Q4 2026 Spark New Zealand Ltd Earnings Call

August 19, 2026

Speaker #3: Thank you for standing by, and welcome to the Spark New Zealand FY26 results. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session.

Operator 2: Thank you for standing by, and welcome to the Spark New Zealand FY26 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Jolie Hodson, CEO. Please go ahead.

Operator: Thank you for standing by, and welcome to the Spark New Zealand FY26 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Jolie Hodson, CEO. Please go ahead.

Speaker #3: If you would like to ask a question, you'll need to press the star key followed by the number 1 on your telephone keypad. I'd now like to hand the conference over to Jolly Hodson, CEO.

Speaker #3: Please go ahead.

Speaker #4: Kieran, good morning everyone. Thanks for joining us today for Spark's full-year results for the period ending 30 June 2026. I'm going to provide an overview of our results and the progress we've made against our strategy, and our CFO, Stuart, will then take you through our financial performance in more detail before we move to Q&A.

Jolie Hodson: Kia ora, and good morning, everyone. Thanks for joining us today for Spark's full-year results for the period ending 30 June 2026. I am going to provide an overview of our results and the progress we have made against our strategy, and our CFO, Stewart, will then take you through our financial performance in more detail before we move to Q&A. FY26 was the first year of execution under Spark 30, and we are building momentum in line with strategic choices that we have made. While the economic environment remains subdued, we refocused on core connectivity, returned mobile service revenue to growth, and continued to simplify beyond the core. We strengthened the fundamentals of our business with further structural productivity improvements, improved free cash flow, and net debt returning to targeted levels following completion of the data center transaction.

Speaker #4: So, FY26 was the first year of execution under Spark 30, and we're building momentum and aligning with the strategic choices that we've made. So, while the economic environment remains subdued, we're refocused on core connectivity, returning mobile service revenue to growth, and continuing to simplify beyond the core.

Speaker #4: We strengthened the fundamentals of our business with further structural productivity improvements, improved free cash flow, and net debt returning to targeted levels following completion of the data center transaction.

Speaker #4: Overall, we finished FY26 within guidance and with a stronger platform from which to deliver improved shareholder returns in the years ahead. So if I turn now to slide 4, and an overview of the results, to clarify our reported and adjusted results: our reported results exclude the data center business, which is classified as a discontinued operation in the financial statements.

Jolie Hodson: Overall, we finished FY26 within guidance and with a stronger platform from which to deliver improved shareholder returns in the years ahead. If I turn now to slide 4 and an overview of the results. To clarify our reported and adjusted results, our reported results exclude the data center business, which is classified as a discontinued operation in the financial statements. FY26 adjusted results include the earnings of the data center business up until the point of sale, while excluding the NZD 278 million gain on sale. FY25 removes the NZD 71 million gain on sale from our Connexa stake and the NZD 53 million in transformation costs. I am now just going to speak to our adjusted numbers as these provide the best year-on-year comparison.

Speaker #4: FY26 adjusted results include the earnings of the data center business up until the point of sale, while excluding the $278 million gain on sale. FY25 removes the $71 million gain on sale from our Connexus stake and the $53 million in transformation costs.

Speaker #4: So I'm now just going to speak to our adjusted numbers, as these provide the best year-on-year comparisons. Adjusted revenue was stable at $3.7 billion, with mobile growth offset by declines in legacy voice and digital services, as well as five fewer months of data center contribution following the sale partway through the year.

Jolie Hodson: Adjusted revenue was stable at NZD 3.7 billion, with mobile growth offset by declines in legacy voice and digital services, as well as five fewer months of data center contribution following the sales pathway through the year. Adjusted EBITDA declined 2.4% to NZD 135 billion, primarily reflecting some mixed shifts in revenue, with continued decline in higher margin legacy voice, which now represents only about 3.2% of our overall revenue and the part-year data center contribution. This was partially offset by mobile growth and NZD 40 million in productivity benefits. Adjusted NPAT declined marginally to NZD 225 million, reflecting the lower EBITDA result and offset by a relative improvement in tax expense. Free cash flow increased 18.5% to NZD 308 million, supported by lower cash interest and tax paid, and improvements in working capital.

Speaker #4: Adjusted EBITDA declined 2.4% to $1.035 billion, primarily reflecting some mixed shifts in revenue, with continued decline in higher-margin legacy voice, which now represents only about 3.2% of our overall revenue, and the part-year data center contribution.

Speaker #4: This was partially offset by mobile growth and $40 million in productivity benefits. Adjusted impact declined marginally to $225 million, reflecting the lower EBITDA result and offset by a relative improvement in tax expense.

Speaker #4: Free cash flow increased 18.5% to $308 million, supported by lower cash interest and tax paid, as well as improvements in working capital. The Board declared a final dividend of $0.08 per share, bringing the total FY26 dividend to $0.16 per share and representing a payout of 100% of free cash flow, in line with guidance.

Jolie Hodson: The board declared a final dividend of NZD 0.08 per share, bringing the total FY2026 dividend to NZD 0.16 per share and representing a payout of 100% of free cash flow in line with guidance. Before I get into further detail on our performance, I will first provide an overview of our progress against Spark 30 during the first year. We set this strategy to refocus Spark on our core connectivity while simplifying and optimizing beyond the core, with the ultimate ambition of delivering annuity-like returns and growing dividends for shareholders over time. Slide seven shows how Spark 30 is starting to translate into results. First, we have focused resources and investment where returns are highest with mobile central to the strategy. Active portfolio management delivered NZD 462 million in proceeds from the data center transaction, returning net debt to targeted levels.

Speaker #4: So, before I get into further detail on our performance, I'll first provide an overview of our progress against Spark 30 during the first year.

Speaker #4: We set the strategy to refocus Spark on our core connectivity, while simplifying and optimizing beyond the core, with the ultimate ambition of delivering a newly light returns and growing dividends for shareholders over time.

Speaker #4: Slide 7 shows how Spark 30 is starting to translate into results. First, we've focused resources and investment where returns are highest, with mobile central to the strategy.

Speaker #4: Active portfolio management delivered $462 million in proceeds from the data center transaction, returning net debt to targeted levels, while our 25% retained stake provides shareholders with the ability to participate in future value growth.

Jolie Hodson: While our 25% retained stake provides shareholders with the ability to participate in future value growth. This focus on maximizing the value of our portfolio continues with the strategic review of digital services. Second, we are investing to differentiate and grow. In a highly competitive telco market, we are focusing investment on the areas that matter most to our customers. Network leadership, better customer experiences, and stronger propositions that give customers more reasons to join and stay. Third, we are strengthening the fundamentals of the business. We are delivering structural productivity improvements, growing free cash flow, building employee engagement, and maintaining our strong license to operate. This progress supports the overall premise of Spark 30. Capital and resources aligned to the areas of highest return, investment behind what customers value, and stronger fundamentals to support growing shareholder returns over time.

Speaker #4: This focus on maximizing the value of our portfolio continues with a strategic review of digital services. Second, we're investing to differentiate and grow in a highly competitive telco market.

Speaker #4: We are focusing investment on the areas that matter most to our customers: network leadership, better customer experiences, and stronger propositions that give customers more reasons to join and stay.

Speaker #4: Third, we're strengthening the fundamentals of the business. We're delivering structural productivity improvements, growing free cash flow, building employee engagement, and maintaining our strong license to operate.

Speaker #4: This progress supports the overall premise of Spark 30: capital and resources aligned to the areas of highest return, investment behind what customers value, and stronger fundamentals to support growing shareholder returns over time.

Speaker #4: Slide 8 focuses on one of the ways we've invested to further improve our network experience during the year, with our satellite-to-mobile partnership with Starlink.

Jolie Hodson: Slide eight focuses on one of the ways we have invested to further improve our network experience during the year with our satellite-to-mobile partnership with Starlink. Our terrestrial network reaches 99% of New Zealanders across 4G and 5G. Satellite enables us to extend that reach to the edge into remote areas, black spots, maritime corridors, and places where traditional mobile coverage is limited or unavailable. There has been a lot of interest in satellite and its role within the telco category. For Spark, satellite plays a complementary role, while our mobile network continuing to offer capability and functionality beyond what is possible with satellite alone. The mobile network provides the customer density, indoor performance, and throughput required for everyday use, while satellite adds an additional layer of coverage and resilience.

