Annual Report 2020 Spark New Zealand Annual Report 2020 Connections Matter

Now more than ever. Annual Report 2020 Spark New Zealand Annual Report 2020 Connections matter Helping Kiwis stay connected during COVID-19. COVID-19 has challenged so much of what Kiwis have always held dear. This year, suddenly separated from the daily interactions that we treasure, we did what we’ve never done before: we discovered new and powerful ways to stay connected digitally with those who matter to us. We kept our distance, and yet we seemed more together as a nation than many other parts of the world. During lockdown we have been reminded that as a ‘lifeline utility’ the role we play in keeping people connected is incredibly important. For most Kiwis, almost every interaction with the outside world has been enabled by a phone or internet connection. COVID-19 has been the biggest test of our infrastructure as Kiwis moved to work, learn and be entertained at home. Years of sustained investment to build capacity into our network has meant that New Zealand has been well served at a time when telecommunications services truly became an essential service. Spark New Zealand Annual Report 2020 Connections matter 1 Spark New Zealand Annual Report 2020 Connections matter We helped our customers stay conneCteD by removing data limits on capped broadband plans, waiving late payment fees and not terminating services for those experiencing financial hardship. As New Zealand went into lockdown our wireless broadband network traffic increased by 40% with more than 17,000 terabytes of data used in total. Calling volumes on mobile increased by 60% at peak, and Kiwis benefited from over 7,200 terabytes of free data to work, learn and connect from home. We worked with our business and enterprise customers to rapidly expanD and enable secure remote working capability through IT solutions and collaboration tools. 2 Our teams adapted quickly to repurpose 39 retail stores as Emergency Distribution Centres to provide hardware to customers with urgent needs. Over1,000 retail, call centre and Business Hub team members were set up with ‘at-home kits’ to help our customers remotely. We’ve been doing our bit to help bridge the digital divide since 2016, when we first launched JUMp our ‘not-for-profit’ broadband service. Since the relaunch of the programme in March 2020 the reach of Jump has almost doubled to connect 9,559 homes by the end of FY20. This was achieved during COVID-19 by working in partnership with community organisations, and with the Ministry of Education to connect households with school-aged children around the country who didn’t have an internet connection at home to ensure as many kids could participate in distance learning as possible. To meet customer needs we aDDeD extra Capacity to 14 cell sites around the country and deployed six ‘cell sites on wheels’ (COWs) to further expand capacity in locations that were experiencing high network loading. These efforts resulted in speed increases of between 70% and 160% for these locations. Spark New Zealand Annual Report 2020 Connections matter 3 Spark New Zealand Annual Report 2020 Connections matter About this report We are evolving our approach to reporting to show a more integrated view of our performance across financial and non-financial measures. Our 2019 Annual Report combined our financial statements with non-financial performance measures, adopting the Global Reporting Initiative (GRI) Standards, the most widely used global sustainability reporting standard. This year’s report is a further evolution and is our first integrated report. Integrated reporting considers the creation of value over the short, medium and long term, thinking holistically about the resources and relationships the organisation uses or affects, and the dependencies and trade-offs between them as value is created. The report is prepared in accordance with the International <IR> Framework and the GRI Core Option. We have not sought external assurance for the non-financial information in this report. This report covers the activities of Spark New Zealand Limited and its subsidiaries. The report is for the period 1 July 2019 to 30 June 2020. This report is dated 26 August 2020 and is signed on behalf of the Board of Spark New Zealand Limited by Justine Smyth, Chair and Charles Sitch, Chair, Audit and Risk Management Committee. Justine Smyth, CNZM Charles Sitch Chair Chair Audit and Risk Management Committee Key Dates Investor Strategy Briefing 16 September 2020 Annual Meeting 6 November 2020 FY21 half-year results announcement 24 February 2021 FY21 year-end results announcement 18 August 2021 4 Contents Connections matter How we create value 6 About Spark 8 Spark performance snapshot FY20 9 Chair and CEO review 10 Our performance 14 Our customers 16 Our network and technology 22 