CHORUS LIMITED — Interim / Quarterly Report 2019

Jul 16, 2019

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

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Email: company.secretary@chorus.co.nz

STOCK EXCHANGE ANNOUNCEMENT

17 July 2019

Chorus Q4 FY19 Connections Update

The Q4 period saw fibre connections grow to 50% of Chorus’ total broadband connections.

• Total broadband connections grew by 5k to 1,196,000 (Q3 FY19: +5k)  demand for 1Gbps connections grew to 58,000 connections, up from 50,000 in March

• fibre demand was strong, with 50,000 fibre installations completed

• weighting of build programme to Q4, kept fibre uptake steady at 53% with 84,000 more customers passed

Total fixed line connections declined by 22k to 1,450,000 in Q4 (Q3 FY19: -14k)

• voice only disconnections increased as retailers targeted their customers with wireless voice

Monthly average data usage grew to 265GB

• fibre users now averaging 341GB monthly, up from 329GB in March

• Aucklanders average 364GB monthly on fibre, 308GB monthly across copper and fibre

• peak time data usage has begun exceeding 2Tbps , up 77% from June 2017 level

ENDS

For further information:

Brett Jackson Nathan Beaumont Investor Relations Manager Stakeholder Communications Manager Phone: +64 4 896 4039 Phone: +64 4 896 4352 Mobile: +64 (27) 488 7808 Mobile: +64 (21) 243 8412 Email: brett.jackson@chorus.co.nz Email: Nathan.Beaumont@chorus.co.nz

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Q4 FY19 Connections Update
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17 July 2019

Q4 FY19 overview

50% of broadband connections now on fibre

• Total broadband connections grew by 5k to 1,196,000 (Q3 FY19: +5k)

• demand for 1Gbps connections grew to 58,000 connections, up from 50,000 in March

• fibre demand was strong, with 50,000 fibre installations completed

• weighting of build programme to Q4, kept fibre uptake steady at 53% with 84,000 more customers passed

• Total fixed line connections declined by 22k to 1,450,000 in Q4 (Q3 FY19: -14k) ▪ voice only disconnections increased as retailers targeted their customers with wireless voice

> Monthly average data usage grew to 265GB

• fibre users now averaging 341GB monthly, up from 329GB in March

• Aucklanders average 364GB monthly on fibre, 308GB monthly across copper and fibre

• peak time data usage has begun exceeding 2Tbps , up 77% from June 2017 level

2

Fibre now 50% of broadband connections

							1600000
	30 June	30 Sept	31 Dec	31 March	30 June
Unbundled copper	2018 53,000	2018 45,000	2018 39,000	2019 31,000	2019 24,000		1400000		Baseband copper
(no broadband) Baseband copper	268,000	255,000	244,000	233,000	214,000		1200000		Unbundled copper
(no broadband) Copper ADSL	433,000	402,000	374,000	352,000	327,000		1000000		Copper ADSL
(includes naked)
VDSL	321,000	309,000	295,000	283,000	270,000		800000
(includes naked) Fibre broadband	433,000	479,000	517,000	556,000	599,000		600000		VDSL
(GPON)
Data services	6,000	5,000	5,000	5,000	5,000		400000
(copper) Fibre premium	12,000	12,000	12,000	12,000	11,000		200000		Fibre (GPON)
(P2P)
Total connections	1,526,000	1,507,000	1,486,000	1,472,000	1,450,000		0
							30-Jun-18		30-Sep-18		31-Dec-18		31-Mar-19		30-Jun-19

> 1,196,000 broadband connections comprises:

• 599,000 fibre (GPON) connections

• 597,000 VDSL/ADSL (copper) connections

3

Connection movements by Zone (indicative)

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Chorus UFB zone Rural (non-UFB) Local Fibre
zone Company UFB zone
Total connections at 30 June 1,092,000 199,000 143,000
Broadband connections 946,000 153,000 97,000
Copper (no broadband) connections 146,000 46,000 46,000
Includes planned UFB1, 2 and 2+ coverage 15 13
Excludes 16k fibre premium and data services 12 12
(copper) connections
10
5
5
Change in 0 Q1Q2 Q3 Q4 Q1Q2 Q3 Q4Q1 Q2 Q3 Q4 Q1 Q2 Q3Q4Q1Q2 Q3 Q4
connections Q1 Q2 Q3 Q4
broadband
(‘000s) -1 -1 -1
-2 -2
-5
-4 -4 -4
-7 -7 -7
-10
-9 -9
-12
-15 -13
-15
-20 -18
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  - Includes planned UFB1, 2 and 2+ coverage

