CEO Jolie Hodson says Spark's 2020 financial year was a year of two parts. "In the first six months we were off to a good start with a strong result. Our last quarter reflected what was happening in the rest of New Zealand with the impact of Covid-19. For us the main impact was on international roaming and store closures", she says.
Spark posted a solid result for the year to June 30 with a 4.4 per cent rise in profit to $427 million and a 2.5 per cent lift in revenue to $3.6 billion.
Hodson says the pandemic wiped $25m from the year's profit. There's no change to the company's forecast for next year. Although Hodson says Spark expects to take a Covid-19 hit of around $75m.
There's some uncertainty around this figure. "We're waiting to see the implications of the end of wage subsidies and other support packages. When that happens, we'll get a real sense of the economic impact on small and medium businesses."
The pandemic has changed much about the business. Hodson says the company made a decision early on not to enforce broadband data caps. This is where users pay an extra charge for consuming more than a set amount of data each month. About a third of Spark customers are on capped plans. These cost less than uncapped plans. Hodson says Spark missed the opportunity to up-sell broadband plans during lockdown.
Hodson says Spark noticed considerable changes in the way customers used broadband. Customers now make much greater use of collaboration, cloud and the other advanced online technologies that demand better broadband. "Businesses were already on a digital transformation path, but the lockdown acted like a catalyst," she says. "It's not only New Zealand, the trend is global. We are seeing an acceleration in the shift from physical to digital. Companies are now thinking more about how to engage with their customers, suppliers and export markets. This is more important when you think about what has happened to traditional channels." For Hodson these all depend on having fantastic connectivity and a digital front end that eases customer engagement.
She worries about digital equity. She says Covid shone a light on the inequity in NZ.
"This is a risk with more public services and more private services going online if we're not closing the gap. It's not only about access, it's about literacy and it's about people feeling safe using the internet.
It's seniors as well as people on low incomes. This is why we shifted our Skinny Jump (a subsidised low-cost broadband programme) to cover more parts of the community that are not existing users. It comes back to having more New Zealanders and more of our society contribute."
Meanwhile Spark, like the rest of the telecommunications sector, continues to invest in increased network capacity. Hodson says the focus is smart infrastructure. "We continue to invest in our own fibre and our optical transport network. There's 5G and more capacity for the Internet of Things."
That should pay off in the long-term. With many more New Zealanders working from home, broadband and connectivity are even more important. Customers now value their connections more than ever. When the time comes, many will invest in bigger and better broadband plans. Hodson points to New Zealand's low productivity. She says this is a time for the nation to stand back and think about making the investing in the infrastructure needed to support economic recovery.
"We need to be thinking about building future-proof infrastructure. We don't want to spend billions, then come back in a decade's time and say; 'I wish we did X, Y and Z'. We also need to invest in the skills so that people can operate safely and more productively in a more connected world."
As for Spark's own people — a priority for Hodson — she says the company has seen huge benefits from the shift to more flexible ways of working. "We want to build on this and find our 'new normal', somewhere between how we used to be and how we work during lockdown.
"We will continue investing behind our people's learning and development, helping them pivot to a future of work where they need to be more adaptable than ever before. And we will maintain our focus on diversity and inclusion — so our people feel they can bring their whole selves to work."
Jolie Hodson's top 3 issues
Recovery from Covid-19: The pandemic has fundamentally shifted the way New Zealanders work, learn and connect and the global recovery could take a number of years. Therefore our recovery needs to be focused on building for the 'new normal', and accelerating New Zealand towards the opportunities it presents, versus simply rebuilding what we have known in the past.
Social inequality: Covid-19 shone a light on the inequities that exist within our society, and we should be doing everything we can to 'lock in' any improvements we are able to make during a time of crisis and ensure we bring everyone with us as we move forward. For Spark, our focus is very firmly on lifting digital equity. It has never been more important to ensure that every New Zealander can be connected than it is now — when the shift to digital ways of working, learning and connecting has accelerated globally.
Productivity: This is a long-term issue we have faced as a small island nation and something that will continue to drag on the economy until we resolve it. For our part we are focusing our capital expenditure on investing behind New Zealand's recovery, specifically through infrastructure that will improve productivity and enable Kiwi businesses to innovate and grow. This includes our 5G roll-out, and targeted investments in rural connectivity.
Businesses were already on a digital transformation path, but the Covid-19 lockdown acted like a catalyst.