Spark New Zealand Limited

Simon Paul Moutter - Chief Executive Officer Chris Quin - Chief Executive Officer Retail Tim Miles - Chief Executive Officer Gen i Jolie Hodson - Chief Financial Officer

Sameer Chopra - Merrill Lynch Arie Dekker - First New Zealand Capital Tristan Joll - UBS Blair Galpin - Forsyth Barr Chris Keall - NBR Raymond Tong - Goldman Sachs Peter Wise - IDC

Good morning everyone. Chris Quin speaking, I thought I would expand a little bit on the digital strategy and digital first commitments that Simon has stated in his earlier announcements this year and again today.

And the point that we are really wanting to communicate a little bit is that this is about meeting our customers desires for digital experiences. So when we look across the summary on the slide in front of you, that really sees what are we getting done or what have we got done so far in terms of digital experience for our mobile customers, they are home, small and medium business and then our corporate and enterprise customers.

You will see there that we have laid in some very solid foundations around the quality of their network offerings across end mobile to enable digital transactions and digital interactions with their customers. The sort of services that we have both in content and also in small and medium business and large corporate enterprise and government services and then the take up of the choices of interacting with us digitally, which is a lot of their customer’s preference.

So really this is reinforcing that along with the Spark brand launch and the commitment that our growth would come through being customer inspired in earning a customer’s business. This gives you a picture of the progress made so far that reinforces what some of the numbers and details.

The progress that Simon pointed to in the earlier chart of the number I think delivered it likes. So the key for us is this is driven by our customers preference, it is the highest quality, most efficient and been the best cost way of delivering service in many ways.

So it underpins both the growth and preference for our brand and some of the progress we are making in cost in terms of reinforcing our ability to remain competitor and to partake and [Indiscernible] margins as much as possible. So a good reflection for us in terms of progress made and gives you some indication of the sort of commitment that sits underneath that shift from the turnaround and reset of the business to the digital first focus for the future.

And then just going a little bit further, for an update really for you on the brand progress since August 2014 when we launched the Spark brand. You will see there are a number of images that are very pleasing from our point of view and they really indicate that our increase in preference and the brand appeal really from a customer’s point of view was increased between 20% and 50% depending on the measure.

While you will also see there is a very firm commitment to the use of net from outer – or NPS [ph] as it’s referred to as a core driver of progress in our business. Some of you will be familiar with us and that’s a way of making an entire proceeds through the business driven by customer feedback in the preference measuring it and turning that into market action.

They will continue to lead our growth in market share. And you will see these numbers and the improvements that we have in brand perception and we will sit across all our market being followed up by the lift in connections here and market share and critical markets.

So the courage that the organization had to go ahead with the brand change and the way in which it was executed which we are very happy with. It’s now showing up in terms of preference numbers and being followed by our market share numbers.

So might hand back to Simon just to carry on with the strategic frame work a little more.

And here I look at those and those we are incredibly positive about the rebranding that we do need to form that brand for the long term success on some very important capability programs that sit well beneath the covers of the business and the first of those has been the turnaround program which is really made a huge difference to our business improvement initiative management proceeds to the performance management culture of the organization and the ability of the organization to hand over a large amount of change in parallel to deliver benefits to the customers that also to shareholders and the proceeds we are now transitioning the very successful program into business as usual and taking all of those skills and tools and systems into the way we will operate this business for the long term. The re-engineering program is sort of just moving through the half way point now, that’s a three year program initially.

We now – the best part of the year and a half into and we made the first major release successfully over the last year and we’re in the threshold of the second major release right now and that will take us to a single customer management system across the entire business and we speak to [Indiscernible] well inside the second half of this financial year. And as I signaled earlier on we are in the process of now of sitting up a new strategic capability program entitled digital first which is about really delivering on the customer experience of the future.

The time is right because now that we have advanced re-engineering will throw its releases they – the possibility is there for a more self service, more automated and much more digital age customer experience to be developed. So we are in sit up mode and we expect to have that program in full flight for FY’16.

And on the data network we’ve been very focused on founding the business on New Zealand’s base data network and we absolutely are delivering for customers a single range roadmap has commenced and we are 70 sights done already. We are ahead of program there, we are in the process of overtaking the competition on 4G, mobile coverage the 700 megahertz advantage that we have in 4G will secure their future leadership and we are rolling hard with 700 megahertz today.

And the – I have just seen the first phase of re-engineering which is the IT stick that makes that network into products and services and enables customers to interact with is has been completed very successfully. So the networks are in great shape.