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

• Strong broadband growth in Chorus UFB areas

• broadband growth is outpacing premises growth in Chorus UFB areas and offsetting broadband disconnections in LFC zone

• VDSL and vectoring upgrades continue to support broadband demand in rural areas

• voice line loss increased in Chorus UFB zone and LFC zone as retailers targeted their customers with wireless voice

Copper (no broadband) Broadband (fibre or copper)

4

Active wholesaler campaigns driving ARPU growth

Total mass market fibre uptake by plan type

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100
1Gbps $60 p.m.
90
200Mbps
$55 p.m.
80
70
60
100Mbps $46 p.m.
% of 50
plans 40
30
20
10 50Mbps $42.50
p.m.
0
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19
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>

• 43,000 mass market fibre connections added in Q4 (vs 39k Q3)

• 1Gbps connections grew by 8k to 10% of mass market fibre connections, up from 50k connections in Q3

• 95%+ of Dunedin Gigatown connections retained on 1Gbps following end of sponsorship

• 71% of mass market fibre connections on 100Mbps

• Focus on enhancing product portfolio

• small business plans launched 1 July with enhanced restoration levels: 100Mbps plan $55 per month; 1Gbps plan $65 per month

• 10GPON trial underway with retailers; use cases identified

Business + Education

5

UFB rollout now 80% complete

> 50,000 installations completed in Q4

• weighted average lead times reduced from 9 to 8 days

• work in progress decreased from 26k to 23k

> Uptake steady at 53% with fibre passing another 84,000 customers in Q4

• 584,000 connections (31 March: 543,000)

• 1,108,000 customers able to connect (31 March: 1,024,000)

• 842,000 premises passed (31 March: 771,000) out of 1,054,000 target

Fibre installations (NZ wide)

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20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000 FY18 FY19
4,000
2,000
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-
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July Aug Sept Oct Nov Dec Jan Feb Mar April May June

6

UFB1 uptake

ROLLOUT ONGOING

% uptake relative to capable addresses

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70.00%
Sep-18 Dec-18 Mar-19 Jun-19
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
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53% 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

7

Fibre penetration by exchange area

Uptake has increased strongly in exchange areas listed in HY19 presentation

Exchange area (>1,000 connections)	Region	Fibre penetration (total Chorus connections)	Fibre penetration (total Chorus connections)	Fibre penetration (Chorus broadband connections)	Fibre penetration (Chorus broadband connections)
		% of total connections	change from Dec 2018	% of broadband connections	change from Dec 2018
Whitby	Wellington	86%	+4%	88%	+5%
Corstorphine	Dunedin	78%	+4%	82%	+4%
Lynmore	Rotorua	77%	+4%	83%	+5%
Ngongotaha	Rotorua	77%	+4%	82%	+5%
Halfway Bush	Dunedin	78%	+5%	84%	+5%
North East Valley	Dunedin	79%	+7%	84%	+8%
Kelvin Grove	Palmerston North	76%	+5%	84%	+5%
Browns Bay	Auckland	76%	+5%	82%	+6%
Belmont	Wellington	76%	+5%	80%	+6%
Gleniti	Timaru	76%	+5%	82%	+5%

8

Monthly average data usage now 265GB

Monthly average data usage per connection on our network

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350
300
250
Data
usage
200
(GB)
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
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> Aucklanders use significantly more data

• 308GB monthly average data usage

• 364GB on fibre

• 213GB on copper

• Monthly average data usage per connection on our network grew to 265GB in Q4 from 247GB (March 2019)

• 341GB on fibre (March:329GB)

• 188GB on copper (March:175GB)

9

77% increase in network traffic at peak time since June 2017

Fixed line network delivering consistent performance at peak time

Average peak time throughput on Chorus network

Download speed: Copper line vs fixed wireless

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Tbps
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2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
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45 41.8
40.9
26% drop in
40
performance at
Mbps 35 peak time
30
24.3
25
18
20
15
9.3 9.1
10
5
0
VDSL ADSL Fixed Wireless
24-7 Peak time
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Source : Commerce Commission, June 2019

Peak time = busiest daily 15 minute period

10