Our people 26 Our environment 32 Our communities 36 Our Board 40 Our Leadership Squad 44 Our governance and risk management 46 Our suppliers 49 Leadership and Board remuneration 50 Financial statements Financial statements 53 Notes to the financial statements 58 Independent auditor’s report 98 Other information Corporate governance disclosures 103 Managing risk framework roles and responsibilities 112 External initiatives and membership of associations 113 Material issues 114 Global Reporting Initiative (GRI) content index 115 Glossary 117 Contact details 118 Spark New Zealand Annual Report 2020 Connections matter 5 Spark New Zealand Annual Report 2020 How we create value How we create value WHAT WE RELY ON OUR BUSINESS MODEL Social capital Our customers TO HELP Consumers and organisations that are enabled by our products and services Financial capital WIN BIG IN A DIGITAL WORLD Āwhinatia ngā tāngata katoa o Aotearoa Financial capital kia matomato te tipu i te ao matihiko. Equity, debt and cash generated through our operations Manufactured + intellectual capital Our Values Our network Whakamana, We Empower and technology Matomato, We Succeed Together Tūhono, We Connect Our mobile sites, data networks, systems, processes and digital services capability Māia, We are Bold Human + intellectual capital Our people Skilled, specialised and diverse workforce that is the heart of our business Natural capital Our environment Energy, materials and impacts of our operations Social + human capital Our communities A culture that develops Our communities around New Zealand and the communities across our global supply chain and empowers our people 6 OUTPUTS FY20 Connected customers • 2.519 million mobile connections • 709,000 broadband connections • Increase in customer interaction Net Promoter Score Providing leading products • Customers supported to adapt to COVID-19 and services that connect and Supporting our customers’ own business models enable New Zealanders and their value creation for New Zealand Innovation to create Financial returns value for Spark and • $3,623 million operating revenues and other gains our customers • $427 million net earnings • 25 cents per share dividend Enhanced network and technology • Resilient network through COVID-19 • 40% increase in wireless broadband traffic • 60% increase in mobile calling at peak • 5G rollout under way Engaged workforce • Positive growth in employee Net Promoter Score Investment in resilient, • 50/50 gender split on Board and adaptable infrastructure Leadership Squad for New Zealand’s future • Investment in training Environmental impact • Net emissions 26.9 kilotonnes CO2 -e • 501 tonnes e-waste recovered • 24,900 mobiles re-used/recycled Supported communities • Skinny Jump reaching 9,559 high-need households • 501 employee volunteer days OUTCOMES ON PAGES 8, 9 AND 13 Spark New Zealand Annual Report 2020 Connections matter 7 Spark New Zealand Annual Report 2020 About Spark About Spark Spark is New Zealand’s largest telecommunications and digital services company. Our customers range from consumers and households to small Connection to USA businesses, government and large enterprises. Across all our services – mobile, broadband, cloud Connections to Australia services, digital services and entertainment – we have relevance for almost every New Zealander. 98% of New Zealanders reached by our 66 4G network Retail Stores 709K 5,224 broadband New Zealand connections employees 2.519M 26 Fibre Transport Network Earth Station Satellite Link mobile Regional Data Centres Corporate Ofﬁces connections Business Hubs Southern Cross Cable Tasman Global Access Cable Brands and businesses IT infrastructure and Business Pre-pay mobile Big-data analytics Cloud consulting Sports streaming Digital trust and cloud services telecommunications and broadband business and Business service verifiable data provider Transformation 8 Spark performance snapshot FY20 Operating revenues and other gains EBITDAI1 $3,623M $1,113M 2.5% 2.1% Net earnings Mobile revenue $427M $1,288M 4.4% 1.3% Cloud security and service Broadband revenue management revenue $680M $443M -0.7% 10.8% Voice revenue Capital expenditure1 $391M $374M -11.3% -10.3% Consumer and small business iNPS2 Employee NPS3 +33 +66 10 points 25 points 1 Earnings before finance income and expense, income tax, depreciation, amortisation and net investment income (EBITDAI) and capital expenditure are non-Generally Accepted Accounting Practice (non-GAAP) measures. These measures are defined and reconciled in note 2.5 of the financial statements. Capital expenditure excludes spectrum additions of $13 million. 2 Interaction Net Promoter Score, a measure of customer engagement. 3 Net Promoter Score, a measure of employee engagement. Spark New Zealand Annual Report

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