The IT systems that support them are rapidly improving and it’s great to see that network now being brought to life in this digital entertainment world where the new service in Internet TV and its going to be an exciting ride over the next year or two as competition hots up in this new disruptive TV service that will take on the current broadcast and satellite delivered Pay TV models in New Zealand So we’ve launched Lightbox. We launched it on time with a product that has performed well and the customer feedback has been consistently strong.

We’ve now got a live [Indiscernible] of 6000 hours of high quality content, so we are having no issues at all with customers finding something good to watch. We have acquired some more exclusive premium content and very proud to be the exclusive rights holder of beta – which is just launched globally to greater climb [ph] and clearly will be the hottest TV show in the world this year.

And we’ve also advanced the program by joining up with Coliseum and a joint venture to start getting into the internet delivered sport content business and I did think it appropriate to update the market today and just indicate that we have increased the level of investment that are applying to this business from our earlier indicated $20 or so million of cash, we speak just being more like $35 in FY 2015 as we seek to make this a strong and wining play in the internet TV business. Jolie.

Thanks Simon, I’ll just now focus on the financial results. The half year reflects many of the trends that Simon has already highlighted with total revenues from continuing operations declining 2.7% to $1.8 billion.

This was due to continued decline in fixed taxes including revenues and were somewhat offset by the growth in both mobile and IT service revenues. Operating cost reduced by 2.4% to $1.36 billion as we continue with our productivity improvement to mitigate falling revenues.

EBITDA from continuing operations declined 3.5% for the year including a $11 million of non-recurring Spark rebating cost as these cost and increase in severance cost of around $5 million [Indiscernible] EBITDA was broadly flat on 2014. Financing cost reduced by 29% to $12 million primarily due to maturing debt being replaced by decent lower interest rates and the reduction in [indiscernible] .

Tax expense reduced – manage the impact of – prior year, cost adjustments in 2014, the combination of these factors meet the net earnings from continuing operations was flat at $147 million versus the same time a year ago. If you look at revenue now, strong mobile IT services growth would be sufficient to offset the fix tax system falling decline.

And from a business unit, Spark Home, Mobile and Business did achieve this total revenue growth of 1.2% for the half year. The mobile business continued to perform well, with revenues up $12 million or 2.4% as we grew in our target segments of Auckland and [indiscernible] under 35.

Our base grew strongly by 108,000 connections; but partially was impacted by strong competition in both business and value inclusion from [indiscernible]. The consumer mobile revenues grew 5.1%, with service revenues contributing either half of that growth, but Digital mobile revenues declined by 7% with service revenue driving all of that decline.

IT services revenues grew 19 million despite Digital repositioned its portfolio with the Revera and cloud services. With the acquisition of Appserv and in contacts that [indiscernible] performing very strongly.

Our fixed line revenues decline $56 million or when I exceed, this rate of decline was impacted by first phase broadband revenue which is back in small growth, because we see customers choosing high data plan, fixed calling down 11% [indiscernible] calling volumes and symbol of the first month of the impact to the primary service revenue change under the telecommunication act. We’d unbundled this [indiscernible] so you’ll be get, becomes a primary service pitch from course and I help out customer do not charge directly by Chorus.

Reduction in revenue is largely offset cost sales reduction. This contributed 7 million or 0.8% of the fixed revenue decline in the first half of 2015.

On an annualized basis we look out for approximately $83 million reduction in revenues. We also saw reduction in the wholesale managed data to the termination of the mobile backhaul deal which will transition further effect ’15 and ’16.

We received seven cost dividends of $31 million they were down $12 million on the prior year – reflecting previous years pre payment capacity other revenues also declined by $13 million due recycling $5 million of insurance price – and the disposal of investment in 2014 We now move to costs. Our total costs declined by 2.4% to $1.36 billion due to disciplined approach to cost management.

Within that net decliments or an increase in mobile IT services and broadband cost of sales, increased volumes in higher broadband backhaul cost. Our Turnaround Program delivered productivity savings across a number of costs during FY 2015 including reduced charges due to low reduction plus procurement savings.

We also had the fifth month of the lower UBA cost, the reduction of $7 million and the impact of the primary service changes with the further $7 million reduction in costs. $6 million decrease in our field services cost which included a reduction in Chorus check wells, LIBOR cost declining $2 million reflected the impact firstly in sourcing of the [Indiscernible] and we get savings later in our other cost and acquisition of AAPT sales.

These are offset by productivity initiatives. The productivity from the Takanini program will be reflected in the second half of FY 2015 with [Indiscernible] in the business in January and February.

