CHORUS LIMITED — Interim / Quarterly Report 2020

Jan 16, 2020

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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

17 January 2020

Chorus Q2 FY20 Connections Update

The Q2 period saw the gigabit fibre uptake surge and the completion of the UFB1 rollout.

Total fixed line connections declined by 12k to 1,432,000 (Q1 FY20: -6k; Q2 FY19: -21k)

• copper voice line reductions moderated in Q2 (Q2 -12k; Q1 -16k) while seasonal factors (e.g. holidays and student disconnections) meant reduced broadband growth in Chorus UFB areas

Total broadband connections stable at 1,206,000 (Q1 FY20: +10k; Q2 FY19: - 4k)

• another strong quarter for fibre demand, with 36k connections added

• 1Gbps connections now 13% of mass market fibre connections, at 87k connections (Q1: 69k)

• UFB uptake rose from 55% to 56%, with the UFB1 rollout now complete and a further 52,000 customers able to connect to fibre across the UFB1 and 2 footprint

• • UFB2 uptake already at 34%

Monthly average data usage for December grew to 293GB, up from 279GB in September

• copper broadband usage grew to 200GB vs 363GB for fibre users

David Collins Chief Financial Officer

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

Nathan Beaumont Stakeholder Communications Manager Mobile: +64 21 243 8412 Email: Nathan.beaumont@chorus.co.nz

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Q2 FY20 Connections Update
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17 January 2020

Q2 FY20 overview

Gigabit fibre demand surges as UFB1 rollout ends

• Total fixed line connections declined by 12k to 1,432,000 (Q1 FY20: -6k; Q2 FY19: -21k)

• copper voice line reductions moderated in Q2 (Q2 -12k; Q1 -16k) while seasonal factors (e.g. holidays and student disconnections) meant reduced broadband growth in Chorus UFB areas

• Total broadband connections stable at 1,206,000 (Q1 FY20: +10k; Q2 FY19: -4k) ▪ another strong quarter for fibre demand, with 36k connections added

• 1Gbps connections now 13% of mass market fibre connections, at 87k connections (Q1: 69k)

• UFB uptake rose from 55% to 56%, with the UFB1 rollout now complete and a further 52,000 customers able to connect to fibre across the UFB1 and 2 footprint

• UFB2 uptake already at 34%

• Monthly average data usage for December grew to 293GB, up from 279GB in September ▪ copper broadband usage grew to 200GB vs 363GB for fibre users

2

Broadband connections steady at 1,206,000

	31 Dec	31 March	30 June	30 Sept	31 Dec
	2018	2019	2019	2019	2019	1400000	Baseband copper
Unbundled copper (no broadband)	39,000	31,000	24,000	21,000	18,000	1200000	Unbundled copper
Baseband copper (no broadband)	244,000	233,000	214,000	201,000	192,000	1000000	Copper ADSL
Copper ADSL	374,000	352,000	327,000	304,000	283,000
(includes naked) VDSL (includes naked)	295,000	283,000	270,000	257,000	242,000	800000	VDSL
Fibre broadband	517,000	556,000	599,000	645,000	681,000	600000
(GPON)
Data services	5,000	5,000	5,000	4,000	4,000	400000
(copper)							Fibre (GPON)
Fibre premium	12,000	12,000	11,000	12,000	12,000	200000
(P2P)
Total connections	1,486,000	1,472,000	1,450,000	1,444,000	1,432,000	0	~~Business premium~~
						31-Dec-18 31-Mar-19			30-Jun-19		30-Sep-19		31-Dec-19

> 1,206,000 broadband connections comprises:

• 681,000 fibre (GPON) connections

• 525,000 VDSL/ADSL (copper) connections

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26% increase in Gigabit uptake

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
60 100Mbps $46 p.m.
% of
plans 50
40
30
20
10
50Mbps $42.50 p.m.
0
Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
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• 36,000 mass market fibre connections added in Q2 (vs 46k in Q1 FY20)

• strong second tier RSP promotions of 1Gbps services, together with RSP migration of 200Mbps customers, drove 1Gbps connections from 69k to 87k

