Ann: ADDRESS: TTK: Managing Director's Address to Annual Meeting

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23/10/2014 12:34
ADDRESS

REL: 1234 HRS TeamTalk Limited

ADDRESS: TTK: Managing Director's Address to Annual Meeting

The following is the transcript of the address made by TeamTalk Managing
Director David Ware to this year's Annual Meeting of Shareholders.

Media Statement

October 23, 2014

David Ware
TeamTalk Managing Director
Address to TeamTalk 2014 Annual General Meeting

Welcome.

Thanks for taking the time to come down and meet the team.
It's great to see so many of you back again this year - and it's great to see
some new people.  If this is your first TeamTalk AGM I need to tell you there
is one thing we do a little bit differently - and that is there are a bunch
of TeamTalk staff here - from all parts of the company - they're here to talk
to you.  I think it's important that everyone in the company hears from you
first hand - not through me or through the board. So I really would
appreciate it if you could stay after the formal bit and have a chat with the
guys.  In a similar vein thank you for your feedback through the year -
particularly the feedback for my PhD thesis, and the feedback from the
shareholder newsletter. This stuff is important to us. Incidentally we'll be
putting another newsletter out before Christmas.

Yes it was twenty years this April that we launched this business. I have to
say, it has been a hell of a journey but we've certainly had more ups than
downs. Back then there were dozens of small Telco start-ups and today hardly
any of them survive and I expect it will be a similar story with those recent
IPOs.  I think the reason that we are still here and still doing great stuff
is down to our culture.  This is a company that thrives on adversity and a
challenge; it's built into our DNA. It's like the guys are never happier than
when we are facing an enormous challenge - be that going head to head with a
multinational or a technical challenge.  It's taking on the impossible and
winning that really gets us out of bed in the mornings.  It's a fantastic
team we've got and I'm incredibly proud of what they achieve.
So twenty years of TeamTalk - I was the first employee and Nick Lourantos
(over there) was employee number 2 - he does sales stuff at Araneo and KB
(over there) is employee number 3 - he does commercial stuff in the wireless
part of the business.

Someone who can't make it today, but who has played a pivotal role in the
company over the last 10 years, is Joe Pope our former Chairman.  Joe joined
the company just as we were going public back in 2004. He retired from all of
his other professional roles a couple of years ago, but such was his
commitment to TeamTalk that he agreed to stay on with us for one more term.
The relationship between a CEO and Chairman is quite unique in business, it's
quite different to a manager/employee relationship, and it's quite different
to a mentoring relationship when it works it's something special.  I have to
say working with Joe for a decade in this capacity was a real privilege.

Now to more immediate matters.
What you want to hear about is what your company is up to and where it's
going. This year this is probably more important than ever because what
we're doing is setting the company up for its next 20 years of growth.
You may recall that last year I told you we had just hired three new general
managers to head up our three operating companies and that my challenge was
to blood them in.  Well, today I'm going to break with tradition and get two
of those GM's to tell you about the business units themselves -that way you
can judge their progress directly.  The other GM hasn't made it this far and
is no longer with the company. The board and I have taken direct
responsibility for managing Farmside. I'll tell you what's happening with
Farmside and then I'll hand over to Nick and Peter who will tell you about
the CityLink and Mobile Radio sides of the business.  And finally I'll wrap
it all up, summarise the group's prospects and we can take questions.

So let's look at Farmside.  I'll start by explaining why I believe that
Farmside will eventually be the biggest most profitable part of our business
and then we'll look at what we've done and where we are going. There are two
reasons Farmside is going to be successful, the first reason revolves around
the fact that the rural market is different to the urban market. To serve
rural customers well you have to do things differently. Having a call centre
in Timaru not Mumbai is a small example of what I mean. By focusing
exclusively on rural New Zealand we can be way more relevant and responsive
to our customers than the other guys.  The second reason we will succeed in
this market is that we can build our own broadband infrastructure.  Building
our own infrastructure gives us a second bite of the apple.  We get the
infrastructure margin that would normally go to the likes of Chorus, and we
get the retailer margin that goes to the ISPs.

By being focused only on rural New Zealand we can do things the big guys
can't, and by having our own infrastructure, we get that second bite of the
apple and it is why we will succeed. So what's been happening? Last year I
likened Farmside to buying a house and discovering that we needed to do some
renovations. Well, I think that analogy was truer than I realised. I've just
started doing renovations on my own house and I've discovered that it's going
to take much longer than I first thought.  The same thing is happening at
Farmside sorting out the problems, but it's taking longer than I expected.

So where are we at?  We've pretty much fixed the structural stuff, we've
reorganised the staff, and we've fixed most of the critical systems like the
finance system.  As we speak we are working on streamlining our process and
recruiting again for some senior roles - the sales manager, and the finance
manager for example, haven't made it this far either.  I'm managing all this
stuff personally.  I'm down in Timaru a couple of days a week and I'm being
assisted by Reg Barrett.  Reg is on our Farmside advisory board and he is a
former senior executive at Vodafone so he really knows this stuff.  Reg is
down in Timaru a couple of days a week as well.  Incidentally I'm sure he
will be happy to answer any of your questions if you want a different
perspective on things.

So this year Farmside has essentially held its own with customer numbers, our
margins have been squeezed because we've moved a bunch of customers onto 3rd
party infrastructure, and we've also taken a bunch of costs out of the
business.   Everything is heading in the right direction.  The frustration is
that it's not happening fast enough. And because things haven't happened fast
enough it has lead us to us write down our assets.