Our other costs declined by $32 million due mainly to those low operations cost cycling our reducing computer cost and cycling’s to deal with bad deal from the prior period. This is offset by some cost associated with severance and an increase in accommodation due to greater mobile site, increased electricity in the data centers coming online.

This is offset by one of non-recurring Spark rebrand cost of $11 million and so we continue to make in Lightbox [Indiscernible] in terms of content marketing of – and paper cost. The half one FY 2015 costs are very much in line with the guidance you put out in terms of the prior period and now I’m going to hand over to Chris.

Thanks Jolie, and look I’ll turn to the Spark Home Mobile and Business results for the half probably from my last time to give you an update on this. Pretty pleased from the teams point of view to show that this home mobile and business unit has achieved revenue and EBITDA growth for the second half in succession.

And a lot of that down to the brand preference growth that I spoke about before and what they are doing in terms of attracting customers. So we grew by over 100,000 customers across mobile and broadband in the first half of FY 2015 and that’s helped in terms of contributing to the half [ph] of the fixed revenue rate of decline compared to one year ago.

And as I will explain further in a minute a real focus now on the venue and broadband and to some extent the hiring plants. We now have a little bit over 46% of our customers on plans $35 and above and we sold broadband revenue growth of 3% in the half.

And I’ll explain a little more in a minute about our focus on that area and how we are shifting our strategy a little bit. We had a good Christmas sales campaign particularly in post paid mobile which indicates a lot about the shift in New Zealand mobile demographics, it’s a mature market now with over a 130% penetration and nearly 70% of the mobile fleet being smart phones in the market now.

While we focused on a lot over Christmas was post-paid and the value that we could position India. We included the acquisition of Appserv in the half and that has contributed to the IT services revenue growth numbers that you have seen.

To give you a little bit of an understanding of these numbers, they do include the Ventures units and when you will exclude the new investments Sparks over there that will include Skinny and Bigpipe broadband business units. The EBITDA and the Home Mobile and Business units as you see it would have been 4% year-on-year.

Total cost down two and in fact when you exclude mobile cost of goods sold all other operating costs were down 9%. So good returned from the focus on cost continuing in the business and a good return in terms of profit growth half on half assisting up to fund some of the future as if adding value to our business as we go forward.

So very pleased to see a second half year of revenue and EBITDA growth is the turnaround that’s progressing in this part of the business. The next story I’d just like to focus on a little bit is a summary of mobile right across Spark, Skinny and the Spark Digital markets.

And our goal is to being number one in mobility and we have closed the gap further in the last half, in fact we would now estimate we hold around 40% revenue share in the mobile market. So our object of us getting some balance in this market and getting to number one is well underway.

Now the connection growth remains very solid, so in fact over the last two years we have added 400,000 net mobile connections to Spark. And in just the last half we grew by just over 108,000, 87,000 of those in post-paid and 71,000 in prepaid.

So good quality and a good mix in that, while across Spark, Skinny and the Spark Digital team. As I'll start, as I am sure is familiar to you, to win on value not price, as you will see from the rate of connection growth versus the rate of revenue growth this is a market that is mature and is being hard and important in terms of monetizing value.

However, we think we are doing a good job in terms of moving forward in our position and maintaining value as we do it. Our title ARPU mix, remains at about $80.

As you will have seen in the last couple of halves, ARPU has declined a bit in post-paid to around mid $48, but that is due largely to the continued growth in the open term plans and the removal of devices from the plan and being financed separately, which as we have talked to the market before about is very good from a margin point of view and from a investment and sales and acquisition cost point of view. So around 44% of our plan acquisition is now on open term and post-paid Prepaid ARPUs have continued to grow, so now sort of above the mid $11 mark and we are continuing to focus on the quality of our prepaid connections as we grow.

The iPhone 6 launch which occurred in the half went very well, very strong demand for the product and we were able to hold good value in terms of the offers. We're looking forward to much rumoured Samsung is such launch in the next couple of months to further continue the growth We are having great take up of our value adds in the mobile market, so what we're seeing is very good attention on things like Socialiser and Spotify still making a good part of the mix as we go forward I'll turn lastly to our broadband strategy and just give you a bit of feeling for our focus on midyear and what is changed in the half.

We have talked in the past about our focus on holding connections here. We have matured that a little bit given where the market is at and the fixed cost nature of this market in particular to focus on value and value for customers in particular with us.