Speaker #4: Our terrestrial network reaches 99% of New Zealanders across 4G and 5G. Satellite enables us to extend that reach to the edge and to remote areas like spots, maritime corridors, and places where traditional mobile coverage is limited or unavailable.

Speaker #4: There's been a lot of interest in satellite and its role within the telco category. For Spark, satellite plays a complementary role, while our mobile network continues to offer capability and functionality beyond what's possible with satellite alone.

Speaker #4: The mobile network provides the customer density, indoor performance, and throughput required for everyday use, while satellite adds an additional layer of coverage and resilience.

Speaker #4: Spectrum is the key enabler of all types of network technology, with Spark holding management rights to 350 megahertz of mobile spectrum, including the largest holding of the sub-1 gigahertz spectrum.

Jolie Hodson: Spectrum is the key enabler of all types of network technology, with Spark holding management rights to 350 MHz of mobile spectrum, including the largest holding of the sub-1GHz spectrum. On slide 9, we overview our sustainability performance, which remains an important part of our license to operate. Our scope 1 and 2 emissions are tracking 59% below our FY20 baseline and ahead of our FY30 science-based target of a 56% reduction. That is supported by our renewable energy partnership, a lower grid emissions factor, and improved energy efficiency within the business. We have also achieved our scope 3 supplier engagement target with 71% of spend now with suppliers that have science-based targets. Skinny Jump now reaches more than 38,000 households, and Spark Foundation continues to support more New Zealanders to participate in the digital world.

Speaker #4: So, on slide 9, we overview our sustainability performance, which remains an important part of our license to operate. Our Scope 1 and 2 emissions are tracking 59% below our FY20 baseline, and ahead of our FY30 science-based target of a 56% reduction.

Speaker #4: And that's supported by a renewable energy partnership, a lower grid emissions factor, and improved energy efficiency within the business. We've also achieved our Scope 3 supplier engagement target, with 71% of spend now with suppliers that have science-based targets.

Speaker #4: Skinny Jump now reaches more than 38,000 households, and Spark Foundation continues to support more New Zealanders to participate in the digital world. So, slide 10 summarizes the process and the progress we've made against our Spark 30 ambitions in the first year.

Jolie Hodson: Slide 10 summarizes the progress we have made against our Spark 30 ambitions in the first year. On productivity, we have delivered NZD 101 million in annualized savings at the end of FY26, against our FY30 ambition of NZD 150 to NZD 180 million from the FY24 baseline. Free cash flow growth is on track, as is CapEx as a percentage of revenue, and Stewart is going to provide some more detail on that shortly. We still have more work to do to achieve our EBITDA ambition. FY26 adjusted EBITDA is in line with guidance, and where we anticipated it to be in year one based on the current operating environment. EBITDA growth in future years will be underpinned by our ongoing focus on mobile growth, diminishing legacy products, portfolio simplification, and further sustainable cost reduction.

Speaker #4: On productivity, we've delivered $101 million in annualized savings at the end of FY26 against our FY30 ambition of $150 to $180 million from the FY24 baseline.

Speaker #4: Free cash flow growth is on track, as is CapEx as a percentage of revenue, and Stuart's going to provide some more detail on that shortly.

Speaker #4: We still have more work to do to achieve our EBITDA ambition. FY26 adjusted EBITDA is in line with guidance, and where we anticipated it to be—based on the current operating environment.

Speaker #4: EBITDA growth in future years will be underpinned by our ongoing focus on mobile growth, diminishing legacy products, portfolio simplification, and further sustainable cost reduction.

Speaker #4: And that will support further progress towards our ROIC ambition of 11 to 13%, with reported ROIC of 13.8% in FY26 and adjusted ROIC of 8.4%, which was flat on FY25.

Jolie Hodson: That will support further progress towards our ROIC ambition of 11% to 13%, with a reported ROIC of 13.8% in FY26 and adjusted ROIC of 8.4%, which was flat on FY25. Finally, we made strong progress on our non-financial ambitions. Customer satisfaction increased for the sixth consecutive year to 42. Employee engagement was up 11 percentage points. We maintained leadership in network coverage experience, and we are tracking ahead of our science-based target requirements. I am now going to turn to our mobile performance starting on slide 12. Overall, mobile revenue increased 4.4% to NZD 1.5 billion. That was driven by strong device growth. Mobile service revenue returned to growth, increasing 1.1% to NZD 998 million, as consumer and SME mobile service revenue increased 1.4%, supported by strong pay monthly ARPU growth and further stabilization in prepaid connections.

Speaker #4: Finally, we made strong progress on our non-financial ambitions. Customer satisfaction increased for the sixth consecutive year to 42, and employee engagement was up 11 percentage points.

Speaker #4: We maintained leadership in network coverage and experience, and we're tracking ahead of our science-based target requirements. So I'm now going to turn to our mobile performance, starting on slide 12.

Speaker #4: Overall, mobile revenue increased 4.4% to $1.5 billion. That was driven by strong device growth. Mobile service revenue returned to growth, increasing 1.1% to $998 million, as consumer and SME mobile service revenue increased 1.4%, supported by strong pay monthly ARPU growth and further stabilization in prepaid connections.

Speaker #4: Enterprise and government mobile service revenue remained under pressure from competitive pricing, but the rate of ARPU decline slowed compared with the prior year, and connections were broadly flat.

Jolie Hodson: Enterprise and government mobile service revenue remained under pressure from competitive pricing, but the rate of ARPU decline slowed compared with the prior year, and connections were broadly flat. Wholesale revenue continued to grow through Spark's owned messaging products and MVNO partnerships. To understand the drivers of this performance, it is useful to break down mobile into its component parts. I have outlined that on slide 13. In consumer and SME pay monthly, connections were broadly flat, and the small decline that we see was attributable to the 3G closure. While ARPU increased 3.6%, supported by plan and pricing changes and a stronger product innovation pipeline. That pipeline included New Zealand's first kids plan, roaming, and satellite, and IFP acquisitions were up around 15%, supporting higher ARPU acquisition and retention. In prepaid, overall connections were down 3.6%, with the rate of decline slowing from 5.2% in FY25.

Speaker #4: Wholesale revenue continued to grow through Spark's owned messaging products and MVNO partnerships. To understand the drivers of this performance, it's useful to break down mobile into its component parts.

Speaker #4: So, I've outlined that on slide 13. Consumer and SME pay monthly connections were broadly flat, and the small decline that we see was attributable to the 3G closure.

Speaker #4: While ARPU increased 3.6%, supported by plan and pricing changes and a stronger product innovation pipeline. That pipeline included New Zealand's first kids plan, roaming and satellite, and IFP acquisitions, which were up around 15%, supporting higher ARPU acquisition and retention.

Speaker #4: And prepaid overall connections were down 3.6%, with the rate of decline slowing from 5.2% in FY25. Around a quarter of that decline was driven by the one-off impact of the 3G closure.

Jolie Hodson: Around a quarter of that decline was driven by the one-off impact of the 3G closure. ARPU proved resilient, holding broadly flat despite intense price competition. Importantly, our New Zealand base, which accounts for around 89% of our revenue, was up 1.1%. Skinny also grew around 2%, supported by the launch of the 52-week plans that offer greater value for customers who commit for a year. In enterprise and government, we saw further stabilization, with connections broadly flat and a small decline that we saw attributable to low-value 3G connections. Positively, the rate of ARPU decline also slowed from NZD 3.26 in FY25 to NZD 1.92 in FY26. We were pleased with the customer wins and re-wins achieved during the half. If I now move to overall mobile market performance and market share, as outlined on Slide 14.

Speaker #4: APU proved resilient, holding broadly flat despite intense price competition. Importantly, our New Zealand base, which accounts for around 89% of our revenue, was at 1.1%.

Speaker #4: Skinny also grew around 2%, supported by the launch of the 52-week plans that offer greater value for customers who commit for a year. And in Enterprise and Government, we saw further stabilization, with connections broadly flat and a small decline that we saw attributable to low-value 3G connections.

Speaker #4: Positively, the rate of APU decline also slowed, from $3.26 in FY25 to $1.92 in FY26. And we were pleased with the customer wins and re-wins achieved during the half.

