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Chorus Limited Level 10, 1 Willis Street P O Box 632 Wellington 6140 New Zealand

7 October 2014

STOCK EXCHANGE ANNOUNCEMENT

Chorus updates connection numbers and gives regulatory update

Chorus will today give institutional investors and analysts a presentation on its business, which includes:

An update on total fixed line connections and market trends
An update on the May investor presentation on the pending final pricing principle (FPP) processes, Chorus’ latest views on potential economic cost modelling (TSLRIC) outcomes and other regulatory and government related matters.

As part of the regulatory update, today’s presentation further informs the market on TSLRIC modelling choices and key parameters that will be part of the Commission’s decision making. A copy of the presentation is attached.

The webcast can be viewed at www.chorus.co.nz/webcast from 10:30am

Connection Update

Fixed line connections increased by 6,000 lines over the three month period to 30 September to a total of 1,783,000 lines. Total broadband connections increased by 15,000 to 1,178,000.

Chorus’ UFB network deployment continues to be ahead of schedule with fibre passing about 286,000 premises at 30 September, meaning 386,000 end-users are within reach of ultra-fast broadband.

Fibre connections grew to 53,000 across Chorus’ nationwide network at 30 September and about 37,000 fibre connections are within Chorus’ completed UFB network footprint.

Chorus’ rural broadband rollout also continues at pace and had brought 75,000 rural lines within reach of better broadband by 30 September.

TSLRIC modelling choices

Early in the Commission’s FPP process, a hybrid TSLRIC copper modelling approach was publicly outlined by world leading experts Analysys Mason. Chorus has said it would continue with this work. Modelling from Analysys Mason will be submitted to

the Commission on 1 December 2014 in line with the Commission’s published timetable.

Analysys Mason is a global telecommunications consultancy, and has assisted regulators in undertaking similar work for networks in Australia, Norway, Denmark, France and the Netherlands.

“Many of our investors have been eager to know how this work is progressing, so to assist the market in further understanding how this particular form of economic modelling technique may be approached, we have set out three scenarios derived from Analysys Mason’s modelling work,” said Mark Ratcliffe, Chorus CEO.

“Under the first scenario, our work with Analysys Mason so far suggests that if we built a copper network that delivers the services provided by Chorus today, without re-using any existing infrastructure at all, it would cost around $16 billion.

“While that full valuation of the network provides a valid starting point for considering value, final FPP prices determined by the Commission are expected to be less given the range of matters upon which it will ultimately take a view. We also note that in the real world market, pricing would of course be constrained by market realities including the need for Chorus to compete with other access networks and technologies.

“The Commission has engaged its own cost modelling firm and it may model fibre costs instead of copper and the model will be the Commission’s own view of how to build a hypothetical new optimised network from scratch.

“The Commission will also decide various parameters that, combined with its modelling choices, will determine the final FPP prices. The Commission has not yet provided preliminary views on all parameters that it may use.”

As such, Chorus has also outlined two further scenarios where the parameters are applied in different ways.

“We have consistently said that we believe evidence does not support aggregate copper pricing below demerger levels of around $45 a month, and that rebalancing is likely between layer 1 and layer 2 pricing, and the progression of modelling continues to support this view,” he said.

The Commerce Commission is scheduled to release draft FPP determinations on 1 December 2014.

Chorus has made, and continues to make, extensive submissions on ongoing consultation documents from the Commission which can be found on the Commission’s website.

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ENDS

For further information:

Ian Bonnar Corporate Affairs Manager Mobile: +64 (27) 215 7564 Email: [email protected]

Brett Jackson Investor Relations Manager Mobile: +64 (27) 488 7808 Email: [email protected]

