CHORUS LIMITED — Interim / Quarterly Report 2018

Jul 12, 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

13 July 2018

Chorus Q4 FY18 Connections Update

The Q4 period to 30 June 2018 saw broadband demand grow strongly in Chorus UFB areas, with reductions in total fixed line connections consistent with Q3.

• Total fixed line connections declined by 17k to 1,526,000 in Q4 (Q3: -16k), with most of the reduction in other fibre company zones. For FY18 : total connections reduced by 76k (FY17: -125k)

• Total broadband connections grew by 3k to 1,187,000 in Q4 (Q3: +3k). For FY18 , total broadband connections increased by 1k (FY17: -40k)

• UFB uptake grew to 45% , with fibre connections now exceeding ADSL connections for the first time.

• 69% of mass market fibre connections now on 100Mbps; 1Gbps connections grew strongly to 30,000

• Peak time data demand continues to surge with 210GB monthly average household data usage in June 2018, up from 185GB in March. Fibre users average 297GB monthly, up from 268GB in March.

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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Q4 FY18 Connections Update
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13 July 2018

Q4 FY18 overview

• Broadband demand grew strongly in Chorus UFB areas, with reductions in total fixed line connections consistent with Q3

• Total fixed line connections declined by 17k to 1,526,000 in Q4 (Q3: -16k), with most of the reduction in other fibre company zones

• For FY18 : total connections reduced by 76k (FY17: -125k)

• Total broadband connections grew by 3k to 1,187,000 in Q4 (Q3: +3k)

• For FY18 , total broadband connections increased by 1k (FY17: -40k)

• UFB uptake grew to 45% , with fibre connections now exceeding ADSL connections for the first time

• 69% of mass market fibre connections now on 100Mbps; 1Gbps connections grew strongly to 30,000

> Peak time data demand continues to surge

• 210GB monthly average household data usage in June 2018, up from 185GB in March

• Fibre users average 297GB monthly, up from 268GB in March

2

Q4 Connection Trends

	30 June 2017	30 Sept 2017	31 Dec 2017	31 March 2018	30 June 2018
Unbundled copper	82,000	76,000	68,000	62,000	53,000
Baseband copper (no broadband)	313,000	302,000	290,000	279,000	268,000
Fibre broadband (GPON)	292,000	328,000	362,000	394,000	433,000
VDSL (includes naked)	244,000	294,000	320,000	325,000	321,000
Copper ADSL (includes naked)	650,000	562,000	499,000	465,000	433,000
Data services (copper)	8,000	7,000	7,000	6,000	6,000
Fibre premium (P2P)	13,000	13,000	13,000	12,000	12,000
Total connections	1,602,000	1,582,000	1,559,000	1,543,000	1,526,000

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1800000
1600000
1400000 Baseband copper
1200000 Unbundled copper
1000000
Copper ADSL
800000
600000
400000 VDSL
200000
Fibre (GPON)
0
Data services (copper) Fibre premium (P2P)
Fibre broadband (GPON) VDSL
Copper ADSL Unbundled copper (no broadband)
Baseband copper (no broadband)
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Connections by Zone - indicative

• broadband connections increased within the Chorus UFB zone, largely offsetting voice/UCLL declines

• broadband demand remained stable in Rural (non-UFB) zone, voice connections continued to reduce

• ▪ slight increase in connection loss in the Local Fibre Company UFB zone at 13k vs 11k in Q3

Category Chorus UFB zone Q4 change Rural (non-UFB) zone Q4 change Local Fibre Company UFB zone Q4 change TOTAL*	Category Chorus UFB zone Q4 change Rural (non-UFB) zone Q4 change Local Fibre Company UFB zone Q4 change TOTAL*	Category Chorus UFB zone Q4 change Rural (non-UFB) zone Q4 change Local Fibre Company UFB zone Q4 change TOTAL*	Category Chorus UFB zone Q4 change Rural (non-UFB) zone Q4 change Local Fibre Company UFB zone Q4 change TOTAL*	Category Chorus UFB zone Q4 change Rural (non-UFB) zone Q4 change Local Fibre Company UFB zone Q4 change TOTAL*	Category Chorus UFB zone Q4 change Rural (non-UFB) zone Q4 change Local Fibre Company UFB zone Q4 change TOTAL*	Category Chorus UFB zone Q4 change Rural (non-UFB) zone Q4 change Local Fibre Company UFB zone Q4 change TOTAL*	Category Chorus UFB zone Q4 change Rural (non-UFB) zone Q4 change Local Fibre Company UFB zone Q4 change TOTAL*
Copper connections: no broadband	206,000	-13k	51,000	-3k	64,000	-4k	321,000
Broadband: copper + fibre	917,000	+12k	143,000	N/C	127,000	-9k	1,187,000
TOTAL	1,123,000		194,000		191,000		1,508,000**