Speaker #4: So if I now move to overall mobile market performance and market share as outlined on slide 14, the mobile market grew an estimated 1.9% in FY26, compared with about 1.3% in FY25.

Jolie Hodson: The mobile market grew an estimated 1.9% in FY26, compared with about 1.3% in FY25. Within this context, we materially improved our market share trajectory in a growing market. While our ultimate goal is to get back into share growth, we are flattening the rate of decline, moving from a 1.8 percentage point decline between FY24 and FY25 to a 0.5 percentage points decline between FY25 and FY26. We also saw stabilization through the year. Our mobile service revenue share broadly flat from H1 to H2, which gives us confidence that the actions we are taking are having an impact. Overall, we maintain our number one position in mobile service revenue share. Slide 15 brings together the FY26 activity that is supporting this momentum and the pipeline that we are building for FY27.

Speaker #4: Within this context, we materially improved our market share trajectory in a growing market. So, while our ultimate goal is to get back into share growth, we are flattening the rate of decline—moving from a 1.8 percentage point decline between FY24 and FY25 to a 0.5 percentage point decline between FY25 and FY26.

Speaker #4: We also saw stabilization through the year. Our mobile service revenue share was broadly flat from H1 to H2, which gives us confidence that the actions we're taking are having an impact.

Speaker #4: Overall, we maintained our number one position in mobile service revenue share. Slide 15 brings together the FY26 activity that is supporting this momentum, and the pipeline that we're building for FY27.

Speaker #4: In FY26, we launched satellite-to-mobile. We refreshed roaming and long-term plans. We launched the kids' plans. We introduced 5G Plus use cases that leverage our investment in standalone.

Jolie Hodson: In FY26, we launched satellite to mobile, we refreshed roaming and long-term plans, we launched the kids plans, we introduced 5G Plus use cases that leverage our investment in standalone, we improved digital journeys, and increased customer satisfaction for the sixth year running. Looking ahead, our FY27 pipeline includes new pay monthly and device upgrade propositions, new reward and recognition initiatives, a refreshed wireless broadband lineup, a new My Spark app, and the continued rollout of new store footages across New Zealand. The common thread across this activity is the same, putting more value into mobile, leading a network, and delivering a great customer experience. If I turn now to broadband and business connectivity on Slide 16. Broadband connections declined 4.9% in a highly competitive, price-driven market.

Speaker #4: We improved digital journeys and increased customer satisfaction for the sixth year running. Looking ahead to FY27, our pipeline includes new pay-monthly and device upgrade propositions, new reward and recognition initiatives, a refreshed wireless broadband lineup, a new MySpark app, and the continued rollout of new store fits across New Zealand.

Speaker #4: The common thread across this activity is the same: building more value into mobile, leading in network, and delivering a great customer experience. So, if I turn now to broadband and business connectivity on slide 16, broadband connections declined 4.9% in a highly competitive, price-driven market.

Speaker #4: The decline was predominantly driven by fixed line technologies, with fiber and copper accounting for around 84% of that decline and wireless about 16%. This mitigated the impact on the broadband gross margin, and when combined with product cost management, margins increased by $1 million.

Jolie Hodson: The decline was predominantly driven by fixed line technologies, with fiber and copper accounting for around 84% of that decline, and wireless about 16%. This mitigated the impact on the broadband gross margin, and when combined with product cost management, margins increased by NZD 1 million. We have a strong pipeline of activity plan for wireless broadband in FY27, including a refreshed lineup to improve competitiveness and bundling with mobile. Business connectivity revenue declined 9.9% to NZD 327 million, impacted by the divestment of Digital Island in FY25. The decline of legacy managed data and network products as customers migrate to model alternatives and the phasing of hardware sales and IoT. Pleasingly, the rate of decline in managed data and networks was half that of FY25. We saw some large-scale collaboration migrations completed, and IoT connections grew 5.1% to 2.5 million devices.

Speaker #4: We have a strong pipeline of activity planned for wireless broadband in FY27, including a refreshed lineup to improve competitiveness and bundling with mobile. Business connectivity revenue declined 9.9% to $327 million, impacted by the divestment of Digital Island in FY25.

Speaker #4: The decline of legacy managed data and network products, as customers migrate to modern alternatives, and the phasing out of hardware sales and IoT. Pleasingly, the rate of decline in managed data and networks was half that of FY25.

Speaker #4: We saw some large-scale collaboration migrations completed, and IoT connections grew 5.1% to 2.5 million devices. So, I'm now going to turn to digital services, which we've identified as an area of the business under strategic review.

Jolie Hodson: I am now going to turn to Digital Services, which we have identified as an area of the business under strategic review. As such, it is useful to start with a summary of the business and the products and services included within it before moving to FY26 performance. Slide 18 sets out the key characteristics of the Digital Services business. This division includes cloud, IT services, and smaller adjacent products, such as data and AI consulting and digital identity. Digital Services is a leading provider to New Zealand's B2B market. It has a majority recurring revenue mix, differentiated intellectual property and cloud, IT services and data and AI, and exposure to long-term positive tailwinds as businesses adopt cloud and broader digitization.

Speaker #4: And as such, it's useful to start with a summary of the business and the products and services included within it, before moving to FY26 performance.

Speaker #4: Slide 18 sets out the key characteristics of the Digital Services business. This division includes Cloud, IT Services, and smaller adjacent products such as Data and AI Consulting, and Digital Identity.

Speaker #4: Digital Services is a leading provider to New Zealand's B2B market. It has a majority recurring revenue mix, differentiated intellectual property, and expertise in cloud, IT services, and data and AI. The business also benefits from long-term positive tailwinds as companies adopt cloud and broader digitization.

Speaker #4: It also remains uniquely positioned to support data sovereign storage in New Zealand, as well as offering access to all hyperscalers, and benefiting from global partnerships with Microsoft, Emphasis, and HPE to support efficiency and access to global innovation.

Jolie Hodson: It also remains uniquely positioned to support data sovereign storage in New Zealand, as well as offering access to all hyperscalers and benefiting from global partnerships with Microsoft, Infosys, and HPE to support efficiency and access to global innovation. This business continues to have a leading market position, significant scale, and a strong customer base. It has helped New Zealand business and government customers transition from traditional technology environments to modern cloud environments over many years. At the same time as outlined on slide 19, this part of the business has faced both cyclical and structural challenges. Within Spark, it has been the hardest hit by weaker business and government spending in New Zealand, and it continues to navigate structural changes as cloud volumes migrate from private to public and IT services from legacy to modern alternatives.

Speaker #4: This business continues to have a leading market position, significant scale, and a strong customer base. It has helped New Zealand business and government customers transition from traditional technology environments to modern cloud environments over many years.

Speaker #4: At the same time, as outlined on slide 19, this part of the business has faced both cyclical and structural challenges. Within Spark, it has been the hardest hit by weaker business and government spending in New Zealand, and it continues to navigate structural changes, as cloud volumes migrate from private to public and IT services shift from legacy to modern alternatives.

Speaker #4: It was this context that contributed to digital services being identified as beyond the core and Spark 30, with a strategic review the next logical step to assess how we maximize shareholder value from this part of Spark in the future.

Jolie Hodson: It was this context that contributed to Digital Services being identified as beyond the core in Spark 30. With this strategic review, the next logical step to assess how we maximize shareholder value from this part of Spark in the future. An external advisor has been appointed, and that review is expected to be completed in the H1 of FY27. I will note that there is no certainty that the review will result in a transaction, nor as to the terms or value of any outcome, and we will provide an update at our H1 results in February. On slide 20, we provide more detail on the performance of Digital Services during FY26. Overall revenue declined 3.4% to NZD 372 million, reflecting the ongoing shift from private to public cloud, some softer IT services demand, and continued migration from legacy services to modern alternatives.

Speaker #4: An external advisor has been appointed, and that review is expected to be completed in the first half of FY27. I will note that there is no certainty that the review will result in a transaction, nor as to the terms or value of any outcome, and I will provide an update at our half-year results in February.

Speaker #4: So on slide 20, we provide more detail on the performance of digital services during FY26. Overall, revenue declined 3.4% to $372 million, reflecting the ongoing shift from private to public cloud.