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Disclaimer

Forward-Looking Statements

This presentation may contain forward-looking statements regarding future events and the future financial performance of Chorus, including forward looking statements regarding industry trends, regulation and the regulatory environment, strategies, capital expenditure, the construction of the UFB network, possible business initiatives, credit ratings and future financial and operational performance. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond Chorus’ control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. No representation, warranty or undertaking, express or implied, is made as to the fairness, accuracy or completeness of the information contained, referred to or reflected in this presentation, or any information provided orally or in writing in connection with it. Please read this presentation in the wider context of material previously published by Chorus and released through the NZX and ASX.
Except as required by law or the NZX Main Board and ASX listing rules, Chorus is not under any obligation to update this presentation at any time after its release, whether as a result of new information, future events or otherwise.
The information in this presentation should be read in conjunction with Chorus’ audited consolidated financial statements for the year ended 30 June 2014. This presentation includes a number of non-GAAP financial measures, including “underlying EBITDA”. These measures may differ from similarly titled measures used by other companies because they are not defined by GAAP or IFRS. Although Chorus considers those measures provide useful information they should not be used in substitution for, or isolation of, Chorus' audited financial statements. Refer to appendix two of Chorus' 2014 Management Commentary, available on Chorus' website at www.chorus.co.nz/investor-centre, for further detail relating to EBITDA measures.

Not an offer of securities

None of the information contained in this presentation constitutes an offer of, or a proposal or an invitation to make an offer of, any security (and, in particular, does not constitute an offer of securities in the United States of America or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act of 1933, as amended ). Distribution of this presentation (including an electronic copy) may be restricted by law and, if you come into possession of it, you should observe any such restrictions. These materials are provided for information purposes only.

Investment Advice

This presentation does not constitute investment advice or a securities recommendation and has not taken into account any particular investor’s investment objectives or other circumstances. Investors are encouraged to make an independent assessment of Chorus.

/ PAGE 2

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Agenda

>Introduction

>Connections and market update

Understanding TSLRIC steps and parameters

▪ note: this presentation is a summary of Chorus’ views to date

Chorus scenarios and comparisons
Regulatory framework and new Government initiatives

Q and A

/ PAGE 4

Fixed line connections

Fixed line connections	30 September 2014	30 June 2014
Baseband copper	1,455,000	1,471,000
UCLL	129,000	127,000
SLU/SLES	3,000	4,000
Naked Basic/Enhanced UBA and Naked VDSL	128,000	117,000
Data services over copper	15,000	16,000
Fibre	53,000	42,000
Total fixed line connections	1,783,000	1,777,000*

> Total connections increased by 6,000 lines

naked lines now account for ~7% of connections and fibre ~3%
baseband demand ‘inflated’ where fibre lines still need copper voice
*baseband copper decline includes 4,000 connections previously counted as intact but non-revenue generating. FY14 total adjusted accordingly

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Q1 change in connections
15
10
5
0
-5 Baseband Data on SLU/SLES UCLL Fibre Naked
copper copper lines
-10
-15
-20
----- End of picture text -----

/ PAGE 5

Continuing broadband growth

Broadband connections	30 September 2014	30 June 2014
Basic UBA	156,000	164,000
Naked Basic UBA	10,000	9,000
Enhanced UBA	792,000	802,000
Naked Enhanced UBA	99,000	93,000
VDSL	61,000	49,000
Naked VDSL	19,000	15,000
Fibre(mass market)	41,000	31,000
Total broadband connections	1,178,000	1,163,000

Q1 change in broadband connections

> 15,000 broadband connections added

high speed services (VDSL and fibre) increased from ~8% to ~10% of broadband connections

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15
10
5
0
Basic UBA EUBA Naked Naked Naked VDSL Fibre
-5 BUBA EUBA VDSL
-10
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/ PAGE 6

Steady migration to broadband, data & fibre

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	Sept 14	June 14	March 14	Dec 13	Sept 13	June 13
Baseband copper	1,455,000	1,471,000	1,485,000	1,495,000	1,507,000	1,519,000

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Demand for high speed broadband is growing

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16,000
(mass market)
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Changing product mix

Steady migration away from basic UBA to EUBA, VDSL and Fibre

Voice/dial-up lines are steadily declining, but still represent a quarter of our connections

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Deployment programmes update

> Rural Broadband Initiative

75,000 lines within reach of better broadband (72,100 at 30 June)
Uptake ~80%
East Cape 220km fibre lay complete

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UFB UFB rollout progress
400,000
▪
rollout 34% complete
350,000
 386,000 end users now within reach of
300,000
Chorus premises
Chorus UFB
passed (cumulative)
250,000
 Build complete for 286,000 premises
200,000
(261,000 at 30 June) End-users within
150,000 reach of Chorus UFB
 FY15 target: 106,000 premises passed
100,000
 ~37,000 end-users connected within
50,000
Chorus deployed UFB area
0
Jun-14 Sep-14
/ PAGE 10
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Broadband provisioning mix

Q1 shows slowdown in provisioning activity, in line with reduced RSP marketing

Number of truck rolls

/ PAGE 11

Significant investment in broadband is delivering results

Connection speed and connection volume

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Note : UFB % is based on household passed while VDSL, >5mbps, and basic broadband is based on lines.

