CHORUS LIMITED — Interim / Quarterly Report 2018

Oct 12, 2017

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Chorus Limited Level 10, 1 Willis Street P O Box 632 Wellington 6140 New Zealand

Email: company.secretary@chorus.co.nz

STOCK EXCHANGE ANNOUNCEMENT

13 October 2017

Chorus Q1 FY18 Connections Update

Total fixed line connections declined by 20k to 1,582,000 in the three months to 30 September, while total broadband connections declined by 2k to 1,184,000

• line loss slowed progressively through Q1 as our Ask for Better campaign made customers more aware of their better broadband options

• broadband connections grew in Chorus’ UFB areas, while local fibre companies continued to gain fibre connections in their areas and some retailers promoted their wireless networks more widely

More customers than ever made the switch to better broadband on copper VDSL or fibre

• 53% of broadband connections now on VDSL or fibre, up from 45% at 30 June

• 50,000 connections were added to VDSL, our largest increase ever

• field force productivity was the highest ever with 40,000 new fibre connections built

• fibre uptake across all Chorus UFB areas is now 39%, with Blenheim leading at 47% uptake

Data demand continues to grow as video streaming drives increased broadband usage

• 1,240 gigabits per second average network throughput at 9pm in September 2017, up from 1,084 Gbps in June 2017

• 162GB monthly average household data usage in September (128GB average on copper broadband; 251GB on fibre), up from 155GB in June

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

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Q1 FY18 Connections Update 13 October 2017

Q1 FY18 OVERVIEW

> Total fixed line connections declined by 20k to 1,582,000 and total broadband connections declined by 2k to 1,184,000

• line loss slowed progressively through Q1 as our Ask for Better campaign made customers more aware of their better broadband options

• broadband connections grew in Chorus’ UFB areas, while local fibre companies continued to gain fibre connections in their areas and some retailers promoted their wireless networks more widely

> More customers than ever made the switch to better broadband on copper VDSL or fibre

• 53% of broadband connections now on VDSL or fibre, up from 45% at 30 June

• 50,000 connections were added to VDSL, our largest increase ever

• field force productivity was the highest ever with 40,000 new fibre connections built

• fibre uptake across all Chorus UFB areas is now 39%, with Blenheim leading at 47% uptake

>

Data demand continues to grow as video streaming drives increased broadband usage

• 1,240 gigabits per second average network throughput at 9pm in September 2017, up from 1,084 Gbps in June 2017

• 162GB monthly average household data usage in September (128GB average on copper broadband; 251GB on fibre), up from 155GB in June

2

Q1 FY18 CONNECTIONS UPDATE

Q1 CONNECTION TRENDS

• Total connections reduced by 20,000 to 1,582,000

• a reduction of 17,000 copper lines with no broadband (including unbundled connections)

• a decrease of 2,000 total broadband connections to 1,184,000

• decline of 1,000 data services (copper) connections

			30 Sept	31 Dec	31 March	30 June	30 Sept
			2016	2016	2017	2017	2017	1800000
	Unbundled copper		105,000	99,000	90,000	82,000	76,000	1600000				Baseband copper
	Baseband copper (no broadband) Fibre broadband (GPON)		354,000 203,000	343,000 231,000	328,000 259,000	313,000 292,000	302,000 328,000	1000000 1200000 1400000				Unbundled copper
	VDSL (includes naked)		179,000	199,000	224,000	244,000	294,000	800000				Copper ADSL
	Copper ADSL		847,000	784,000	716,000	650,000	562,000	600000
	(includes naked)
	Data services		10,000	9,000	9,000	8,000	7,000	400000				VDSL
	(copper)
	Fibre premium		13,000	13,000	13,000	13,000	13,000	200000				Fibre (GPON)
	(P2P)							0
	Total fixed line		1,711,000	1,678,000	1,639,000	1,602,000	1,582,000	30-Jun-16		30-Sep-16		31-Dec-16		31-Mar-17		30-Jun-17		30-Sep-17
	connections							Data services (copper) Fibre broadband (GPON) Copper ADSL Baseband copper (no broadband)						Fibre premium (P2P) VDSL Unbundled copper (no				broadband)

KEY CONNECTION TRENDS – Q1 FY18

• copper voice only lines reduced by 17k (prior quarter –23k), with just under half of the reduction being UCLL connections presumably migrating to fibre, or other broadband products

• the decline in total broadband connections slowed significantly to -2k (prior quarter -13k) as our Ask for Better advertising and retailer incentives came into effect (campaign started in May)

• 53% of broadband connections are now on VDSL or fibre, up from 45% at 30 June

• VDSL connections grew by 50k in Q1 (prior quarter +20k) as some retailers began to accelerate the migration of their customers to better broadband

• fibre connections grew by 36k in Q1 (prior quarter +33k)

