CHORUS LIMITED — Interim / Quarterly Report 2018

Apr 12, 2018

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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 April 2018

Chorus Q3 FY18 Connections Update

The Q3 period to 31 March 2018 was characterised by a continued slowdown in line loss, with strong broadband demand in Chorus UFB zones

• total fixed line connections declined by 16k to 1,543,000 (-23k in Q2), with most of the reduction in other fibre company zones as expected

• non-broadband copper lines declined by 17k, (-20k in Q2)

• total broadband connections grew by 3k to 1,184,000 (-3k in Q2)

• broadband connections grew by 11k within Chorus UFB zones

Fibre uptake in UFB areas now 43%

• strongest ever quarter for fibre demand with 67k orders

• 67% of mass market fibre connections on 100Mbps

• 25% increase in 1Gbps connections to 25,000

• continued increase, albeit off a low base, of off-net “win-backs” where fibre now available

Peak time data demand continues to surge

• new peak record of 1,599 gigabits per second network throughput on 4 April 2018

• 185GB monthly average household data usage in March 2018, up from 174GB in December

ENDS

For further information:

Nathan Beaumont Media and PR 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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Q3 FY18 Connections Update 13 April 2018

Q3 FY18 OVERVIEW

• The Q3 period to 31 March 2018 was characterised by a continued slowdown in line loss, with strong broadband demand in Chorus UFB zones

• total fixed line connections declined by 16k to 1,543,000 (-23k in Q2), with most of the reduction in other fibre company zones as expected

• non-broadband copper lines declined by 17k, (-20k in Q2)

• total broadband connections grew by 3k to 1,184,000 (-3k in Q2)

• broadband connections grew by 11k within Chorus UFB zones

> Fibre uptake in UFB areas now 43%

• strongest ever quarter for fibre demand with 67k orders

• 67% of mass market fibre connections on 100Mbps

• 25% increase in 1Gbps connections to 25,000

• continued increase, albeit off a low base, of off-net “win-backs” where fibre now available

> Peak time data demand continues to surge

• new peak record of 1,599 gigabits per second network throughput on 4 April 2018

• 185GB monthly average household data usage in March 2018, up from 174GB in December

2

Q3 FY18 CONNECTIONS UPDATE

Q3 CONNECTION TRENDS

• Total connections reduced by 16,000 to 1,543,000

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

• an increase of 3,000 total broadband connections to 1,184,000

• fibre premium connections declined as customers move to lower cost/grade inputs

		31 March	30 June	30 Sept	31 Dec	31 March		1800000
		2017	2017	2017	2017	2018		1600000
	Unbundled copper	90,000	82,000	76,000	68,000	62,000		1400000		Baseband copper
	Baseband copper (no broadband)	328,000	313,000	302,000	290,000	279,000		1200000		Unbundled copper
	Fibre broadband	259,000	292,000	328,000	362,000	394,000		1000000		Copper ADSL
	(GPON) VDSL (includes naked)	224,000	244,000	294,000	320,000	325,000		600000 800000
	Copper ADSL	716,000	650,000	562,000	499,000	465,000		400000
	(includes naked) Data services (copper)	9,000	8,000	7,000	7,000	6,000		0 200000		VDSL Fibre(GPON)
	Fibre premium	13,000	13,000	13,000	13,000	12,000
	(P2P)
	Total connections	1,639,000	1,602,000	1,582,000	1,559,000	1,543,000
								Data services (copper)				Fibre premium (P2P)
								Fibre broadband (GPON) Copper ADSL Baseband copper (no broadband)				VDSL Unbundled copper (no broadband)

CONNECTIONS BY ZONE

> The table below shows indicative connection totals by zone as at 31 March

• broadband connections within the Chorus UFB zone increased

• connections in Rural (non-UFB) zone were stable

• the pace of connection loss in the LFC UFB zone has slowed compared to the same time last year