Speaker #4: Some softer IT services demand and continue migration from legacy services to modern alternatives. Within that public cloud revenue continues to grow strongly at 20%, benefiting from long-term demand tailwinds.

Jolie Hodson: Within that public cloud revenue continues to grow strongly at 20%, benefiting from long-term demand tailwinds. Private cloud revenue declined 12%, due in part to the impact of a NZD 9 million reclassification of services due to the integration of CCL. The remaining underlying decline was due to the industry-wide shift to public cloud. IT service management revenue declined 10.3% to NZD 104 million, reflecting continued migration from legacy services to Spark's modern ServiceFlex platform and some subdued project work. We have been actively managing the cost base, with labor costs reducing faster than revenue, and CapEx needs remain small and steady, reflecting the capital-light nature of a services business. Other Digital Services revenue was NZD 35 million, up 2.9% on FY25, with improvement in gross margin driven by product cost reductions.

Speaker #4: Private cloud revenue declined 12%, due in part to the impact of a $9 million reclassification of services due to the integration of CCL. The remaining underlying decline was due to the industry-wide shift to public cloud.

Speaker #4: IT service management revenue declined 10.3% to $104 million, reflecting continued migration from legacy services to Spark's modern Service Flex platform and some subdued project work.

Speaker #4: We've been actively managing the cost base, with labor costs reducing faster than revenue. CapEx needs remain small and steady, reflecting the capital-light nature of a services business.

Speaker #4: Other digital services revenue was $35 million, up 2.9% on FY25, with improvement in gross margin driven by product cost reductions. So I'm now going to hand over to Stuart.

Jolie Hodson: I am now going to hand over to Stewart, who is going to talk you through our detailed financial performance, capital management, and guidance.

Speaker #4: He's going to talk you through our detailed financial performance, capital management, and guidance.

Speaker #1: Thank you very much, Charlie, and good morning to everyone on the call. So I'm going to pick up on slides 22 and 23, and I'll talk to them collectively and talk through those key financial outcomes.

Stewart Taylor: Thank you very much, Charlie, and good morning to everyone on the call. I am going to pick up on slides 22 and 23, and I will talk to them collectively and talk through those key financial outcomes. I just did want to pick up on explaining the differences between our reported and adjusted earnings again. If I look at slide 22, the FY2026 reported EBITDA of NZD 129.5 million, which is up 23% year-on-year, includes the NZD 278 million gain on the sale of the 75% stake in the data center business. However, it does exclude the net earnings of that business up until the date of that sale. It was classified as a discontinued operation. If you drop down, you will see a number of NZD 13 million against net earnings from discontinuing operation there. That obviously sits outside of the EBITDI number and just above NPAT.

Speaker #1: I just did want to pick up on explaining the differences between our reported and adjusted earnings again. So if I look at slide 22, the FY26 reported EBITDA of $1,295 million, which is up 23% year on year, includes the $278 million gain on the sale of the 75% stake in the data center business.

Speaker #1: However, it does exclude the net earnings of that business up until the date of that sale. It was classified as a discontinued operation. So, if you drop down, you'll see a number of $13 million against net earnings from discontinued operations there.

Speaker #1: So, that obviously sits outside of the EBITDA number and just above NPAT. So, the FY26 adjusted result is effectively the opposite. It excludes the $278 million gain on sale, but this time it does include the earnings from the data center business up until the date of the sale.

Stewart Taylor: The FY2026 adjusted result is effectively the opposite. It excludes the NZD 278 million gain on sale. But this time it does include the earnings from the data center business up until the date of the sale. If you do the same drop-down, you will see that there is nothing against their earnings from discontinuing operation there in the adjusted, because that is included in EBITDI for the purpose of the adjusted earnings. Looking at the comparatives for FY2025. FY2025 adjusted earnings does remove the NZD 71 million gain on sale from the sale of the Connexa stake, and it also excludes the NZD 53 million of transformation costs that we took in that year. The comparison of FY2026 to FY2025 adjusted earnings therefore provides the best like for like year-on-year performance comparison.

Speaker #1: And if you do the same dropdown, you'll see that there is nothing against that earnings from discontinuing operation there in the adjusted, because that's included in EBITDA for the purpose of the adjusted earnings.

Speaker #1: Now, looking at the comparatives for FY25—so FY25 adjusted earnings does remove the $71 million gain on sale from the sale of the Connecta stake, and it also excludes the $53 million of transformation costs that we took in that year.

Speaker #1: So, adjusting the comparison of FY26 to FY25 adjusted earnings therefore provides the best like-for-like year-on-year performance comparison. Now, if I go back to reported earnings, our tax expense was marginally lower in FY26, as the gain on sale itself was substantially non-taxable.

Stewart Taylor: If I go back to reported earnings, our tax expense was marginally lower in FY2026 as the gain on sale itself was substantially non-taxable. Just dropping down, business as usual CapEx was flat at NZD 401 million year-on-year, and it is 10.8% of our adjusted operating revenues. The unreported NPAT was up 91.9% to NZD 499 million. Just moving across to adjusted EBITDI, that declined 2.4%. This primarily, and Jolie just talked about this, it primarily reflects the decline in digital services, the decline in legacy voice, which now represents only 3.2% of our overall revenue. And we had five fewer months of data center earnings following the sale of that business partway through the year. Adjusted net profit after tax was down to only NZD 2 million as the tax expense was proportionately lower. Those are slides 22 and 23.

Speaker #1: Just dropping down, business-as-usual CapEx was flat at $401 million year-on-year, and it's 10.8% of our adjusted operating revenues. The unreported NPAT was up 91.9%, to $499 million.

Speaker #1: Just moving across to adjusted EBITDA, that declined 2.4%. And this primarily—and Jolie just talked about this—it primarily reflects the decline in digital services.

Speaker #1: The decline in legacy voice, which now represents only 3.2% of our overall revenue, and we had five fewer months of data center earnings following the sale of that business partway through the year.

Speaker #1: Adjusted net profit after tax was down to only $2 million, as tax expense was proportionately lower. So those are slides 22 and 23.

Speaker #1: I'm going to move on now, and I'm going to talk to slide 24, which is the first of two slides covering our cost reduction program and the progress that we have made on that.

Stewart Taylor: I am going to move on now and I am going to talk to slide 24, which is the first of two slides covering our cost reduction program and the progress that we have made on that. If I go back to our H1 results, when we talked to our H1 results in February, FY26 productivity benefits were weighted to H1, and that is primarily due to the timing of labor benefits falling within H2 FY25 and expected OpEx increases, which were going to come through in H2 FY26. What I can confirm is that overall, we have ended the year with NZD 40 million in productivity benefits year-on-year. This includes NZD 35 million of sustainable product cost reductions and a net labor OpEx benefit of NZD 5 million. When aggregated, this is in line with our narrowed target of NZD 40 million to NZD 50 million in year.

Speaker #1: So if I go back to our first half results, and when we talked to our first half results in February, FY26 productivity benefits were weighted to H1, and that’s primarily due to the timing of labor benefits falling within H2 FY25, and expected opex increases, which are going to come through in H2 FY26.

Speaker #1: Now, what I can confirm is that overall, we have ended the year with $40 million in productivity benefits year-on-year. This includes $35 million of sustainable product cost reductions, and a net labor opex benefit of $5 million.

Speaker #1: And so, when aggregated, this is in line with our narrow target of $40 to $50 million in-year. Now, starting with our product costs—so that's the bar chart on the left, the first bar chart there.

Stewart Taylor: Starting with our product costs. That is the first bar chart there. Our product costs are over NZD 1.7 billion, and we saw a NZD 65 million net increase, connected with product volume sold. That is primarily driven by higher sales of mobile devices and plans, and partially offset by lower sales of declining legacy products. Over and above that, we then delivered NZD 35 million of sustainable product cost savings. This came through a combination of better buying terms with major suppliers and also the benefit of exiting some legacy products as well as ongoing simplification across the group. If I go to the second chart on the right-hand side in labor and OpEx, we have called out the net benefit of the introduction of our new technology delivery model, and that net benefit is NZD 23 million.

Speaker #1: Our product costs are over $1.7 billion, and we saw a $65 million net increase connected with product volume sold. That's primarily driven by higher sales of mobile devices and plans, and partially offset by lower sales of declining legacy products.