Now one of the things I am sure you all are aware of this, this product is become essential in every hunt and it’s not just a commodity to many people, it is now something that they do care about speed, the capacity and the service of and we focused a lot on that as we focus on having it grow in broadband and having the right of briefing the client half – of what across fixed portfolio So as I mentioned, 46% of our customers are now in $85 and above plans and that’s a critical KPI for us. Who have learned a few lessons here from mobile in terms of value added services and how they can assist us in the overall value package in broadband.

And so bundling Lightbox post the end of the half year period has been a positive thing to do. I am pretty excited about the way that it’s been received by our customers and new customers.

In the half that we're reviewing, we added nearly 5,000 net connections, and whilst there is still market growth, we think we're worth an about 0.5% of the connections here, but we have grown broadband revenues in the half. Our unlimited plans on the Naked, so we now have the complete portfolio of unlimited plans that have launched and are going very well, and market reception toward shifting the price mix a little bit has been very good.

The multi-brand strategy is working and Bigpipe is starting to make some good strides into the value focus part of the market. And we are pleased that the market has understood what we needed to do in terms of the UBA an UCLL cost increase right across the board and that we've got some good behavior.

Fiber now available on all of the LFCs across the market and we have 21 sales and fiber customers, 45,000 VDSL now. So demand for those high value products is very strong and we're working on our continuum suite of value added services into this market as we aim at becoming New Zealand’s most valuable broadband services.

I'll hand now to Tim, to talk a little bit about Spark Digital.

Thanks, Chris. Good morning everybody.

Whereas Chris commented earlier our digital strategy is resonating very strongly with our customers and the levels of new business activity are very, very strong. In fact in some cases of the strongest in around five years, much of this business is not yet shown up is been built, and obviously that will be important to us in helping offset the Telco decline.

Spark Digitals natural results should be seen in the context of the significant strategic shift which is ongoing in this business and in particular our focus on managed infrastructure. The fixed line decline of 7.9% is tracking in line with our expectations.

This is due to Telco price pressure and the re-negotiation of major contracts many of which happened last year. Mobile connections actually grew in the half, while mobile revenues as previously mentioned declined 7%.

This decline reflects ARPU pressure and a significant migration of customers, especially government customers on to new plans. We expect this rate of revenue decline to moderate to around 3% once this price down is led.

It’s worth noting that due to the cost out measures we've taken actual margin decline in mobile is 4% not 7%. IT service revenues grew 4%, this was driven by Revera, that experienced extremely strong growth to 42%.

We expect that would moderate over time as Revera grows. Revera's growth was partially offset by the unwinding of legacy IT services contracts as part of their drive for quality repeatable business.

From an operational perspective, we made a huge investment in improving our project execution capability for our people and processes. And we believe this is getting close to best in class.

We've also maintained our real focus on our cost and margins. We're confident in our strategy in Spark digital and the outlook for this business.

Our cloud computing and platform based ICT services that leverage Spark Digital state-of-the-art New Zealand facilities. As freight ship Takanini data center was opened in October and that strengthens our lead as New Zealand’s number one provider of hosting infrastructure services and is obviously a key path of the managed infrastructure play.

This is New Zealand’s premier facility for mission critical applications and is already experienced strong customer endorsement with significant installations from both the public and the private sectors. Takanini is a key path of our investment in cloud, which also includes the acquisition of the service providers Revera and Appserv, the building of across streets data center [indiscernible] and upgrade to add the maiden data center and the completion of the third data center facility in Willington for Revera.

We have a clear line of sight to around 70% utilization of our data center facilities in the coming months. The prospects for these businesses we believe are exciting and accordingly we recently appointed a new Executive to take us to the next level of performance.

Jolie?

Thanks, Tim. So now to focus on our capital envelope from continuing operations.

In the first half reflected that we made the payment of $158 million for 700 megahertz spectrum, excluding this our capital expenditure for the first half was $249 million, down 6.4% versus the prior year. The second half is expected to be much lower around about $170 million.

We've continue to make significant investments and enhancing our network with the 4G network, now the largest in New Zealand, further enhancing our optical transport network an investing in the state of the art campus, built data center in Takanini as Tim just described. We're investing another $70 million in the re engineering of our IT spec during the year as it mostly relates to of re engineering.

We've also announced the partnership with Vodafone and Telstra to commence construction of new trans-Tasman cable. We continue to succeed in our mix of investment and will shift to cycle the investment in data center into FY 2015 to building the cable, continue to invest in mobility and a greater investment in our core networks.