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Chorus Rural Local Fibre TOTAL
UFB zone (non-UFB) Company
Q3 change zone Q3 change UFB zone Q3 change
Copper connections: 219,000 -13k 54,000 -1k 68,000 -3k 341,000
no broadband
Broadband: 905,000 +11k 143,000 - 136,000 -8k 1,184,000
copper and fibre
TOTAL 1,124,000 197,000 204,000 1,525,000
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• Includes planned UFB1, 2 and 2+ coverage

**Excludes the 18k business fibre/copper data connections

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Q3 FY18 CONNECTIONS UPDATE

FIBRE UPTAKE & USAGE

• 32,000 mass market fibre connections added in Q3

• 25,000 connections now on gigabit plans (Q2: 20,000)

• 67% of mass market fibre connections on 100Mbps

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

Total mass market fibre uptake by plan type

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100
90
80
70
60
50
40
30
20
10
0
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% of
plans
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Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

50Mbps 100Mbps 200Mbps Gigabit Education Business 100Mbps+

• Monthly average data usage per connection on our network grew to 185GB from 174GB in Dec 2017 ▪ 268GB on fibre (Dec: 250GB)

• 144GB on copper (Dec:141GB)

Monthly average data usage per connection on our network

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300
250
GB 200
150
100
50
GB Copper Fibre Average
0
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18
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Q3 FY18 CONNECTIONS UPDATE

ONLINE VIEWING DRIVING RECORD PEAKS

• New peak traffic record of 1,599 Gbps on 4[th] April

• up 20% since Q2 record peak of 1,328Gbps on 10 December

• increase equivalent to an extra 50,000 HD TV streams

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Record traffic peaks on Chorus’ network TVNZ reports 1.33m live
streams (~30m viewing
Network 1800
1599 minutes) during first 7 days
throughput 1600 1449 1457 of Commonwealth Games
(Gbps) 1385
1328
1400
1200
1000
800
600
400
200
0
10-Dec-17 18-Jan-18 1-Feb-18 29-Mar-18 4-Apr-18
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Q3 FY18 CONNECTIONS UPDATE

FIBRE FOCUS

> Record quarter for fibre demand with 67k orders

• 32k fibre installations completed

• weighted average lead times reduced from 14 to 8 days

• field crews increased from 700 to 720

• work in progress increased from 25k to 32k

> Migration activity fuelling order growth

• 30+ concurrent campaigns (RSP and Chorus led)

• Hokitika build + ONT trial extended to Thames: about 2/3 of customers spoken to so far agree to ONT installation

• strong response to trial Wellington off-net campaign

> 43% UFB uptake at 31 March (Q2: 42%)

• 373,000 connections

• 863,000 customers able to connect

• 643,000 premises passed

• scheduled to pass 45,000 more premises in Q4

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No. of UFB rollout and uptake
connections Uptake
1,400,000 100%
90%
1,200,000
80%
1,000,000 70%
60%
800,000
50%
600,000
40%
400,000 30%
20%
200,000
10%
0 0%
UFB connections UFB available addresses
Planned footprint % Uptake
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

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Q3 FY18 CONNECTIONS UPDATE

UFB UPTAKE BY AREA

ROLLOUT COMPLETED IN THESE AREAS

% uptake relative to capable addresses

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

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passes more addresses in a period
50.00%
45.00% 43%
AVERAGE
40.00% UPTAKE
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Jun-17 Sep-17 Dec-17 Mar-18
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Q3 FY18 CONNECTIONS UPDATE

CONNECTION SPEED

• 61% of broadband connections now on VDSL or fibre

• Average broadband speed has increased from 64Mbps in Dec 17 to 72Mbps in March 18. Connection Speed

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1,400,000 80
70
1,200,000
60
1,000,000
50
800,000
40
600,000
30
400,000
20
200,000 10
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 Nov-17
ADSL ADSL2+ VDSL2 GPON Average Connection Speed
Active Connections
Average Connection Speed (Mbps)
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Q3 FY18 CONNECTIONS UPDATE