• broadband connections grew in Chorus UFB1 & 2 areas

INDICATIVE CONNECTIONS BY ZONE AT 30 SEPT	Chorus	Non-UFB1	& 2	Local Fibre Company	TOTAL
(note: zones not yet defined to reflect UFB2+ areas)	UFB1 & 2 areas	areas		UFB 1 & 2 areas
Copper connections – no broadband	241,000		62,000	75,000	378,000
Broadband – copper and fibre	866,000		170,000	148,000	1,184,000
TOTAL	1,107,000		232,000	223,000	1,562,000*

*Excludes the 20k business fibre/copper data connections

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Q1 FY18 CONNECTIONS UPDATE

PROMOTING BETTER BROADBAND

• Our Ask for better campaign continues to raise awareness of VDSL and fibre availability

• more targeted incentives for retailers to migrate ADSL/UCLL connections to better broadband and win back off-net connections

• Consumer New Zealand has reported that wireless marketing claims “don’t stack up” relative to fixed line options given speed, data, and congestion limitations.

> Fibre migration trials yielding results

• 70% of customers spoken to agreed to connect their homes at the same time as the street rollout in Hokitika.

• 40% of customers in an Auckland neighbourhood, whom hadn’t yet connected to fibre, agreed to have their homes connected when approached by Chorus.

• Contact Energy has become the largest electricity retailer to enter the broadband market, offering unlimited plans only and no fixed term contract.

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Q1 FY18 CONNECTIONS UPDATE

FIBRE UPTAKE & USAGE

• 39% uptake with 309,000 connections within UFB deployed footprint (FY17: 35% uptake and 275,000 connections)

• 73% of mass market fibre plans 100Mbps or higher

• 162GB monthly average data usage per connection on our network in Sept 2017

  • 251GB on fibre

  • 128GB on copper

• total number of 50Mbps connections now reducing

Monthly average data usage per connection on our network

% of plans

Total mass market fibre uptake by plan type

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100
90
80
70
60
50
40
30
20
10
0
Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17
50Mbps 100Mbps 200Mbps
Gigabit Education Business 100Mbps+
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300
250
200
GB
150
100
50
GB Copper Fibre Average
0
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Q1 FY18 CONNECTIONS UPDATE

UNLIMITED DATA BECOMING THE NORM

> 62% of connections are now estimated to be on unlimited data

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Share of residential connections by data cap
100%
6% 5% 8%
90% Unlimited
33%
80%
51% 100GB or more
70% 62%
60%
50GB to 100GB
50%
40% 20GB to 50GB
30%
5GB to 20GB
20%
10%
Under 5GB
0%
2012 2013 2014 2015 2016 2017
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Source: St atistics NZ ISP Survey June 2017

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Q1 FY18 CONNECTIONS UPDATE

FIBRE ROLLOUT AND UPTAKE

• 585,000 premises passed (FY17:581,000) out of ~1,054,000 to be passed by the end of 2022

• 40,000 new fibre connections built in Q1 , our highest ever quarter for build

• 784,000 customers now able to connect

• 14 days weighted average lead time for fibre connection (was 22 days in June)

• 27k work in progress connections (was 32k in June)

• customer satisfaction with installation was 7.4 in August (rolling three month average)

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Chorus fibre connection activity - all NZ

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25000
20000
15000
10000
5000
0
Connections built and activated Additional connections completed
Orders (net of cancellations and rejections in the month)
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Q1 FY18 CONNECTIONS UPDATE

UFB1 UPTAKE BY REGION

ROLLOUT COMPLETED IN THESE AREAS

% uptake relative to capable addresses

50.00% 45.00% 40.00% 39% AVERAGE 35.00% UPTAKE 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

Sep-16 Dec-16 Mar-17 Jun-17 Sep-17

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Q1 FY18 CONNECTIONS UPDATE

CONNECTION SPEED

• With 53% of broadband connections now on VDSL or fibre, average broadband speed has increased from 33Mbps in Sept 16 to 59Mbps in Sept 17.

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1,400,000 60
1,200,000
50
1,000,000
40
800,000
30
600,000
20
400,000
10
200,000
0 0
May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17
ADSL ADSL2+ VDSL2 GPON Average Connection Speed 10
Active Connections
Average Connection Speed (Mbps)
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Q1 FY18 CONNECTIONS UPDATE

CONNECTION SPEED HISTOGRAM – 30 Sept 2017

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225,000
175,000
~300,000+ ADSL customers
could make the switch to
125,000 VDSL or Chorus fibre
75,000
25,000
Number of Connections
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 99 101 103 105 107 200
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-25,000 Connection Speed (Mbps)

VDSL2 ADSL ADSL2+ GPON

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Q1 FY18 CONNECTIONS UPDATE