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Average connection speed has increased steadily

Average connection speed within Chorus’ network, reflecting:
network capability enhanced through fibre to the node (ADSL2+, VDSL) and fibre rollouts
customer uptake of VDSL and mass market fibre
reduction in number of legacy modems

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01.09.2014
15.26 Mbps
01.12.2011
10.83 Mbps
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NZ is outperforming Australia on speed, not uptake

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% uptake of
premises Fibre uptake - NZ vs Australia
passed
45 151,000
connections
40
35
30
25
20
15 39,500
connections
10
5
0
June 2011 June 2012 June 2013 June 2013
NBN uptake UFB uptake
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Source: Ookla, TrueNet
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Sustained HD video impacts throughput

Low concurrent usage is what enables a good (but not perfect) experience today
Significant increases in concurrent use will drive network challenges, as traffic is aggregated through the network

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18 Web browsing (2 people)
16 Netflix
14 Lightbox using
Lightbox
2Mbps on
12 Netflix using
IPAD2
6Mbps on
10 AppleTV
8
6
4
Average = 290kbps 6.26Mbps 8.42Mbps 6.32Mbps 230kbps
2
0
Throughput at Layer 2 (Mbps)
7:00 7:04 7:09 7:13 7:18 7:22 7:27 7:31 7:36 7:40 7:45 7:49 7:54 7:58 8:03 8:07 8:12 8:16 8:21 8:25 8:30 8:34 8:39 8:43 8:48 8:52 8:57 9:01 9:06 9:10 9:15 9:19 9:24 9:28 9:33 9:37 9:42 9:46 9:51 9:55 0 8
10:0 10:04 10:09 10:13 10:18 10:22 10:27 10:31 10:36 10:40 10:45 10:49 10:54 10:5
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Location = Auckland
Connection = 70Mbps VDSL; 30
second samples • Netflix (HD) on Apple TV with
wifi to standard router,
Lightbox on IPAD (Gen 2)

Time (h:mm) on the evening of Thursday 12[th] September

/ PAGE 15

Moving forward – latest product proposals

Boost VDSL

10 Mbps throughput
commitment over 15mins

> Proposing to launch 1 December

$44.99 price until 31 December 2015 including applicable install charges

Basic VDSL

99% probability of 32kbps
throughput average over 15mins

> Existing basic VDSL to continue to be available from 1 Dec

Existing VDSL connections drop to $39.44 (where $5 connection and wiring uplift applies)
New ‘Basic’ VDSL connections $44.44 (where $10 connection and wiring uplift applies)

Boost HD

5Mbps throughput commitment over 15mins

> On hold

small number of customers interested but too difficult with current uncertainties

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Traffic management
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> UBA currently best efforts and unmanaged

> Chorus will reassess once FPP outcomes known

view it as permitted under the STD and expect we will need to do it in future
expect overall average throughput will grow from 230kbps today to 300kbps by around mid next year

/ PAGE 16

Section break

Regulatory update Anna Moodie

DOCUMENT TITLE / V 1.0 / XX DAY 2012 / PAGE 17

Total Service Long Run Incremental Cost (TSLRIC)

The service :

Step 1 What is the service? Step 2 What MEA can deliver that service? Step 3 What are the parameters? Step 4 What is the price?