Speaker #1: Over and above that, we then delivered $35 million of sustainable product cost savings. This came through a combination of better buying terms with major suppliers and also the benefit of exiting some legacy products, as well as ongoing simplification.

Speaker #1: Across the group. So then, if I go to the second chart on the right-hand side, in labor and opex, we've called out the net benefit of the introduction of our new technology delivery model, and that net benefit is $23 million.

Speaker #1: So it included $58 million worth of labor savings, offset by a $35 million increase in other OPEX, which are the costs of our newly established global partnerships.

Stewart Taylor: It included NZD 58 million worth of labor savings, offset by a NZD 35 million increase in other OpEx, which are the costs of our newly established global partnerships. Across OpEx, some of this net benefit was offset by general inflationary pressures. We also put additional money into market to support the brand and the growth of our mobile business during the year. We have incurred severance costs, and we have some one-off shutdown costs in relation to legacy products such as 3G. These cost increases would not be expected to occur at the same rate in future years. I will also note that data center costs were NZD 6 million less due to the timing of the transaction. I will now go to slide 25.

Speaker #1: Now, across opex, some of this net benefit was offset by general inflationary pressures. We also put additional money into market to support the brand and the growth of our mobile business during the year.

Speaker #1: We've incurred some additional severance costs, and we have some one-off shutdown costs in relation to legacy products such as 3G. Now, these cost increases would not be expected to occur at the same rate in future years.

Speaker #1: Look, I'll also note that data center costs were $6 million less due to the timing of the transaction. I'll now go to slide 25.

Speaker #1: And this really summarizes how the FY26 result places us relative to our FY27 productivity target of $110 to $140 million in annualized savings, which was based on our FY24 baseline.

Stewart Taylor: This really summarizes how the FY26 result places us relative to our FY27 productivity target of NZD 110 million to NZD 140 million annualized savings, which was based on our FY24 baseline. At the end of FY26, we have now delivered NZD 101 million of cumulative cost reductions. This includes NZD 46 million in labor and other OpEx, and NZD 55 million in product costs. We are confident we remain on track to meet that FY27 ambition, and we expect to deliver that through three main levers. The first is additional labor benefits through business simplification and the implementation of some of the organizational structure changes which we announced last month. The second is managing other OpEx to be broadly flat year-on-year. This means that we do continue to have inflationary pressure, but we will offset that with our cost reduction program.

Speaker #1: Now, at the end of FY26, we've delivered $101 million of cumulative cost reductions. This includes $46 million in labor and other opex, and $55 million in product costs.

Speaker #1: So we're confident that we may remain on track to meet that FY27 ambition, and we expect to deliver that through three main levers. The first is additional labor benefits through business simplification.

Speaker #1: And the implementation of some of the organizational structure changes which we announced last month. The second is managing other opex to be broadly flat year-on-year.

Speaker #1: This means that we do continue having inflationary pressure, but we will offset that with our cost reduction program. And I think, similar to the savings achieved in FY26, we'll continue to deliver further sustainable product cost savings across that $1.7 billion cost base.

Stewart Taylor: And I think similar to the savings achieved in FY26, we will continue to deliver further sustainable product cost savings across that NZD 1.7 billion cost base. Now, I will move on now to our capital management framework. So this is slide 26. You may remember when we talked to you a year ago, we set out a new capital management framework, and we wanted to provide a timely reminder of the objectives of that framework and what we have actually done to deliver against that during the year. So the first one is the proceeds of the data center transaction have enabled us to reduce net debt to targeted levels. And so they have returned our net debt to EBITDAI ratio to around 1.7 times, which is consistent with the metric for our current credit rating. Our BAU CapEx of NZD 401 million is flat on last year.

Speaker #1: Now, if I just I'll move on now to our capital management framework. So this is slide 26. So you may remember when we talked to you a year ago, we set out a new capital management framework, and we wanted to provide a timely reminder of the objectives of that framework and what we've actually done to deliver against that during the year.

Speaker #1: So the first one is the proceeds of the data center transaction and have enabled us to reduce net debt to that targeted levels. And so they've returned net debt to net debt our net debt to EBITDA ratio to around 1.7 times.

Speaker #1: Which is consistent with the metric for our current credit rating. Our BAU capex, the $401 million, is flat on last year, represents 10.8% of revenue, and it's sort of marginally, sort of very close to the midpoint of that targeted capex-to-revenue ratio of 10% to 12%.

Stewart Taylor: Represents 10.8% of revenue, and it is marginally very close to the midpoint of that targeted CapEx to revenue ratio of 10% to 12%. In 2026, we did have strategic CapEx of NZD 66 million, but this purely represented CapEx that was committed as part of the data center transaction and wasn't itself reflected in the sale price of that business. And then objective three around sustainable shareholder returns. So in line with guidance, the boards declared a final dividend of NZD 0.08 per share, which gives a total dividend of NZD 0.16 per share, which is 100% payout of free cash flow. This final dividend will be 50% imputed. The boards also determined that the dividend reinvestment plan will be reinstated for this final dividend, with the shares issued at a 0% discount to those who elect to participate in the plan.

Speaker #1: In '26, we did have strategic capex of $66 million, but this purely represented capex that was committed as part of the data center transaction.

Speaker #1: And wasn't itself reflected in the sale price of that business. And then objective three, around sustainable shareholder returns. So, in line with guidance, the Board has declared a final dividend of 8 cents per share.

Speaker #1: Which gives a total dividend of 16 cents per share, which is a 100% payout of free cash flow. This final dividend will be 50% imputed.

Speaker #1: The Board has also determined that the Dividend Reinvestment Plan will be reinstated for this final dividend, with the shares issued at a 0% discount to those who elect to participate in the plan.

Speaker #1: And finally, reported return on invested capital was 13.8%, compared to 8.7% in FY25. Again, this was mainly due to the gain on sale.

Stewart Taylor: And finally, reported return on invested capital was 13.8%, and that was versus 8.7% in FY25. Again, this was mainly due to the gain on sale of the data center business. When this is adjusted from the result, return on invested capital was 8.4%, and which was broadly similar with the FY25 ROIC when calculated on a similar basis. Now on slide 26, we have outlined our CapEx in more detail, and this really shows how this investment is aligned to support our Spark 30 strategy through network leadership and resilience, better customer experience, and of course, efficiency through tech and AI. Again, BAU CapEx of NZD 401 million was the same as it was in FY25. Now if I start from the top, our investment in fixed network and international cables increased 40% to NZD 88 million. Well, this was delivering increased capacity for fiber and transport and IP networks to meet the growth in forecasted demand for data, as well as ensuring that we are making ongoing resilience improvements, which absolutely underpin our network reliability.

Speaker #1: Of the data center business. When this is adjusted from the result, return on invested capital was 8.4%, which was broadly similar to the FY25 ROIC when calculated on a similar basis.

Speaker #1: Now, on slide 26, we have outlined our capex in more detail. This really shows how this investment is aligned to support our SPK 30 strategy through network leadership and resilience, better customer experience, and, of course, efficiency through tech and AI.

Speaker #1: Again, BAU capex of $401 million was the same as it was in FY25. Now, if I start from the top, our investment in fixed network and international cables increased 40% to $88 million.

Speaker #1: So what was this doing? Well, this was delivering increased capacity for fiber, transport, and IP networks to meet the growth in forecasted demand for data.

Speaker #1: As well as ensuring that we're making ongoing resilience improvements, which absolutely underpin our network reliability. The second part of this is investing in our mobile network, which remains critical to our success.

Stewart Taylor: The second part of this is investing in our mobile network, which remains critical to our success. We spent NZD 140 million delivering increased capacity across 236 4G and 5G sites for our customers, and a further 81 sites built across the country. This spend itself was actually 18% lower than FY25, but that was largely due to the completion of the build of our 5G standalone mobile core. Now, spend on IT systems and AI increased 5% to NZD 155 million. This spend really enables us to sustain and license core business systems that underpin our operations.

Speaker #1: We spent $140 million delivering increased capacity across 236 4G and 5G sites for our customers, and a further 81 sites built across the country.

Speaker #1: This spend itself was actually 18% lower than FY25, but that was largely due to the completion of the build of our 5G standalone mobile core.