To the turnaround program we looked focused on creating sustainable core CapEx program with a pathway over the next 18 months to the line 400 million per annum generating additional free cash flow for the business over that time with greater than $70 million Turning now to capital management, we remain committed to the principal we've previously shared with the market that has the objective of maximizing returns to shareholders, maintaining our financial strength and retaining flexibility as we reposition our business for growth. We target a capital structure consistent with an A band credit rating, whilst investing in the business.

This requires the net debt to EBITDA does not exceed one-times in a long run basis for credit rating purposes this equates to approximately to 1.5 times. During the period Moody's which did a credit rating at our request, we continue to rising by Standard & Poor's and have nice modest stable credit rating.

Our pursued method shareholder distribution continues to be – to substantially grow dividends over time. Over the last 18 months we've generated significant free cash flow from the sale of our AAPT in our turnaround program, which is enabling us to invest in business growth and strategic investments like spectrum.

We'll continue to invest in non-core asset is appropriate [indiscernible] of 60% share in Telecom, Qualcomm to complete in the first half of this reflected state, sorry second half of reflected state, with approximately $250 million of debt headroom which we believe is appropriate given the stage of our business turnaround and on by short term uncertainty around things UCLL/UBA. In line with I’m sustainably growing dividends over time, I can’t confirm our dividend for the first half will be 9 cps and full imputed.

Even the recent and material change in the regulatory position over the last six months, we wanted to clarify the implications of the changes to Spark New Zealand. From 1st December, 2014 the regulated broadband input costs reduced in line with the commerce commission Initially Processing Principle, IPP.

Decision to [indiscernible] demand, this change reduce New Zealand cost by about $85 million on an annualized basis, This reduction have been signaled well advance and was reflected in retail costing. On 2nd of December, the commerce commission released its draft related input prices both the copper loop and broadband based on its final pricing principle, resulting in an unexpected increase in copper loop cost of $60 million on annualized basis.

The commerce commission’s final FPP division at June and September 2015 with current indications decision maybe [indiscernible] to 1st December, 2014. As [indiscernible] which occurs the impact for the seven months ended 30 June, would be around $35 million.

Any catch up timing in relation to FY 2015 is likely to fall on the first half of FY 2016 given the value and timing is uncertain [indiscernible] but the final decision is actually north of September. This is therefore now reflects to the net FY 2015 earnings guidance.

Spark New Zealand has also adjusted retail prices to fix it ever to sustain partially offset debt impacted the potential increase in copper loop prices contributing around $15 million over the five months to 30 June. We’ll obviously continue to monitor the situation and the market should be material new information in to matter.

We’ll now move to guidance. Taking into account my earlier comments in relation to the implication of the final FPP decisions and associated accounting treatment on FY 2015.

Our operating cost is still expected to be within the previous guidance ranges. The title revenue guidance have low single decline from FY 2014, adjusted EBITDA of lower single digit growth, CapEx and spectrum in line with the original guidance.

We also reconfirming our guidance of a total dividend payment for FY 2015 of $0.18 per share and that will be fully imputed. Should be noted however that if the FPP final decision to back guide to understand [indiscernible] this would have a material impact on the FY 2015 EBITDA guidance provided, but our revenue CapEx bitumen and dividend guidance would remain unchanged.

I’ll now hand back to Simon.

Thanks, Julie. And so the final second last slide here is the slide we provided at the last briefing together with the annual results for FY 2014.

These are key metrics for – and wish [ph] us to monitor against for the 2015 year. We’re on track against those metrics, let me just call out the ones with the notes against some on broadband revenue market share we have some difficulty measuring this figure exactly, but we think we are broadly on track there.

But as Chris knows that we are now increasingly emphasizing our performance in the higher end of that market in a least concerned around what’s happening at the very bottom of the DSO [ph] market. On Lightbox, we undertook to provide and update at the end of the year and just to hit of any questions on this, we will not be providing any indication of subscribers or ARPUs and it is hotly competitive market developing out and this time we’re not prepare to provide those sort of benchmarks that enable our competitors to triangulate against how we’re going and what they have do.

So but we do undertake to provide that information with our annual result in August. And of course as Julie has noted, the EBITDA level in any profit growth we’re on track, but this subject clearly to what the final outcomes from the commerce commission processes are.

So look at our Investor Day, right back in May 2013, we set out a bold strategy to transform the company in two clear phases. These are the exact words we used.

Back in for financial years 2014 and 2015. We’re all about stabilizing revenue margin and reducing costs and that has been our relentless focus.

And I think the results of that program are visible and that seems I would like to just a pay a little tribute to Chris. As he noted will be his last will be his last time in one of these calls.

