CHORUS LIMITED — Capital/Financing Update 2019

Apr 9, 2019

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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

10 April 2019

Chorus Q3 FY19 Connections Update

The Q3 period to 31 March 2019 saw broadband connections rebound, with UFB uptake growing to 53%.

Total fixed line connections declined by 14k to 1,472,000 in Q3 (Q3 FY18: - 16k)

• broadband growth returned to Q1 levels in Chorus fibre areas, largely offsetting declines in copper lines with no broadband

• the pace of connection losses in other fibre company zones slowed

Total broadband connections grew by 5k to 1,191,000 (Q3 FY18: +3k)

• fibre demand was strong through Q3, with 43,000 fibre installations completed

• fibre uptake within our UFB areas increased to 53% , up from 51% in December

• Waiuku and Queenstown lead with 62% uptake, while demand in Auckland is also strong at 57%

• demand for 1Gbps connections grew to 50,000 connections, up from 44,000 in December

Monthly average data usage grew to 247GB

• fibre users now averaging 329GB monthly, up from 315GB in December

• peak time data usage has begun exceeding 1.8Tbps , up from 1.3Tbps in March 2018

ENDS

For further information:

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

Nathan Beaumont

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

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Q3 FY19 Connections Update
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10 April 2019

Q3 FY19 overview

Broadband connections rebounded, with UFB uptake growing to 53%

• Total fixed line connections declined by 14k to 1,472,000 in Q3 (Q3 FY18: -16k)

• broadband growth returned to Q1 levels in Chorus fibre areas, largely offsetting declines in copper lines with no broadband

• the pace of connection losses in other fibre company zones slowed

> Total broadband connections grew by 5k to 1,191,000 (Q3 FY18: +3k)

• fibre demand was strong through Q3, with 43,000 fibre installations completed

• fibre uptake within our UFB areas increased to 53% , up from 51% in December

• Waiuku and Queenstown lead with 62% uptake, while demand in Auckland is also strong at 57%

• ▪ demand for 1Gbps connections grew to 50,000 connections, up from 44,000 in December

> Monthly average data usage grew to 247GB

• fibre users now averaging 329GB monthly, up from 315GB in December

• peak time data usage has begun exceeding 1.8Tbps , up from 1.3Tbps in March 2018

2

Fibre now 47% of broadband connections

0 200000 400000 600000 800000 1000000 1200000 1400000 1600000 31 March 2018 30 June 2018 30 Sept 2018 31 Dec 2018 31 March 2019 Unbundled copper 62,000 53,000 45,000 39,000 31,000 Baseband copper (no broadband) 279,000 268,000 255,000 244,000 233,000 Fibre broadband (GPON) 394,000 433,000 479,000 517,000 556,000 VDSL (includes naked) 325,000 321,000 309,000 295,000 283,000 Copper ADSL (includes naked) 465,000 433,000 402,000 374,000 352,000 Data services (copper) 6,000 6,000 5,000 5,000 5,000 Fibre premium (P2P) 12,000 12,000 12,000 12,000 12,000 Total connections 1,543,000 1,526,000 1,507,000 1,486,000 1,472,000
	Unbundled copper Baseband copper
	Copper ADSL
	VDSL
	Fibre (GPON)

Data services (copper) Fibre premium (P2P) Fibre broadband (GPON) VDSL Copper ADSL Unbundled copper (no broadband) Baseband copper (no broadband)

3

Connection movements by Zone (indicative)

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15
13 12 Copper (no broadband)
Broadband (fibre or copper)
10
5
5
Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3
0
Change in Q1 Q2 Q3
connections
-1 -1
(‘000s) -2 -2
-5 -4 -4 -4
-7
-10 -9 -9
-12
-13
-15
-15
Chorus UFB zone Rural (non-UFB) Local Fibre
zone Company UFB zone
Total connections at 31 March 1,098,000 200,000 157,000
Broadband connections 934,000 153,000 104,000
Copper (no broadband) connections 164,000 47,000 53,000
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• Broadband connections grew by 12k in Chorus UFB areas

  • broadband growth in Chorus areas offsetting broadband reductions in LFC zone

  • line loss in LFC zone slowed slightly in Q3

  • VDSL and vectoring upgrades continue to support broadband demand in rural areas

• Includes planned UFB1, 2 and 2+ coverage

• **Excludes 17k fibre premium and data services (copper) connections

4

1Gbps connections gaining share

Total mass market fibre uptake by plan type

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100
$65 monthly
90
$55 monthly
80
70
60 $45 monthly
% of 50
plans 40
30
20
10 $41.50 monthly
0
50Mbps 100Mbps 200Mbps Gigabit Education Business 100Mbps+
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• 39,000 mass market fibre connections added in Q3 (vs 32k Q3 FY18)

• 1Gbps uptake grew to 9%: 50k connections, up from 44k at 31 Dec

• 70% of mass market fibre connections on 100Mbps

• Q4 incentives for retailers to connect new customers, or upgrade existing customers, to higher speed fibre plans:

>

• 75% of orders in Q4 are 100Mbps or faster = $50 credit per eligible connection

• 15% < 25% of orders in Q4 are 1Gbps = $125 credit per eligible connection

• 25% of orders in Q4 are 1Gbps = $150 credit per eligible connection

5

UFB uptake grows to 53%

> UFB rollout now 73% complete with another 33,000 premises passed

• 771,000 premises passed (31 Dec: 738,000)

• 1,024,000 customers able to connect (31 Dec: 981,000)

• 543,000 connections (31 Dec: 504,000) = uptake grew from 51% (31 Dec) to 53% (31 March)

> 43,000 installations completed in Q3

• weighted average lead times reduced to 9 days vs 12 days in December

• work in progress increased from 22k to 26k

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20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
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Fibre installations (NZ wide)

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FY18 FY19
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-
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July Aug Sept Oct Nov Dec Jan Feb Mar April May June

6

UFB1 uptake

ROLLOUT ONGOING

% uptake relative to capable addresses

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60.00%
Jun-18 Sep-18 Dec-18 Mar-19
53%
AVERAGE
50.00%
UPTAKE
40.00%
30.00%
20.00%
10.00%
0.00%
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Note: % uptake can reduce in areas as the fibre rollout passes more addresses in a period

7

Chorus uptake on similar trajectory to Singapore

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100
90
Netlink Trust (Singapore)
80
Chorus (NZ)
70
60
50
Rollout
completed
40
30
20
Fibre
uptake (%)
10
0
2011 2012 2013 2014 2015 2016 2017 2018
Source: Analysys Mason, Chorus data
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• Chorus fibre uptake compares favourably to Netlink Trust (Singapore)

• Singapore fibre rollout completed in 2013

• Chorus fibre rollout will be completed in 2022: the ongoing growth in network footprint is offsetting the increase in fibre uptake

• Singapore’s fibre uptake has been driven by the imminent shutdown of third party ADSL and cable networks

8

Fibre data usage up 61GB since March 2018

Monthly average data usage per connection on our network

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350
300
250
Data
usage
200
(GB)
150
100
Copper Fibre Average
50
0
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Monthly average data usage per connection on our network grew to 247GB from 235GB (Dec 2018)

• 329GB on fibre (Dec:315GB)

• 175GB on copper (Dec:174GB)

9

Peak time data usage has begun exceeding 1.8Tbps

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10 10 April 2019
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Average peak time usage in March 2018 was 1.34Tbps

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Date
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