So what does the next year hold for Farmside?
Well, it's going to be a big one, first up we're going to roll out our own
infrastructure to 15 rural communities before Christmas - that's little
communities with between 50 and 100 homes.  The first one went live this week
in a small community outside Rotorua.  For the first time ever these people
will have true broadband like we get in the cities and at near city prices -
and yes - we will make money out of this stuff.  If we stop making money we
will stop doing it.

Building infrastructure off of our own bat is just the first step. The
government just announced that they will be investing $100M in additional
rural broadband infrastructure.  That money will be spent with companies like
TeamTalk to build broadband in areas where it's uneconomic for anyone to
build. We're very well placed to compete for chunks of that $100M because
we've already won the two test regions. We built our networks in Haast and
the Chatham Islands with the help of government funds. I expect that in the
next year the government will be issuing more tenders and we will be
competing hard for those contracts.

So effectively what's going to happen over the next year or two is a land
grab for these rural customers.  Whoever builds this infrastructure can be
assured of a long-term revenue stream.
We're all tooled up and ready to go.

So as far as Farmside is concerned, I've got to say I'm excited about our
prospects - it's fair to say it has been hard work but the important thing is
we've got Farmside to the right place at the right time.
I'll now hand over to Nick.

Nick Willis Talking Points - CityLink CEO
CityLink is focusing on three areas.

1) Auckland
2) Wi-Fi
3) NZ Internet Exchanges

Auckland accounts for 20% our network and 20% of our revenue, but we have no
staff focused on this large market.  We are setting up our Auckland Office to
raise our profile to be a national player, and compete in New Zealand's
largest metropolitan market.   We are targeting our Auckland business to
expand by up to four fold over the next five years to match Wellington.
Wi-Fi is the second area of focus.

Just as we put in fibre infrastructure and resell that to multiple customers
- we are doing the same thing with Wi-Fi.  We install our Wi-Fi
infrastructure and sell it multiple times to other Telco's, businesses,
advertisers and visitors.  We are blurring the boundaries of the office from
the four walls to the whole city.  We are New Zealand largest wholesale Wi-Fi
provider operating 50 different networks and connecting to 100,000 unique
devices every month.  We run education network Eduroam and 2degrees Wi-Fi.
We're constantly increasing our footprint and will soon be providing services
at the new National War Memorial.

CityLink runs New Zealand's Internet Exchanges, which are the backbone of New
Zealand's national internet traffic.
While the rest of the market is focused on UFB, we are looking beyond that to
the next generation of Software Defined Networking technology and
opportunities for increased security, bandwidth on demand, and stock
market-like real-time trading of capacity at the exchanges.
By staying nimble and responsive to our customer's requirements, moving into
new geographic areas, exploring emerging market segments and keeping an eye
on the next generation technology, CityLink has a strong future ahead.

Peter Baines Talking Points - TeamTalk Wireless CEO
*Highlights from last year

NZ Bus
Through a digital radio solution put in by TeamTalk, bus drivers in
Wellington and Auckland now have panic buttons to help in times of emergency.
 This activates a live microphone connected to the communications centre,
which is also recorded.  On board GPS trackers can direct police to where
they need to be. We have equipped their fleet of more than 1,000 buses in
both major centres.
Going digital has also extended the bus company's communications coverage,
meaning an Auckland control room could manage all vehicles operating on
Wellington routes, and vice versa, in the event of a natural disaster.

Motorola relationship
This year TeamTalk was pleased to announce that it signed a Dealership
Agreement with Motorola.  We can now directly supply and fully support the
comprehensive range of Motorola's world leading mobile radio products as well
as their extensive range of apps.
Motorola are well known as the benchmark supplier of mobile radio equipment
so it's a win-win for our customers and us.

Broadband in Westland
Residents in South Westland can now get broadband connection speeds that
rival those available in urban areas. We are serving schools, businesses,
residents, and tourists, using fixed line and wireless connections.

The government has funded this project.
At the Haast School all the students can use the internet at the same time
for their school work. The teacher can do her preparation from home instead
of staying 'til all hours of the evening.
A similar broadband service is nearing completion in the Chatham Islands,
which further positions TeamTalk as a leader in rural broadband.

Rural Broadband
We are very excited by our Rural Strategy.  The plan is to bring broadband to
large parts of rural New Zealand at faster speeds than available now, even in
the most remote parts of the country.
We are delighted to announce that our first broadband service connecting to a
Chorus cabinet is up and running near Rotorua and we have customers live on
the service.  Connecting to the cabinets means customers can connect via the
telephone lines already wired into their houses.
Over the next three years our goal is to bring broadband to tens of thousands
of rural houses through either the Chorus cabinets or wireless.

Thank you Peter,

I guess by now you know me pretty well and you know that I'm always on the
look-out for acquisitions. Right now we don't need to rush out and buy
anything big, we don't need another game changer we're headed in the right
direction. What I'm looking at is acquiring assets that we can bolt onto our
existing business. At the moment we are actively doing due diligence on three
opportunities I'm not sure which if any will come off - all I can say is that
if we get them at the right price they'd all make nice add-ons to our current
businesses.

So this year is all about is doing what so many of you have told me you want
us to do we're investing in our future. Our financial numbers aren't going to
be fantastic as a result, investing in people and equipment all takes cash.
This is the one year where our progress should be measured not by our bottom
line but by our ability to win these government contracts and on our ability
to win new customers across the company.

Our guidance remains unchanged from our statement in the annual report we're
still shooting for a 15 cent fully imputed divided.

So that's us. We've got a big year ahead of us, and I have to say I'm more
excited about our prospects and the future than I have been in years.

I'll now hand back to Roger.

-----------ENDS----------

For more information please contact:
David Ware, TeamTalk
0800 101-900
End CA:00256750 For:TTK    Type:ADDRESS    Time:2014-10-23 12:34:15