He has taken decision to move on from the business that we hugely appreciate the job he’s done in the home mobile and business division and the result sort of help this achieve that outcome in the first reset phase of the business. We’re now obviously looking forward to FY 2016 and beyond, where our objective is to increasingly drive market, revenue and margin growth, but keeping a very eye on the unit cost and continuing to improve those and Digital First will play an important role in both driving revenue forward and unit cost down.

So with that reset phase largely complete, we are looking forward and are in the process now of transitioning into the second phase. I’m pleased with the progress and the fact that we’re able to be on track and do that.

So that concludes the formal part of the presentation. I’d like now to hand to the operator to guide us through any questions.

Thank you.

Good morning. Thank you for good set of results from the connection numbers.

I had couple of question. One, you made a comment that the mobile market is shrinking and I was wondering if you could give us some color around that.

Second one is around guidance has been maintain even though the Lightbox investment has been stepped up. Is it fair to say that the fixed price increases is offsetting the Lightbox investment?

And then the last one was around if you could – and may I miss this on the call. But what percentage of the fixed line customer numbers are now unbundled?

Thank you.

Look on mobile mark what we’re referring to here is the publicly available information and we source mostly from IDC right Julie, and it indicate slight contraction in overall market revenues, Jolie if you got the figure these that you can see just handy. Slight contraction in overall mobile market revenue, so we gaining, but a nice slightly shrinking market which is indicative I think is both on CEOs division of CEOs is indicated value increases inside plans and price reductions in some parts of the market as well and heavy competition there.

So that was the color there. On Lightbox that we have – and invested more, but that cost has been covered by the Turnaround Programme initiative, got nothing to do with broadband pricing and we’ve got a terrific program, and as we always cast the Turnaround Programme was about freeing out cash partly through sustained price reductions and offer value to – more value to customers, but partly to fund the investment on future and that’s how we look at the model and we would not upped the [indiscernible] on Lightbox if we could not have funded that of the Turnaround Programme.

In terms of the fixed and customers on bundles, Chris do you have any info to handle mix.

Sameer, Chris Quin speaking. So our primarily focus on fixed and particular is the value so that’s why I’ve return to the 46% of customers to $95 and above.

Our market share in mobile as we said, we think we’re near 40% per revenue now. We are closer of the 50% of the broadband market.

One of the reengineering drop that is being done right now as moving to a single customer database to improve our accuracy at [indiscernible] West but there is reasonably strong correlation between First and mobile customer seat, so you can assume somewhere in those numbers. Our focus is been on the individual values, so I can sure focus on value, mobile and broadband.

However, we have started offering and seem that seem that the customers on board. And you will see it particular in the naked broadband bundles where with mobile is a slight different price to with that.

And this is obviously a key focus for us as we go and delivering our loyal customers and growing our base, pulling those together. But you would be set to assume somewhere in that early 40s, to mid 40s is that bundle mix.

Morning, Simon. Just two or three questions.

Firstly, just can you clarify that you mentioned that you had 25,000 fiber subscribers now on U.S. bay.

And can you just give us some update on how far away you are from having a retail void product?

Fiber at the 21,000 USD fiber customers and Arie, we have obviously lots of other fiber customers in our business data portfolio. At USB is seat number and we expect to be in market where they and sort of the last quarter of this financial?

We are vast testing and things to that yes.

So that will be some cost that drops out as well in FY 2015.

We have to see that as follow-on from it, Chris doesn’t need to sell a cooper line alongside of fiber once we’ve got that. So you can and you can make sure A team and B team will be on to that pretty quickly once we got the fiber voice product beat if firmly in.

Do you envisage any one-off in rolling that out?

I’m not aware of any significant, Chris.

There is a technical transition cost in the process of changing layout. That is Chris speaking.

That is in our forecast, so as part of their plan where we are old. The return we get from making that shift and lowering the input cost and the one-off cost to make that change from a customer point of view

Yes. And I’m sure that’s no [indiscernible].

Just in terms of the strategy turnaround and sort of coming to in the end, we’re engineering obviously, so as you mentioned on the half light throw and introducing Digital First can you sort, and I know there is a lot benefit of these program flowing back into the business and investment. But can you just sort of give us a sort of a sense of in terms of that $200 million to $300 of benefits that was sort earmarked from these program, have you trekking it instead?

Hi, Arie, its Jolie here. In terms of the benefits we are tracking well $200 to $300, we believe by the end of – if I sustain we will plus to that $300 million mark.

Cross combination obviously of P&L and CapEx, so its apart from cash rather just P&L Yes.

You mean CapEx benefit?