Fibre plan movement by quarter

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30
Q1 Q2
Change in 20
connections
(‘000s)
10
0
-10
50Mbps 100Mbps 200Mbps 1Gbps
> Annual update to regulated copper pricing from mid
December
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Regulated copper pricing	Line only (monthly)	With broadband (monthly)
Prior pricing	$31.19	$42.02
From mid Dec 2019	$31.68	$42.35

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4 17 January 2020 Q2 FY20 CONNECTIONS UPDATE
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Connection changes by Zone (indicative)

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Chorus UFB Rural (non- Local Fibre
Q2 -7k -2k zone UFB) zone Company
UFB zone
LFC
Total connections at 1,096,000 196,000 124,000
Zone
Q1 -7k -3k Broadband connections 31 Dec
Copper (no broadband) connections Broadband connections 969,000 154,000 83,000
Copper (no broadband) 127,000 42,000 41,000
Q2 N/C -2k
Rural connections
Zone
Includes planned UFB1, 2 and 2+ coverage
Q1 +1k -2k Excludes 16k fibre premium and data services (copper) connections
Q2 +7k -8k
Chorus
UFB Zone
Q1 +16k -11k
0 200000 400000 600000 800000 1000000
No. of connections
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5 17 January 2020 Q2 FY20 CONNECTIONS UPDATE
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Broadband mix in Chorus planned UFB zone

76% of Chorus broadband connections in Auckland on fibre

Fibre now 68% of Chorus broadband connections

Chorus UFB zone broadband mix

Auckland broadband connections by type (%) 11 13 76 Fibre

1,000,000 900,000 800,000 700,000 600,000 No. of connections 500,000 400,000 300,000 200,000 100,000 -

Copper - VDSL

Copper - ADSL

Fibre Copper broadband

6

Fibre continues to grow Wellington connections

Return to connection growth in recently completed UFB areas

No. of connections

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Karori exchange
3200
3100
3000
2900
2800
2700
2600
UFB rollout
2500
Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
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No. of
connections
Island Bay exchange
1700
1600
UFB rollout
1500
Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
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7

UFB1 rollout complete

Fibre installations (NZ wide)

• UFB uptake increased from 55% to 56% within completed footprint

• 58% uptake across UFB1 footprint

• uptake in UFB2 areas grew from 29% to 34%

• (note: uptake includes some UFB2 areas that have been partially built, but not yet submitted for Crown sign-off)

• 664,000 connections (Q1: 624,000) now within completed footprint, including business premium

• 1,185,000 customers able to connect (Q1: 1,133,000)

• 909,000 premises passed (Q1: 863,000) out of 1,054,000 target = UFB rollout 86% complete

> 45,000 fibre installations completed in Q2 (Q1: 53k)

• customer satisfaction consistent at 7.8

• field crew levels stable at ~670

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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

• weighted average lead times increased from 6 to 7 days

• work in progress reduced from 23k (Q1) to 20k

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UFB1 uptake: 58%

70.00%

% uptake relative to capable addresses

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Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
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9

Monthly average data usage now 293GB

Monthly average data usage per connection on our network

• Monthly average data usage per connection on our network grew to 293GB in Q2, up from 279GB (Sept)

• 363GB on fibre (Sept:360GB)

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400 363 ▪ 200GB on copper (Sept:187GB)
350
> Data usage growth typically slows in Q2 due to Christmas holidays
293
300 Peak time usage now typically more than 2Tbps: Christmas and New
Year’s Eve saw reduced data usage
Data 250
200
usage
200
(GB)
150
100
Copper Fibre Average
50
0
Throughput (Tbps)
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 Dec-19
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Quality of fibre broadband highlighted in Commerce Commission reporting

Sam Knows testing showed:

• Fibre consistently enables multiple streams of Ultra High Definition content while other technologies have variable performance - see Figure 11.

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• Fibre ensures low latency performance. Latency above 30ms can result in poor experience of applications such as gaming or video calls - see Figure 13.

Source: Measuring Broadband New Zealand , Spring Report, December 2019, Commerce Commission

11