* Includes planned UFB1, 2 and 2+ coverage

• **Excludes the 18k fibre premium and data services (copper) connections

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Fibre uptake and usage

• 39,000 mass market fibre connections added in Q4 ▪ 30,000 connections now on gigabit plans (Q3: 25,000)

• 69% of mass market fibre connections on 100Mbps

• 100/20Mbps pricing increased to $45 monthly from 1 July

Total mass market fibre uptake by plan type

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100
90
80
70
% of
60
plans
50
40
$45
monthly
30
20
$41.50
10
monthly
0
Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18
50Mbps 100Mbps 200Mbps Gigabit Education Business 100Mbps+
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• Monthly average data usage per connection on our network grew to 210GB from 185GB (March 2018) ▪ 297GB on fibre (March: 268GB)

• 160GB on copper (March:144GB)

Monthly average data usage per connection on our network

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300
250
Data 200
usage
(GB) 150
100
50
Copper Fibre Average
0
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37% growth in June traffic peak year on year

Network throughput (Tbps)

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1.800 Current peak traffic
record of 1,658Gbps on
1.600 1 [st] May 2018
1.400
June 2018
1.200
average peak throughput
1.000
0.800
June 2017
0.600 average peak throughput
0.400
0.200
0.000
Time of day
12:00:00 a.m. 12:45:00 a.m. 1:30:00 a.m. 2:15:00 a.m. 3:00:00 a.m. 3:45:00 a.m. 4:30:00 a.m. 5:15:00 a.m. 6:00:00 a.m. 6:45:00 a.m. 7:30:00 a.m. 8:15:00 a.m. 9:00:00 a.m. 9:45:00 a.m. 10:30:00 a.m. 11:15:00 a.m. 12:00:00 p.m. 12:45:00 p.m. 1:30:00 p.m. 2:15:00 p.m. 3:00:00 p.m. 3:45:00 p.m. 4:30:00 p.m. 5:15:00 p.m. 6:00:00 p.m. 6:45:00 p.m. 7:30:00 p.m. 8:15:00 p.m. 9:00:00 p.m. 9:45:00 p.m. 10:30:00 p.m. 11:15:00 p.m.
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6

Fibre demand steps up

> Record quarter for fibre installations

• 47k fibre installations completed

• field crews increased from 720 to 800

• work in progress steady at 30k

• weighted average lead times grew from 8 to 13 days as year-end release of new areas increased demand

> 45% UFB uptake at 30 June (Q3: 43%)

• 415,000 connections (Q3: 373,000)

• 932,000 customers able to connect (Q3: 863,000)

• 700,000 premises passed (Q3: 643,000); includes 15,000 greenfields and 6,000 UFB2 premises

UFB rollout and uptake

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No. of Uptake
connections
1,400,000 100%
90%
1,200,000
80%
1,000,000 70%
60%
800,000
50%
600,000
40%
30%
400,000
20%
200,000
10%
0 0%
UFB connections UFB available addresses
Planned footprint % Uptake (RHS)
Premises to pass by Dec 2022 ~1,054,000
Customers able to connect ~1.36 million
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*Includes estimated 43k greenfields premises for UFB1

7

UPTAKE BY UFB1 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%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Jun-17 Sep-17 Dec-17 Mar-18 Jun-18
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45% AVERAGE UPTAKE

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NZ broadband market trends - IDC (Q1 2018)

Broadband uptake by retailer (all technology)

NZ broadband market – by technology

1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Spark Vodafone Vocus 2degrees Trustpower ROM

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Source: IDC

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1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
-
Chorus xDSL Chorus mass market fibre Chorus premium fibre
Local fibre companies (UFB) Other fibre networks Other xDSL
Vodafone cable Fixed (mobile) wireless Legacy fixed wireless, satellite
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Source: IDC

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