CHORUS LIMITED — Capital/Financing Update 2018

Oct 10, 2018

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Chorus Limited Level 10, 1 Willis Street P O Box 632 Wellington New Zealand

Email: company.secretary@chorus.co.nz

STOCK EXCHANGE ANNOUNCEMENT

11 October 2018

Chorus Q1 FY19 Connections Update

The Q1 period to 30 September 2018 saw broadband demand continue to grow strongly in Chorus fibre areas, with UFB uptake reaching 50% following a record quarter for new fibre installations.

• Total fixed line connections declined by 19k to 1,507,000 in Q1 (Q4 FY18: -17k)

• In Chorus fibre areas, the decline in copper lines with no broadband is being largely offset by strong broadband growth. The majority of the decline in total connections was in other fibre company zones as expected given fibre demand.

• Total broadband connections grew by 3k to 1,190,000 (Q4 FY18: +3k).

• Fibre demand was strong through Q1, with a record 50,000 fibre installations completed.

• UFB uptake grew to 50% from 45% (30 June) within Chorus’ completed areas.

• 1Gbps connections grew 20% to 36,000.

• The surge in data demand continues with 221GB monthly average household data usage in September, up from 210GB in June, and fibre users now averaging 307GB monthly, up from 297GB in June.

ENDS

For further information:

Nathan Beaumont

Stakeholder Communications Manager Phone: +64 4 896 4352 Mobile: +64 (21) 243 8412 Email: nathan.beaumont@chorus.co.nz

Brett Jackson

Investor Relations Manager Phone: +64 4 896 4039 Mobile: +64 (27) 488 7808 Email: brett.jackson@chorus.co.nz

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Q1 FY19 Connections Update
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11 October 2018

Q1 FY19 overview

Broadband demand continued to grow strongly in Chorus fibre areas, with UFB uptake reaching 50% following a record quarter for new fibre installations

• Total fixed line connections declined by 19k to 1,507,000 in Q1 (Q4 FY18: -17k)

• in Chorus fibre areas, the decline in copper lines with no broadband is being largely offset by strong broadband growth

• the majority of the decline in total connections was in other fibre company zones as expected given fibre demand

> Total broadband connections grew by 3k to 1,190,000 (Q4 FY18 : +3k)

• fibre demand was strong through Q1, with a record 50,000 fibre installations completed

• UFB uptake grew to 50% from 45% (30 June) within Chorus’ completed areas

• 1Gbps connections grew 20% to 36,000

> Surge in data demand continues

• 221GB monthly average household data usage in September, up from 210GB in June

• fibre users now average 307GB monthly, up from 297GB in June

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Q1 connection trends

	30 Sept	31 Dec	31 March	30 June	30 Sept	1600000
	2017	2017	2018	2018	2018
Unbundled	76,000	68,000	62,000	53,000	45,000	1400000		Baseband copper
copper Baseband	302,000	290,000	279,000	268,000	255,000	1200000		Unbundled copper
copper
(no broadband) Fibre broadband	328,000	362,000	394,000	433,000	479,000	1000000		Copper ADSL
(GPON)
VDSL	294,000	320,000	325,000	321,000	309,000	800000
(includes naked)
Copper ADSL	562,000	499,000	465,000	433,000	402,000	600000
(includes naked)								VDSL
Data services (copper)	7,000	7,000	6,000	6,000	5,000	400000
Fibre premium	13,000	13,000	12,000	12,000	12,000
(P2P)						200000		Fibre (GPON)
Total connections	1,582,000	1,559,000	1,543,000	1,526,000	1,507,000
						0
						30-Jun-17		30-Sep-17		31-Dec-17 31-Mar-18				30-Jun-18		30-Sep-18
							Data services (copper) Fibre broadband (GPON) Copper ADSL Baseband copper (no broadband)					Fibre premium (P2P) VDSL Unbundled copper (no broadband)

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Connections by Zone - indicative

▪ the indicative data below includes revised 30 June totals to better reflect all UFB zone boundaries ▪ the Rural zone includes ~13k fibre premises and the LFC zone ~3k fibre premises

