CHORUS LIMITED — Interim / Quarterly Report 2020

Oct 8, 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

9 October 2019

Chorus Q1 FY20 Connections Update

The Q1 period saw line loss slow significantly as broadband uptake soared.

Total broadband connections grew by 10k to 1,206,000 (Q4 FY19: +5k)

• record quarter for fibre demand, with 46k connections added

• demand for 1Gbps connections grew to 69,000 connections, up from 58,000 in June

• 25,000 more customers were passed by the fibre rollout

• UFB uptake rose from 53% to 55%

Total fixed line connections declined by 6k to 1,444,000 (Q4 FY19: -22k)

• connections in Chorus UFB areas grew by 5k

• disconnections in LFC areas slowed

Monthly average data usage grew to 279GB

• fibre users now averaging 360GB monthly, up from 341GB in June

• peak time network throughput now regularly above 2Tbps

• new peak time record of 2.5Tbps coincided with Wales vs Australia match

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

Steve Pettigrew Stakeholder Communications Manager Mobile: +64 (27) 2586257 Email: steve.pettigrew@chorus.co.nz

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Q1 FY20 Connections Update
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9 October 2019

Q1 FY20 overview

Line loss slows significantly as broadband uptake soars

• Total broadband connections grew by 10k to 1,206,000 (Q4 FY19: +5k)

• record quarter for fibre demand, with 46k connections added

• demand for 1Gbps connections grew to 69,000 connections, up from 58,000 in June

• 25,000 more customers were passed by the fibre rollout

• UFB uptake rose from 53% to 55%

• Total fixed line connections declined by 6k to 1,444,000 (Q4 FY19: -22k) ▪ connections in Chorus UFB areas grew by 5k

• disconnections in LFC areas slowed

> Monthly average data usage grew to 279GB

• fibre users now averaging 360GB monthly, up from 341GB in June

• peak time network throughput now regularly above 2Tbps

• new peak time record of 2.5Tbps coincided with Wales vs Australia match

2

Fibre now 53% of broadband connections

	30 Sept	31 Dec	31 March	30 June	30 Sept		1600000
	2018	2018	2019	2019	2019
Unbundled copper	45,000	39,000	31,000	24,000	21,000		1400000	Baseband copper
(no broadband)
Baseband copper	255,000	244,000	233,000	214,000	201,000		1200000	Unbundled copper
(no broadband)
Copper ADSL	402,000	374,000	352,000	327,000	304,000		1000000	Copper ADSL
(includes naked)
VDSL	309,000	295,000	283,000	270,000	257,000		800000
(includes naked)
Fibre broadband (GPON)	479,000	517,000	556,000	599,000	645,000		600000		VDSL
Data services (copper)	5,000	5,000	5,000	5,000	4,000		400000
Fibre premium (P2P)	12,000	12,000	12,000	11,000	12,000		200000		Fibre (GPON)
Total connections	1,507,000	1,486,000	1,472,000	1,450,000	1,444,000		0		~~Fibre premium~~
							30-Sep-18		31-Dec-18		31-Mar-19		30-Jun-19		30-Sep-19

> 1,206,000 broadband connections comprises:

• 645,000 fibre (GPON) connections

• 561,000 VDSL/ADSL (copper) connections

3

Active wholesaler campaigns driving ARPU growth

Total mass market fibre uptake by plan type

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100 Business/Education plans
1Gbps $60 p.m.
90
200Mbps
$55 p.m.
80
70
$46 p.m.
60 100Mbps
% of
plans 50
40
30
20
10
50Mbps $42.50 p.m.
0
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19
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• 46,000 mass market fibre connections added in Q1 (vs 43k in Q4 FY19)

• 1Gbps connections grew to 69k (Q4 FY19: 58k) and are now ~11% of mass market fibre connections

• second tier retailers continue to grow market share with some promoting 1Gbps at ~$85p.m.

• ▪ 100Mbps connections stable at 71%

Copper pricing

Regulated copper pricing	Line only (monthly)	With broadband (monthly)
Current pricing	$31.19	$42.02
From mid Dec 2019	$31.68	$42.35

4

Connection changes by Zone (indicative)

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Connections
(’000s)
20
15
10
5
0
-5
-10
-15
-20
Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20
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UFB: copper lines (no broadband) UFB: broadband lines LFC: copper lines (no broadband) LFC: broadband lines Rural: copper lines (no broadband) Rural: broadband lines

	Chorus UFB zone*	Rural (non- UFB) zone	Local Fibre Company UFB zone
Total connections at 30 Sept**	1,097,000	198,000	133,000
Broadband connections	962,000	154,000	90,000
Copper (no broadband) connections	135,000	44,000	43,000

• Includes planned UFB1, 2 and 2+ coverage

• **Excludes 16k fibre premium and data services (copper) connections

• premises growth, increasing broadband penetration and winback of offnet customers to fibre is fuelling broadband demand in Chorus UFB areas

• VDSL vectoring upgrade and premises growth helping offset wireless competition in rural areas

• mobile network operators are targeting their copper voice customers with wireless voice services across all Zones

5

Premises growth supporting broadband uptake

96,000 dwellings forecast to be consented in Auckland (2019-2024)

• Auckland : new peak of ~13k dwelling unit consents in 2018, forecast to keep growing

• New Zealand : average of 37,000 new dwellings forecast per annum for the next six years

• New Zealand : multi-unit dwellings expected to grow from 36% to 41% of new residential dwellings by 2024

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6

UFB rollout 82% complete

• 53,000 fibre installations completed in Q1 (Q4 FY19: 50k)

• weighted average lead times reduced from 8 to 6 days

• work in progress stable at 23k

• customer satisfaction increased from 7.7 to 7.8 (August)

• field crews stable at ~670

• UFB uptake increased from 53% to 55%

• 624,000 connections (30 June: 584,000)

• 1,133,000 customers able to connect (30 June: 1,108,000)

• uptake in UFB2 areas already 29%

• 863,000 premises passed (30 June: 842,000) out of 1,054,000 target = 82% complete

Fibre installations (NZ wide)

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20,000
FY18 FY19 FY20
18,000
16,000
14,000
12,000
10,000
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8,000
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July Aug Sept Oct Nov Dec Jan Feb Mar April May June

7

UFB1 uptake

ROLLOUT ONGOING

% uptake relative to capable addresses

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70.00%
Sep-18 Dec-18 Mar-19 Jun-19 Sep-19
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
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55%
AVERAGE
UPTAKE
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Note: % uptake can reduce in areas as the fibre rollout passes more addresses in a period and greenfield subdivisions are claimed

8

Monthly average data usage now 279GB

Monthly average data usage per connection on our network

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400
360
350
300
279
Data
250
usage
(GB)
200 187
150
100
Copper Fibre Average
50
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 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19
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• Monthly average data usage per connection on our network grew to 279GB in Q1, up from 265GB (June) ▪ 360GB on fibre (June:341GB)

• 187GB on copper (June:188GB)

9

Rugby streaming driving higher data usage

Record 2.5 Tbps peak at 9:25pm on 30 Sept coincided with Australia vs Wales

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NZ vs Sth Africa
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NZ vs Canada NZ vs Namibia
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Chorus network throughput

Scheduled RWC match

Copper data usage

Fibre data usage

10