CHORUS LIMITED — Interim / Quarterly Report 2017

Oct 20, 2016

==> picture [720 x 307] intentionally omitted <==

Q1 FY17 – Connections update 21 October 2016

Q1 FY17 OVERVIEW

• The reduction in total fixed line connections slowed in Q1 FY17 relative to Q4 FY16, while broadband growth resumed

• Fibre connection productivity is increasing with ~38,000 connections built in Q1 vs ~31,000 in Q4 FY16

• Auckland lead time now 6 business days and national weighted average of 12 days (July:16 days)

• Work in progress reduced by almost 20%

• Demand for data continues to surge with the growth of video streaming and unlimited datacaps

• September average monthly household data usage was 117GB up from 103GB in June. We’re forecasting ~170GB by FY18.

• Statistics NZ reported almost half of broadband connections are on unlimited data plans, vs one-third in 2015.

> High-speed broadband uptake (fibre and VDSL) is growing rapidly

• Fibre uptake increased to 29% across Chorus’ UFB areas (June:24%); 647,000 homes and businesses are within reach of Chorus fibre with 189,000 connected

• 59% of mass market fibre connections are on plans of 100Mbps or better (June 54%)

• VDSL growth almost doubled in Q1 to 20,000 new connections

• We estimate about 60% of households could get faster broadband than they already have by switching to a VDSL or 100Mbps fibre plan. Some retailers offer the best available technology – ADSL, VDSL or fibre – at the same retail price.

• In the last 3 months there were 360,000 broadband checks on www.chorus.co.nz/broadband-checker

2

CHORUS Q1 FY17 UPDATE

CONNECTIONS

Fixed line connections 16,000

Broadband connections 3,000

Fixed line connections	30 Sept 2016	30 June 2016	31 March 2016
Baseband copper	1,167,000	1,221,000	1,273,000
Naked copper(UBA/VDSL)	204,000		190,000
		197,000
UCLL	103,000	108,000	112,000
SLU/SLES	2,000	2,000	2,000
Baseband IP	9,000	9,000	10,000
Data services over copper	10,000	10,000	11,000
Fibre(mass market+premium business)	216,000	180,000	149,000
Total fixed line connections	1,711,000	1,727,000	1,747,000
Broadband connections	30 Sept 2016	30 June 2016	31 March 2016
UBA(Basic + Enhanced +Naked)	847,000	900,000	944,000
VDSL(including naked)	179,000	159,000	148,000
Fibre(mass market)	203,000	167,000	136,000
Total broadband connections	1,229,000	1,226,000	1,228,000

3

CHORUS Q1 FY17 UPDATE

CONNECTION TRENDS

• The shift to high-speed broadband continues:

• pace of migration to fibre grew again in Q1

• VDSL uptake almost doubled, further increasing the reduction in copper broadband (UBA)

• naked line growth remains steady

• unbundled lines continue to reduce with fibre uptake

==> picture [404 x 341] intentionally omitted <==

----- Start of picture text -----

Change in fixed line connections
Baseband Baseband
copper IP UCLL/SLU Naked lines Data Fibre
40
20
0
-20
-40
-60
Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17
Change in broadband connections
UBA VDSL Fibre
40
30
20
10
0
-10
-20
-30
-40
-50
-60
CHORUS Q1 FY17 UPDATE 4
----- End of picture text -----

FIBRE ROLLOUT & UPTAKE

Total mass market fibre uptake by plan type

> Rollout 58% complete with 480,000 premises passed

• 647,000 customers able to connect

• 29% uptake with 189,000 connections within UFB deployed footprint (156,000 at 30 June 2016)

• 82% of Q1 net adds were on 100Mbps plans or higher

• 59% of mass market fibre plans now >100Mbps

==> picture [310 x 204] intentionally omitted <==

----- Start of picture text -----

100
90
% of
80
plans
70
60
50
40
30
20
10
0
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16
30Mbps 100Mbps 200Mbps
Gigatown Education Business 100Mbps+
----- End of picture text -----

5

CHORUS Q1 FY17 UPDATE

BANDWIDTH DEMAND IS SURGING

• September average monthly household data usage was 117GB (up from 103GB in June)

• 102GB average on copper and 193GB on fibre

• Our data suggests ~170GB average by FY18

• Note: 2 hours streaming a day is global average for Netflix subscribers – 1 hour of HD video uses 2GB to 3GB

> Almost half of NZ households have unlimited data plans

==> picture [353 x 158] intentionally omitted <==

Average monthly data usage (GB) per connection

==> picture [275 x 181] intentionally omitted <==

----- Start of picture text -----

250
200
150
100
50
0
Dec-15 Mar-16 Jun-16 Sep-16
Copper Fibre Average
----- End of picture text -----

6

CHORUS Q1 FY17 UPDATE

FIBRE PRODUCTIVITY INCREASING

Chorus fibre connection activity - all NZ

0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000	Connections built and activated Additional connections completed

>

~38,000 fibre connections built in Q1

• 552 crews in September, up from 524 in June

• productivity increasing as Visionstream takes on primary connection role

• work in progress reduced to 26,600 (June: 32,700)

• reschedules reduced to 21% (July:25%)

• national weighted average lead time reduced to 12 business days (July:16 days)

• Auckland has a 6-day lead time

• Downer areas currently have longer lead times and we are transitioning connection work to Visionstream

Orders (net of cancellations and rejections in the month)

7

CHORUS Q1 FY17 UPDATE

UFB UPTAKE BY REGION

35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Dec-15 Mar-16 Jun-16 Sep-16 CHORUS Q1 FY17 UPDATE

==> picture [144 x 176] intentionally omitted <==

8

AVERAGE CONNECTION SPEED

• the average connection speed across our network is 33Mbps, up from 30Mbps in June, as fibre and VDSL uptake

==> picture [614 x 266] intentionally omitted <==

----- Start of picture text -----

grows 33
1,400,000 Mbps 35
1,200,000 30
Speed (Mbps)
1,000,000 25
800,000 20
600,000 15
400,000 10
10
Mbps
200,000 5
0 0
May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16
ADSL ADSL2+ VDSL2 GPON Average Connection Speed
Active Connections
Average Connection Speed (Mbps)
----- End of picture text -----

9

CHORUS Q1 FY17 UPDATE

CONNECTION SPEED

 connection speeds are subject to factors such as service choice, modem type and home wiring

Connection Speed Histogram - September 2016

==> picture [699 x 196] intentionally omitted <==

----- Start of picture text -----

120,000
ADSL ADSL2+ VDSL2 GPON
100,000
80,000
60,000
40,000
No. of 20,000
Connections
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 200
----- End of picture text -----

==> picture [96 x 8] intentionally omitted <==

----- Start of picture text -----

Connection speed - Mbps
----- End of picture text -----

10

CHORUS Q1 FY17 UPDATE