Speaker #1: Now, spend on IT systems and AI increased 5 million—sorry, 5%—to $155 million. Now, this spend really enables us to sustain and license core business systems that underpin our operations.

Speaker #1: It also captures our investment in enabling automation and efficiency, and expanding the use of AI across the business. Ultimately, this is to support our strategic objectives of better customer experiences and delivering greater productivity across Spark.

Stewart Taylor: It also captures our investment in enabling automation and efficiency and expanding the use of AI across the business. Ultimately, this is to support our strategic objectives of better customer experiences and delivering greater productivity across Spark. Finally, there was about NZD 18 million of other CapEx, mainly made up of property and cloud investment, and this was down slightly in previous years. I did talk before, strategic CapEx in the year is at NZD 66 million versus previous guidance of NZD 55 million, and this was due to additional committed CapEx on the data center business being brought forward, but under the terms of the sale agreement was paid for by Spark, but then reflected in the final amount received by PUP in the wash up of the transaction. Next slide I am going to talk to is on free cash flow.

Speaker #1: Finally, there was about $18 million of other capex, mainly made up of property and cloud investment. This was down slightly on previous years. I did talk before—strategic capex in the year is at $66 million, versus previous guidance of $55 million.

Speaker #1: And this was due to additional committed capex on the data center business being brought forward, but under the terms of the sale agreement, was paid for by Spark, but then reflected in the final amount received by PUP in the wash-up of the transaction.

Speaker #1: So next slide, I'm going to talk to is just is on free cash flow. And so we've reported 18 and a half percent growth in free cash flow.

Stewart Taylor: We have reported an 18.5% growth in free cash flow, and that is supporting the payment of a NZD 0.16 per share dividend. If I look through the key drivers, there is a NZD 75 million increase year on year. Sorry. The key drivers are NZD 75 million increase, a lower cash paid on interest and tax, plus a release of cash from changes in working capital. The cash paid on tax was lower as we utilized the prepaid tax asset, which will continue to provide further benefit to free cash flows that unwind in future years. Cash paid on leases did increase by NZD 37 million.

Speaker #1: And that is supporting the payment of a 16 cents per share dividend. If I look through the key drivers, there's a $75 million increase year on year.

Speaker #1: Sorry, the key drivers are a $75 million increase, lower cash paid on interest and tax, plus a release of cash from changes in working capital.

Speaker #1: The cash paid on tax was lower as we utilized the prepaid tax asset, which will continue to provide further benefit to free cash flows that unwind in future years.

Speaker #1: Now, cash paid on leases did increase by $37 million. This was due to a combination of more mobile sites being built, and also the fact that FY25 included a $12 million one-off benefit from moving into the new corporate office.

Stewart Taylor: This was due to a combination of more mobile sites being built and also the fact that FY25 included a NZD 12 million one-off benefit from moving into the new corporate office. We would expect the cash paid for leases in FY27 to be similar to that in FY26. We also have a NZD 56 million benefit from working capital changes in FY26. This was due to a reduction in receivables and an increase in the tight management of payables. We did, during the period, undertake the transaction with Challenger for the sale of our IFP receivables, and so the NZD 219 million impact of the sale of IFP receivables has been completely excluded from this outcome, given it is the first year of the transaction. I will now turn to the debt slide.

Speaker #1: We would expect the cash paid for leases in FY27 to be similar to that in FY26. We also have a $56 million benefit from working capital changes in FY26.

Speaker #1: This was due to a reduction in receivables and an increase in pay, and the tight management of payables. We did, during the period, undertake the transaction with Challenger for the sale of our IFP receivables.

Speaker #1: And so the $219 million impact of the sale of IFP receivables has been completely excluded from this outcome, given it's the first year of the transaction.

Speaker #1: I'll now turn to I'll now turn to the debt slide. And the risk of repeating myself, but the proceeds of 75% of the sale of the 75% of the data center business has reduced our core net debt 35% to 899 million.

Stewart Taylor: At the risk of repeating myself, the proceeds of the sale of the 75% of the data center business has reduced our core net debt 35% to NZD 899 million. Net debt to EBITDA ratio was turned to around 1.7x as at 30 June 2026, based on the S&P methodology. As we have said before, we remain focused on maintaining a strong balance sheet and targeting metrics consistent with our current credit rating. You will also note that our overall borrowing costs reduced in FY26 on a like-for-like basis to 5.5%. That reflects the mix of debt we have drawn down versus trends in market, where I know rates are generally trending up. The FY26 rate, in this case, excludes the initial loss on the sale of the IFP receivables book to improve comparability. Of course, levels of gearing and interest cover, I consider, remain very healthy.

Speaker #1: And net debt to EBITDA ratio was around 1.7 times as at 30 June 2026, based on the S&P methodology. As we've said before, we remain focused on maintaining a strong balance sheet and targeting metrics consistent with our current credit rating.

Speaker #1: You'll also note that our overall borrowing costs reduced in FY26, on a like-for-like basis, to 5.5%. And that reflects the mix of debt we've drawn down versus trends in the market, where I know rates are generally trending up.

Speaker #1: The FY26 rate in this case excludes the initial loss on the sale of the IFP receivables book to improve comparability. Of course, levels of gearing and interest cover, I consider, remain very healthy.

Speaker #1: And so, turning to the last of my slides—the one I'm sure there's a lot of interest in—is around our FY27 guidance. So, I'll just run through this very quickly.

Stewart Taylor: Turning to the last of my slides, the one I am sure there is a lot of interest in is around our FY27 guidance. I will just run through this very quickly. We are guiding to adjusted EBITDA within the range of NZD 1,010 to NZD 1,080 million. This really reflects ongoing mobile service revenue growth and productivity benefits, and we do expect that to be partially offset by the exit of the data center business during 2026, and continued margin across the digital services business, and some ongoing decline of diminishing legacy products, noting my previous comments that those are now a smaller share of our revenue. BAU CapEx is expected to be in the range of NZD 350 to NZD 380 million.

Speaker #1: So we're guiding to adjusted EBITDA within the range of $1.01 billion to $1.08 billion. And this really reflects ongoing mobile service revenue growth and productivity benefits.

Speaker #1: And we do expect that to be partially offset by the exit of the data center business during '26 and continued margin pressure across the digital services business.

Speaker #1: And some ongoing decline of diminishing legacy products, noting my previous comments that those are now a smaller share of our revenue. BAU capex is expected to be in the range of $350 million to $380 million.

Speaker #1: That's down in FY26 as we benefit from the maturing 5G rollout, lower licensing investment in core systems, and really taking a disciplined approach to where we invest our capital as we simplify the business.

Stewart Taylor: That is down on FY26 as we benefit from the maturing 5G rollout, lower licensing investment in core systems, and really taking a disciplined approach to where we invest our capital as we simplify the business. For free cash flow, we expect this to be between NZD 300 and NZD 350 million. The growth there primarily driven by an improvement in EBITDA, the reduction in cash CapEx, and the ongoing unwind of our prepaid tax asset. Then finally, in line with our capital management framework, it is expected that the dividend in FY27 would represent 90% to 100% of the free cash flow. What we have also done here is we have included a target FY27 dividend range of NZD 0.16 to NZD 0.18 per share.

Speaker #1: For free cash flow, we expect this to be between $300 million and $350 million. The growth there is primarily driven by an improvement in EBITDA and a reduction in cash capex on the ongoing unwind of our prepaid tax asset.

Speaker #1: And then finally, in line with our capital management framework, it's expected that the dividend in FY27 would represent 90 to 100% of the free cash flow.

Speaker #1: Now, what we've also done here is we've included a target FY27 dividend range of 16 to 18 cents per share. And really, that is in the interest of providing investors with greater clarity on the expected range of the dividend based on both the free cash flow guidance range and the fact that we have a 90 to 100% payout ratio on that free cash flow.

Stewart Taylor: Really that is in the interest of providing investors with greater clarity on the expected range of the dividend based on both the range, the free cash flow guidance range, and also the fact that we have a 90% to 100% range, payout ratio on that free cash flow. On that, I will hand back to you, Jolie. Thank you.

Speaker #1: So on that, I will hand back to you, Jolie. Thank you.

