay. I might now move to the question -- No, I won't be. One more on phone question, okay.

Your next question comes from Ian Martin with Martin Advisory (sic) [ New Street Research ].

From New Street Research, actually. But just a bit further on the cloud question. Obviously, you've noted that there's competitive pressures there sort of impacted revenue and margin and so on. Since the half year result, AWS announced, I think, a $7.5 billion investment in cloud infrastructure in New Zealand, which is massive compared to the amounts you're investing in extra data centers. And they've also announced the local zone concept for Auckland, which means they want to play in edge services and possibly private LTE and so on. And I know that's in partnership, [indiscernible] got some partnership role in that as well. But the level of investment they've got is massive, and be clear, they would need to get some kind of return on that investment. So I just wonder how you characterize that. I think someone mentioned the maturity, managing this as a mature business when it looks like it's going to another level.

I think so just to go back to the AWS investment, that was announced a few years ago, the $7.5 billion. And over a period of time, I think it takes into account all of the things they're doing in this country. I'm not sure that it's all straight into data centers would be my first thing, I'd say. They are partnering locally too with different providers and the capacity we're seeing come onshore is a combination, I think, of what will be locally here, but also New Zealand has a lot of good credentials around renewables, trusted business environment, et cetera, potentially to be resilient for beyond just this market here as well. So we are very wise to the -- what's happening. I'm sure we also look across Australia and see the type of growth that's happening there. I think it was 500 megawatts in New South Wales alone announced last year. So we're focused on that. As I said, when we're investing, we're investing with contracted commitments. So we're clear about the returns we're getting. And we're working with different partners to make sure that we are leveraging the assets that we have there with that.

Can I just ask as well, back in January, you did a proof of concept for stand-alone 5G. And when you announced at it, I saw the words cloud-native proof-of-concept. My understanding of that is that, that puts a lot of the core functionality in the public cloud rather than necessarily on premises. I don't think I've heard today that cloud-native term. But is that where you're going with 5G stand-alone?

You want to talk to, Mark?

Yes, I can talk to that. yes. So for that particular trial, we did go cloud native, but it doesn't necessarily need to be cloud native. So you can take a cloud instance, which might be our own cloud versus being a hyperscaler cloud instance.

And so when you're talking about actually rolling out stand-alone 5G, it's not necessarily going to be cloud native. Is that what you're saying?

Yes. Yes. So I mean, there's different vendors who play in the 5G stand-alone space. And some of them we use for specific trials, we might use hyperscaler and mix them with a standard vendor. Others, we might just use the standard vendor that's in the network space.

Okay. We might just go to the ones on the screen then, now. So Chante, are you going to read those out?

So we have a question in regards to MATTR. Does Spark attempt to make use of the blockchain while storing credentials? Or is it not related at all?

So this is when I am most frequently asked questions in this space to do with blockchain. So architecture can accommodate use of distributed ledgers, but it doesn't need to. And in fact, most of our clients don't require them at all for the solutions that they are embarking on. And in the context of decentralization, we can achieve the properties of decentralization, anchoring into existing routes of trust and PKI and decentralized PKI infrastructure without needing to as blockchain at all.

Are you working on partnering with any organizations to provide skills training to your workforce to combat the labor shortages, especially in the IT services market?

Yes. So yes, we already are working with a range of different partnerships, be that vocational institutions, education to [indiscernible] as an example, do a number of micro credentialing and certifications with some of our partners in the technology and product space. But what I would say is, as we think about that skill development incubator, we are now rethinking additional or variants of partnerships that will help us to bring that to life through our own incubation of skills that we need for the future.

How does Spark plan to compete against 1 New Zealand and 2 degrees as they partner with satellite providers to provide mobile coverage across Aotearoa?

So perhaps just provide a little bit of context in terms of the satellite for mobile, that is early development. As was noted, the other -- the day of the announcement, so '24 -- into '24, might be able to text. Into '25, some voice capability within that. We will partner with the satellite because we do think it has a role to play, particularly when you think about the topography of New Zealand, some of the rural areas, and we will have a role to play but the technology is relatively early at this point, and we'll be partnering alongside that. We are doing some more work around enterprise broadband using satellite, and so we've got a trial that's going to launch shortly with some larger enterprise customers who have multisites. So we're working through that. I think, Chante, the next one, we've probably answered already.

This one is from Lance Reynolds from Aspiring. Your cash flow growth of 10% between FY '24 and FY '26, I assume, includes the returns on your growth CapEx. How much of this free cash flow dollar growth target is essentially acquired growth from new investment? I'm interested to know what your guidance implies for core growth, would 5% be over the next 3 years, be an unreasonable number to work off? Also, could you please provide some guidance on dividend imputation levels over the next 3 years.

Stef?

Yes. So first of all, I am looking at the portion of free cash flow growth that's driven out of the core, the vast majority of it would come out of the core. If you think about the investments we're making of that $350 million. The majority of it doesn't really start to come online in terms of from a revenue and earnings perspective until into FY '26. And even in the data center space, they have to scale. So the vast majority of it would be from core growth. Then secondly, can we provide a guidance on dividend. We'll do that annually. We don't give in advance. But clearly, our aspiration is to grow the dividend over time, and our ambition would be to have that fully imputed as we go. But once again, we would have to assess that on an annual basis and work on that with the Board and then that would be released as guidance on an annual basis.

Okay. Thank you, everyone. I think that ends Q&A. So we're now going to prepare and set up for the next sessions around both the MATTR demo and also the brain demo. So thanks for your attention and for participating in today.