Yes. It is in terms of reduction CapEx envelope over time.

So down to that sub $400 million, so that will – the last phase that will come through in FY ‘16 but in terms of the broad the 300, are they are about over the 12 months, yes we are.

Okay. And then the last question on Lightbox.

And as you mentioned, I think the Anti [ph] and it is a hotly competitive market. I guess, we’re got a couple of established suppliers and [indiscernible] looking at being in the spice and more recently even fixed sort of mentioning that they might be coming over to invest [ph].

In terms of the, quickly just sort of shed a little bit a light on what you sort of said, for Lightbox over the next 12 months whether you’ve got any risks or points in terms of where you want the business today and just the capability that you guys are developing in that space?

I’m reluctant to say much not because I want to hide it from Invesis [ph] but we want hide our ambitious and strategy from competition obviously say, clearly as we always see our ambition here is to be part of the disruption to be on the right side of disruption for once in a year, for once in your life. And to see if we can gain a position.

And I think so our eyes are on over the next two or three years where we think we will – the customers will dramatically alter the way they consume video entertainment services in the shift from broadcast and satellite, PayTV to in terms of delivered there. Our objective is to create a sustainable position.

We have some metrics and mind for that and probably provide a bit more color on that at the full year, we now tell you exactly where we tracking but it will be a fast changing market and it’s the sort of market that means you going to have to adjust quickly to what the trends are, to what the consumers want, to what they’re willing to pay for. And so we’ve started with the proposition that we observe to be selling around the world which is TV Box good quality ones in a -- service that we created a platform and a concept that can do many more things than that.

And we started to and we create a little option by moving along side that call CM team to have a look at sporting content, so we’ll keep their options upon and follow what we exceed over the next two or three years, so that’s about all I can say.

Thank you. That’s all from me.

All right. Just two questions, first of all on headcount, I was going to ask you about FDA is going up sequentially 53 for the -- but it’s always a comment that 200 are going to come in the next couple of months kind of solve there.

So I had three things, one, in your reported number for the half can you configure on the $5 million bucks for severance payments was in there and then secondly, I just wanted if you could confirm that what you [indiscernible] in August whether you would expect later to be $10 million or $20 million down year-on-year excluding acquisitions that are still tracking towards that?

Hi, Tristan Jolie here. The first question around our severance costs and half year [indiscernible] high number than that in the half, but if you look at the shift year-over-year its – that’s around 8.5, and in terms of are we still on track to that numbers if we yes we are the reduction.

And Tristan, just the first half the increase is masking really significantly decrease but in the first half we had the best part of 200 people join the organization with Appserv and the in sourcing of the Alcatel Lucent teams. So the fact that we’re up slightly is masking a need of real reduction of more like a $150.

I haven’t got the exact number, but in that order, yes.

Okay. That’s understood, okay, Thanks.

And just on LIBOR, revenue is a flat, [indiscernible] I understand that from a previous result that some said that there were parts of account and financing options on handsets. Are those changes forcing through so I mean what I’m asking you is when you look at 9% ARPU decline how much of that relates to I suppose the counting out of these versus actual changes of mix and price pressure on the enterprise channel, can you give us a sense of that?

I think first taking – and the thing you say the use of the revenues flat to slightly up, ARPU down 9% and I think you can probably reduce [ph] from that, that a lot of the ARPU in fact we are seeing is essentially out of the device approach changing. And essentially what we are seeing in the market as I’m sure many of you are seeing is that pricing staying similar about the inclusions within pricing are going up quite considerably.

So the upgrade parts are getting tougher to position in market and then offsetting that for us is our rise in connections of $108,000 or so for the quarter, for the half sorry.

And Tristan Jolie here, I think also the impact of the enterprise as Tim mentioned earlier has had an impact on – it is largely offsetting the growth of the consumer [Indiscernible] and we recycle as we got through this year picking up I think more like a decline on going with three potential and we’ll move through that site.

Okay, so what you are saying is that you would expect ARPUs to drop or trade [ph] next year….

Business perspective we put the [Indiscernible] high what’s impacting it is Spark digital has been the biggest driver of that service revenue decline. A lot of it has to do with the government pricing and the elements that have gone through that, we are now getting close to cycling 12 months of it, so that has not had its marked decline and that I’m sticking out for this year as we ship into next year as it did in the last sort of 12 months.

Okay. All right that’s helpful, thanks.

And then finally I understand the sensitivity around Lightbox but just on the costs you’ve given us $35 million run rate. Can you just remind us what it’s going to be up from last year?