Speaker #2: Thanks, Stuart. So, to summarize for FY26, we delivered our results in line with guidance. We grew free cash flow, returned net debt to targeted levels, and delivered the first year of SPAC 30 with tangible progress against the areas we said mattered most.

Jolie Hodson: Thanks, Stewart. To summarize FY26, we delivered our result in line with guidance. We grew free cash flow. We returned net debt to targeted levels and delivered the first year of Spark 30 with tangible progress against the areas we said mattered most. We move into FY27 with strengthened fundamentals, a clearer strategic focus, and a strong pipeline of activity designed to build value in mobile, to lead a network, and to deliver great customer experiences. Future EBITDA growth will be supported by continued mobile momentum, further sustainable cost reduction, diminishing legacy products, and an ongoing portfolio management. Our ambition remains simple. It is better with Spark. We are determined to deliver more for our customers, our people, and our shareholders. With that, I am going to hand now back to the moderator to facilitate the Q&A session now. Thank you.

Speaker #2: We move into FY27 with strengthened fundamentals, a clearer strategic focus, and a strong pipeline of activity designed to build value in mobile, to lead in network, and to deliver great customer experiences.

Speaker #2: Future EBITDA growth will be supported by continued mobile momentum, further sustainable cost reduction, diminishing legacy products, and ongoing portfolio management. Our ambition remains simple.

Speaker #2: It's better with Spark. We're determined to deliver more for our customers, our people, and our shareholders. So with that, I'm going to hand now back to the moderator to facilitate the Q&A session.

Speaker #2: Thank you.

Speaker #1: Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two.

Operator 2: Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Leo Pan from E&P. Please go ahead.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Leo Pan from E&P. Please go ahead.

Speaker #1: If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Leo Pan from EMP.

Speaker #1: Please go ahead.

Speaker #3: Hi Jolie, Stuart. This is Leo from Evans & Partners. I think, just to start with, I’ve got two questions here. The first one: on mobile enterprise and gov, you guys know that the rate of decline in ARPU has slowed this year.

Leo Pan: Hi, Jolie, Stuart. This is Leo from Evans and Partners. I think just to start with, I have two questions here. First one on mobile Enterprise and Gov. You guys noted that the rate of decline in ARPU has slowed this year. Can we expect that to further moderate in FY27? How is that environment looking in EG broadly?

Speaker #3: Can we expect that to further moderate in FY27? And how is that environment looking in E&G broadly?

Speaker #2: Okay, I'll take your first question, and then we'll come back to your second one. In terms of enterprise and government, we have seen that rate slowing.

Jolie Hodson: Okay. I will take your first question, then we will come back to your second one.

Leo Pan: Yeah.

Jolie Hodson: In terms of Enterprise and Government, we have seen that rate slowing. If you think back to between 2024 and 2025, we saw around a 16% reduction in service revenue. Sorry, that dropped to 7% this year. What I would say, though, is most of the Enterprise and Government contracts are three to five-year type contracts. This is a natural portfolio renewal. Our expectation, it will be similar levels of change in FY27.

Speaker #2: If you think back to between '24 and '25, we saw around a 16% reduction in service revenue—that's 16%. Sorry, and that dropped to 7% this year.

Speaker #2: What I would say, though, is that most of the enterprise and government contracts are three- to five-year type contracts. This is a natural portfolio renewal, but our expectation is that there'll be similar levels of change in FY27.

Leo Pan: Cool. Thank you. Just maybe broadly, how is that competitive environment looking?

Speaker #3: Cool. Thank you. And just maybe broadly, how's that competitive environment looking?

Speaker #2: From a competitive environment, we're really pleased with the customers that we're winning and really winning within that. I think we've seen a stabilization on that overall pricing competition component.

Jolie Hodson: From a competitive environment, we are really pleased with the customers we are winning and re-winning within that. I think we are seeing a stabilization in that overall pricing competition component. So really more what you are seeing is the flow-through of some of those impacts across the portfolio. You can see from the connections, we are broadly stable in that base and the ARPU's reduction is improving as well.

Speaker #2: So really, more of what you're seeing is the flow-through of some of those impacts across the portfolio. But you can see from the connections, we're broadly stable in that base, and the ARPU reduction is improving as well.

Speaker #3: Great. And if I could squeeze in just one more, please.

Leo Pan: Great. If I could squeeze in just one more, please.

Jolie Hodson: Sure.

Speaker #2: Sure.

Speaker #3: In terms of the price increase you guys rolled out for consumer mobile at the end of July, what are you seeing in terms of churn, and how should we be thinking about ARPU and revenue growth against maybe some lost subs?

Leo Pan: In terms of the price increase you guys rolled out for consumer mobile at the end of July.

Jolie Hodson: Yes

Leo Pan: What are you guys seeing in terms of churn and like how should we be thinking about ARPU revenue growth against maybe some lost subs?

Speaker #2: So I think from a point of view of the July price increase, effectively on the bill—because obviously we do have two points where we notify the price increase and then when it comes through—we've been pleased to see the levels of churn are sitting below what we would have anticipated within that.

Jolie Hodson: I think from a point of view of the July price increase effectively on the bill, because obviously we do have two points where we notify the price increase and then when it comes through. We have been pleased to see the levels of churn sitting below what we would have anticipated within that. The price increases on average were around NZD 3 if you were to look at it per month for most of those pay monthly plans. And I think if you compare that to the investments we make in networks and the resilience and importance of mobile connectivity for our customers, I think it is a fair exchange.

Speaker #2: The price increases on average were around $3 if you were to look at it per month for most of those pay monthly plans. And I think if you compare that to the investments we're making in networks to enhance the resilience and importance of mobile connectivity for our customers, I think it's a fair exchange.

Speaker #3: Okay. Thanks guys.

Leo Pan: Okay. Thanks, guys.

Speaker #2: Thank you.

Jolie Hodson: Thank you.

Speaker #1: Thank you. Your next question comes from Ben Crozier from Fawcett Bar. Please go ahead.

Operator 2: Thank you. Your next question comes from Ben Crozier of Forsyth Barr. Please go ahead.

Operator: Thank you. Your next question comes from Ben Crozier of Forsyth Barr. Please go ahead.

Speaker #4: Good morning, team. Just the first one from me, just on the DIP. Can you just give us a bit more rationale for turning the DIP on versus, say, paying out a lower dividend?

Ben Crozier: Morning, team. Just first one for me just on the DRP. Can you just give us a bit of more rationale of turning the DRP on, versus say, paying out a lower dividend? Presumably a DRP will, you get a bit of share count creep and so the dividend growth going forward will be slightly lower, and you sort of alluded to net debt back to target range. Why do you need a DRP on at this stage then?

Speaker #4: Presumably, with the DRIP, you’ll get a bit of share count creep, so dividend growth going forward will be slightly lower, and you sort of alluded to net debt being back to the target range.

Speaker #4: Why do you need a DIP-on at this stage then?

Speaker #1: Yeah, Ben, I can answer that. I mean, so there's a couple of things, there's a couple of drivers there. The first one is we've had quite a lot—we had quite a lot of feedback from our retail investor base on the DRP, and so it has proved popular with our retail investors.

Stewart Taylor: Yeah, Ben, I can answer that. I mean, so there's a couple of drivers there. The first one is we had quite a lot of feedback from our retail investor base on the DRP, and so it has proved popular with our retail investors, so it's something we considered we wanted to switch back on. There's also the point around, whilst we're back at 1.7 times, we're looking to create sustainable headroom relative to that S&P metric, and that we've got a number of levers available to us. It includes the dividend payout ratio, and it also includes the DRP as well. So it does have some value there. And that's the balance we are trying to strike. Now, I would note that the DRP has it at a 0% discount as well. So, it does not come at a discount this time around.

Speaker #1: So it's something we considered we wanted to switch back on. There's also the point around I mean, whilst we're back at 1.7 times, we're looking to create with our looking to create sustainable headroom relative to the S&P metric and that we've got any we've got a number of levers available to us.

Speaker #1: It includes the dividend payout ratio, and it also includes the DRP as well. So it does have some value there, and that's the balance we're trying to—we are trying to strike now.

Speaker #1: I would note that the DRP as it had a 0% discount as well. So there is it doesn't it does not come at a discount this time around.

Speaker #4: Yeah, no, thank you. And maybe just on fixed wireless, I think if we go back to the strategy day, I think you sort of indicated that fixed wireless still has more growth.