INDICATIVE CONNECTIONS Chorus UFB zone Rural (non-UFB) zone Local Fibre Company UFB zone TOTAL*	INDICATIVE CONNECTIONS Chorus UFB zone Rural (non-UFB) zone Local Fibre Company UFB zone TOTAL*	INDICATIVE CONNECTIONS Chorus UFB zone Rural (non-UFB) zone Local Fibre Company UFB zone TOTAL*	INDICATIVE CONNECTIONS Chorus UFB zone Rural (non-UFB) zone Local Fibre Company UFB zone TOTAL*	INDICATIVE CONNECTIONS Chorus UFB zone Rural (non-UFB) zone Local Fibre Company UFB zone TOTAL*
TOTAL 30 June	1,108,000	206,000	194,000	1,508,000**
TOTAL 30 Sept	1,106,000	203,000	181,000	1,490,000**
Copper connections: no broadband	189,000	50,000	61,000	300,000
Broadband: copper + fibre	917,000	153,000	120,000	1,190,000

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Q1 – net change by zone
Chorus UFB Rural LFC UFB
13
15
10
5
0
-5 -2 -1
-4
-10
-9
-15
-15
-20
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* Includes planned UFB1, 2 and 2+ coverage

**Excludes fibre premium and data services (copper) connections

Copper (no broadband) Broadband (fibre or copper)

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Fibre uptake and data demand

• 46,000 mass market fibre connections added in Q1 ▪ 36,000 connections now on gigabit plans (Q4: 30,000)

• Monthly average data usage per connection on our network grew to 221GB from 210GB (June 2018) ▪ 307GB on fibre (June: 297GB) ▪ 163GB on copper (June:160GB)

• 70% of mass market fibre connections on 100Mbps

Total mass market fibre uptake by plan type

Monthly average data usage per connection on our network

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100
$65 monthly per connection on our network
90
350
80
70 300
% of 60 Data 250
plans 50 usage
200
(GB)
40
$45 monthly
150
30
100
20
$41.50 monthly 50 Copper Fibre Average
10
0 0
Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18
50Mbps 100Mbps 200Mbps Gigabit Education Business 100Mbps+ Other
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Streaming is driving shift to unlimited data plans

71% of NZ broadband connections had no data cap at 30 June 2018

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Share of connections by data cap
100%
5% 8% > ~1.3m broadband connections are
90% believed to be on unlimited data
Unlimited
33% plans, up from ~130k in 2014
80%
50%
70% 62% 100GB or more
71%
60%
50GB to 100GB
50%
40% 20GB to 50GB
30%
5GB to 20GB
20%
10%
Under 5GB
0%
Source: Statistics NZ ISP Survey June 2018
2013 2014 2015 2016 2017 2018
6 11 October 2018 Q1 FY19 CONNECTIONS UPDATE
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UFB uptake reaches 50%

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No. of UFB rollout and uptake Uptake
connections
1,400,000 100%
90%
1,200,000
80%
UFB connections UFB available addresses
1,000,000 70%
Planned footprint % Uptake (RHS)
60%
800,000
50%
600,000
40%
30%
400,000
20%
200,000
10%
0 0%
Premises to pass by Dec 2022 ~1,054,000
Customers able to connect ~1.36 million
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• 50% UFB uptake at 30 Sept (30 June: 45%)

• 472,000 connections

• 950,000 customers able to connect

• 714,000 premises passed

Record quarter for fibre installations

• 50k fibre installations completed (NZ wide)

• field crews reduced to 770 vs 800 at 30 June

• work in progress reduced to 25k vs 30k at 30 June

• weighted average lead times reduced to 8 days vs 13

• days at 30 June

• *Includes estimated 43k greenfields premises for UFB1

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40% growth in traffic peak: Sept 2017-2018

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Network
throughput
(Tbps)
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Average Peak Throughput - September
1.8 Fortnite effect: record
peak traffic 1,792Gbps
1.6 on 12 July 2018
2018 2017
1.4
1.2
1
0.8
0.6
0.4
0.2
0
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Time of day
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UFB1 uptake by area

% uptake relative to capable addresses

ROLLOUT COMPLETED IN THESE AREAS

Note: % uptake can reduce in areas as the fibre rollout passes more addresses in a period

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60.00%
50%
50.00% AVERAGE
UPTAKE
40.00%
30.00%
20.00%
10.00%
0.00%
Dec-17 Mar-18 Jun-18 Sep-18
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