And can you give us a sense of how much of any will be kept [Indiscernible]?

We indicated at the – before that we had spent 20ish in the year. So that of cash that number now is more like 35 and roughly 5 as CapEx.

All right. Thanks very much.

Good morning guys. Just a few easy questions.

Firstly, Chris I’m not sure if you guide about, but what’s the naked numbers that you thought?

I didn’t give those numbers, so 21,005 of 45,000 VDSL, I don’t actually have the number of those that are naked connections through hand.

That’s fine. And Jolie in terms of the wholesale backhaul and Lightbox you sort of mentioned how much of that 33 [Indiscernible] slightly come off by the next [Indiscernible].

I can’t tell you complete value of that but what I can say the changes is probably being slow in the first half than we anticipated that it will transition over the second half will be more and I think in the [Indiscernible] come off.

Okay. And then lastly on by the end of the FY 2015.

Yes.

Okay. And I suppose the final question; re-engineering cost sort of I think you sort of half way through that [Indiscernible]

That’s right. FY 2016 we will still hedge [Indiscernible] much more to the normal course of business.

Right. That’s it from me.

Thanks.

Sorry to pull it on. I just wanted to follow up on the direct question.

You had 33 million and a half on Managed data and I was saying that the number could be 25 in the second half, what would be a decent – once that contract is reversed?

I can’t give you that specifically Tristan, but I think in the realms of that type of reductions were reasonable for the second half.

And then on an ongoing basis, I suppose you are looking at over a period of two years maybe you are looking at that revenue line having half or something along those lines?

Yes, that will be same.

Okay. All right thanks very much.

Hi, Simon. It’s been nice that recently you’re chasing some common technology and so called reforms with Telstra and that Telstra has tighten on some of the corporate customers as you’ve got.

You may besides from the Australian market, can you split to how your license business Telstra [indiscernible] done in the near future?

Chris, our main competitor in telecommunications in this make are Vodafone operates on both sides of the testament and clearly sort of aligns it’s so from a manner and so naturally when we are looking for options to align. So in Australia we would align toward Telstra and we have a healthy working relationship with them.

We have struck a dealership arrangement with them and Australia to wind out our remaining obligation which are part the Gen-i Australia growth that’s we’re being exceeding that business and we do very carefully consider in our technology choices, the options to ensure that we’re aligning with Telstra because that will give our customers a better train [indiscernible] experience that we make it easy if we’re operating in the same spectrum bands and mobile if we develop. We’re aligning our data.

I think we have to work well and interconnect easy with them like Telstra. So, while there’s no formal partnership or anything of those sort of nature, it just makes logical scenes to us to be align to a significant player in Australia where lot of customers travelling, do business.

Operator, any further questions.

Good morning, guys. I was in mute.

Just a few questions just on 4G versus 3G, just wondering to get sense from you in terms of the usage of between two different products and also is there any ARPU differential between 4G and 3G and its still quite early days? And just in terms of you pass for as far as 4G coverage of the country going forward, what do you added the [indiscernible] where do you plan to get to as far as in the medium term.

And just leave it at that for moment.

Look on 4G or 3G where we’ve enabled 4G services, we are seeing quite a bit more effort transitional data services from 3G to 4G then we expect that actually and so in the areas available it moving up around to 30% mark or data traffic already shifted across the 4G so that is terrific and validate. So I don’t have any inflow on ARPUs on the [indiscernible] where I really wouldn’t have any idea of that.

At this moment we don’t charge for a secretly or anything like that, so it’s not a metric that we’ve looked at on coverage is a seat in – briefing period we arrive at – Vodafone and this mack – hit that hit an early kick off on 43G during the pricing of overtaking them on coverage. And so they have been very round numbers we’re moving through the sort of two thirds of the population been having 4G available to them now.

And Simon what do you think it’s about 4G penetration as it stands at the moment?

4G penetration. Sorry I don’t have the answer to it.

Mark, maybe something we could have a look at and if we do hit there.

Okay. Great, thank you.

Operator, any further questions.

Good morning guys. I just wanted to if you could give some commentary on the wholesale business particularly given the UBA/UCLL changes have you had to sort of pass that onto the wholesale customers and just a overall sort of comment on how that’s all affecting the wholesale business?

Look in wholesale clearly those changes impact wholesale and by necessity [ph] we would pass through as far as our contracts with customers allow any increase in the input cost. So there’s something that’s being worked through with each wholesale customer at the moment, Peter.

Thanks.

Right. And saying well thank you very much for your time on the call this morning and we look forward to the next update with our full year results in August.

Cheers.