Ben Crozier: No, thank you. And maybe just on fixed wireless, I think if we go back to the strategy day, I think you're sort of targeting, the fixed wireless still has more growth, and I guess over the last year has slipped back. Can you just sort of give a bit more color on where those sort of losses have been? Are they just in rural to Starlink, or are there urban losses as well?

Speaker #4: And I guess, over the last year, has slipped back. Can you just sort of give a bit more color on where those sorts of losses have been?

Speaker #4: Are they just in rural to Starlink, or is it urban losses as well?

Speaker #2: I think it'd be a combination. We were talking about 8,000 connections across over 200,000 base in that wireless broadband. So, it will be a combination.

Jolie Hodson: I think it will be a combination. We are talking about 8,000 connections across over 200,000 base in that wireless broadband, so it will be a combination. It is a highly competitive market, and I think when we talk about strategy day, we talked about the opportunity for 5G, and of course, as that rollout continues across the country and we have greater population coverage, then you have got the opportunity to add more capacity for customers to use, and therefore open up more addresses, and you also open up the coverage component too through that. We still believe that wireless broadband has opportunity to grow. We are relaunching new plans in FY27, which will be. Well, I will not say too much on the call because it is obviously open to public, but effectively more competitive, and so we think that will also help with that shift forward.

Speaker #2: It is a highly competitive market. And I think, as when we talk about strategy—we had Strategy Day—we talked about the opportunity for 5G. And, of course, as that rollout continues across the country and we have greater population coverage, then you’ve got the opportunity to add more capacity for customers to use, and therefore open up more addresses. And you also open up the coverage component too, through that.

Speaker #2: So we still believe that wireless broadband has opportunity to grow. We're relaunching new plans in FY27, which will be—well, I won't say too much on the call because it's obviously open to the public, but effectively more competitive, and so we think that will also help with that shift forward.

Speaker #4: Yeah. Maybe just the last one quickly on the data center business. You still have 25% of it, and there's still that earn-out to come—I think it's near $28 million.

Ben Crozier: Yeah. Maybe just last one quickly on the data center business. You still have 25% of it, and there is still that earn-out to come. I think it is end of 2028. Is that business tracking? Are you still confident you can receive that earn-out?

Speaker #4: Has that business been tracking as expected? Are you still confident you can receive that earn-out and everything?

Speaker #1: Yeah, I mean, there are two tranches to the earn-out, Ben, and that's if you pick through the annual report—I think it's in Note 1.4. The first of those is based on meeting some performance metrics between 31 December this year and February of next.

Stewart Taylor: Yeah. I mean, there are two tranches to the earn-out, Ben, and that is if you pick through the annual report. I think it is in note 1.4, and the first of those is based on meeting some performance metrics between 31 December this year and February of next. Then the second earn-out tranche is based on hitting some metrics on 31 December 2027. So yeah, if you look across the earn-out, we are confident that the business, particularly on that first tranche, is going to deliver on the metrics that it needs to. Obviously on the second tranche, that is a little bit further away and things can change there. But I mean, what we do know is that there is plenty of. We have got some excellent sites, and there is plenty of demand for capacity in that business.

Speaker #1: And then the second try and earn-out tranche would be based on hitting some metrics on 31 December 2027. And so, yeah, look, if you look across the sort of the entire, if you look across the earn-out, we're confident that the business, particularly on that first tranche, is going to deliver on the metrics that it needs to.

Speaker #1: Obviously, on the second tranche, that's a little bit further away and things can change there. But I mean, what we do know is that there is there is plenty of we've got a very we've got some excellent sites and there is plenty of demand for capacity in that business.

Speaker #4: That's all from me. Thank you.

Ben Crozier: That is all from me. Thank you.

Speaker #2: Thanks, Ben.

Jolie Hodson: Thanks, Ben.

Speaker #1: Thank you. Once again, if you would like to ask a question, please press star one on your telephone and your name will be announced.

Operator 2: Thank you. Once again, if you would like to ask a question, please press star one on your telephone. We will have your name to be announced. Your next question comes from Wade Gardiner from Craigs Investment Partners. Please go ahead.

Operator: Thank you. Once again, if you would like to ask a question, please press star one on your telephone. We will have your name to be announced. Your next question comes from Wade Gardiner from Craigs Investment Partners. Please go ahead.

Speaker #1: Your next question comes from Wayne Gardner from Craigs Investment Partners. Please go ahead.

Speaker #3: Hi there, a few questions from me. Can we just go back and expand on Leo's question earlier? You said that, yes, the decline in enterprise and government ARPU has slowed.

Wade Gardiner: Hi there. A few questions from me. Can we just go back to just expand on Leo's question earlier. You say that, yes, the decline in enterprise and government ARPU it is slowed, but you are expecting a similar level for this year. If we assume therefore that contracts are rolling on 3 to 5 years.

Speaker #3: But you're expecting a similar level for this year. If we assume therefore that contracts are rolling on three to five years, does that therefore say that we're going to call it for the next three or four years, we're going to continue to see that sort of seven, call it five to seven percent decline in ARPU?

Wade Gardiner: Does that therefore say that for the next 3 or 4 years, we are going to continue to see that sort of call it 5% to 7% decline in ARPU as everything rebases?

Speaker #3: As everything rebases?

Speaker #2: No, I think, Wayne, we've seen the majority of that. I still expect some decline in FY27. Equally, there's opportunity for connection growth as well within that.

Jolie Hodson: No. I think, Wade, we have seen the majority of that. I still expect some decline in FY27. Equally, there is opportunity for connection growth as well within that. I do not think it continues on for another three to four years. I think you see the bulk of it complete by the end of FY27.

Speaker #2: So, I don't think it continues on for another three to four years. I think you'd see the bulk of it complete by the end of FY27.

Speaker #3: Okay, thank you for the disclosure around digital services. Are you able to provide a bit of color around—you've given that disclosure at the GM level, but not at an EBITDA level?

Wade Gardiner: Okay. Thank you for the disclosure around digital services. Are you able to provide a bit of color around You have given that disclosure at the GM level, but not at an EBITDA level. What sort of cost allocation for labor and other operating costs would we like to see?

Speaker #3: What sort of cost allocation for labor and other operating costs are we likely to see?

Speaker #2: We don't provide that down by each of the units for that. Clearly, as we go through the strategic review, if we have more to share in relation to the decisions out the back of that, we will provide that as part of that.

Jolie Hodson: We do not provide that down by each of the units for that. Clearly, as we go through the strategic review, if we have more to share in relation to the decisions out of the back of that, we know we will provide that as part of that. But I have got nothing more to say in terms of that at the moment in relation to the EBITDA strip.

Speaker #2: But I've got nothing more to say in terms of that at the moment, in relation to the EBITDA strip.

Speaker #3: Okay, and just one more from me. Just on slide 15, you talked about investment into mobile. There are a number of areas there. Is that going to have a margin impact as we go into FY27?

Wade Gardiner: Okay. Just one more from me. Just on slide 15, you talked about investment into mobile. There is a number of areas there. Is that going to have a margin impact as we go into FY27?

Speaker #2: I think, in terms of what we're doing there, there'll be a combination of what we're looking to do, which is to track and retain more customers. So, we'd see it both as churn prevention, but also as opportunities for customers to experience different offers within that.

Jolie Hodson: I think in terms of what we are doing there will be a combination. What we are looking to is track to retain more customers. We would see it both as churn prevention, but also as opportunities for customers to experience different offers within that. Without again getting into too much of the detail, overall, when we have set our guidance for FY27, we thought about what we will be doing and investing within that. I think these are all margin accretive in terms of how we think about the opportunities that we have got there for 2027.

Speaker #2: So, without, again, getting into too much detail, overall, when we've set our guidance for FY27, we thought about what we will be doing and investing within that.

Speaker #2: So I think these are all margin-accretive in terms of how we think about the opportunities that we've got there for '27.

Speaker #3: Okay, that's all from me. Thanks.

Wade Gardiner: Okay. That is all from me. Thanks.

Speaker #2: Thanks.

Jolie Hodson: Thanks.

Operator 2: Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.

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Q4 2026 Spark New Zealand Ltd Earnings Call

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