Can be unbundled
Has the full functionality of UCLL/UBA (network built for STD, voice, TSO etc)

MEA Options :

Copper – orthodox, real world data

GPON fibre and fixed wireless cannot be unbundled and/or deliver functionality

P2P fibre – lacks precedent, would need to include cost of adding functionality. Likely to be higher cost

Key parameters:

Asset valuation (e.g. trenching cost, equipment costs)
Cost of capital, asset lives, demand, opex

Price includes:

Monthly charges
Sundry charges (e.g. connection charges)

= A price for services offered in New Zealand on a New Zealand network

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Step 1
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The UCLL & SLU services

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UCLL MPF
SLES SLU MPF
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The service :

Can be unbundled (so precludes fixed wireless)
Has the full functionality of UCLL (network built for STD, voice, TSO etc)
Expect average TSLRIC of non-cabinetised UCLL lines approximately equals average TSLRIC of SLU lines

Note: UCLFS incorporates SLES + SLU so UCLFS cost is higher than UCLL/SLU

/ PAGE 19

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Step 1
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Understanding Chorus’ network reach

Chorus is required by TSO to connect 100% of end-users within its 2001 footprint
approximately 1.8m address points nationwide
97% xDSL broadband coverage today and wholesaled to RSPs

Fibre to the node (FTTN) zones summary

Zone 1	High density areas of Auckland, Hamilton, Wellington, Christchurch and Dunedin	48% of all switched lines
Zone 2	High density areas of 28 provincial centres. Key satellite towns of the five main centres.	24% of all switched lines
Zone 3	High density (i.e. 50km/h) areas of small towns with greater than 500 lines	9% of all switched lines
Zone 4	Remaining very small towns, low density areas and remote locations (e.g. Chatham Islands, Great Barrier Island)	19% of all switched lines

81% of all switched lines
FTTN investment 2008-2012
UFB planned to 75% by 2020
Government proposal to extend UFB to 80%
Focus of Government’s Rural Broadband Initiative
RBI target of broadband coverage to 252,000 households via fixed + wireless

/ PAGE 20

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Step 1
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= Zones 1 to 3 (~80% of lines)

Rural Broadband Initiative mandated
fibre connectivity to communities, schools, hospitals and towers throughout Zone 4
Chorus upgrading and extending 5Mbps broadband to 57% of Zone 4 homes
Fibre also connecting Vodafone towers to deliver overlapping community coverage of 5Mbps to 80% of Zone 4
Note: recent Government proposal to extend fixed line coverage further again

/ PAGE 21

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Step 1
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This is the UBA service

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First data switch*

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> An RSP wanting to replicate the UBA service would:

Purchase UCLL on non-cabinetised lines, and invest in DSLAMS in the exchange;
Purchase SLU on cabinetised lines, invest in DSLAMS in the cabinet, and purchase backhaul to the exchange;
Also invest in fibre to the first data switch, which may be located at a distant exchange (rather than the local exchange).

/ PAGE 22

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Step 2
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The Modern Equivalent Asset (MEA)

Commerce Commission views to date

Chorus views

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MEA
selection
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July : a TSLRIC model to determine the costs incurred by a hypothetical operator using the most efficient means to provide the service. Not constrained by Chorus’ existing network. Concept of “core functionality”.

A forward looking TSLRIC modelling approach should reflect the efficient cost of providing regulated services in the real world NZ context. Step 1) what is the service; Step 2) what is the MEA that can deliver that service

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UCLL MEA
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July: FTTH for the majority of the network, and fixed wireless in less dense rural areas.

Will also model a copper network.

The cost of building functionality used by end users today (e.g. alarms, facsimiles) will not be accounted for.

Any MEA should be able to deliver the regulated services that needs to support services required by regulation and/or used by end-users today, such as alarms, Sky set top boxes and phones that work in a power cut.

The simplest approach is to model a copper MEA. Alternatively, the Commission could model point-to-point fibre and include cost of fixes.

Fixed wireless cannot be unbundled and has challenges achieving 100% coverage. (Sweden: 2%; Australia: 1%; Denmark: 0%)

UBA MEA

July : copper network based on Chorus’ copper-based inputs

Agree with Commission approach

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Step 2
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Civil costs are common across MEA choices

70 to 80% of network costs are in the civil works required to deploy cable whether it is copper or fibre
TERA’s 2013 analysis for the Danish regulator showed copper network can be cheaper than fibre (note: TERA did not model wireless)

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Source : MEA assessment, Danish Business Authority, May 2013

/ PAGE 24

Achieving 100% coverage ▪ Map shows Chorus ‘multi-access’ and ‘country set’ radio connection paths for most remote ~7,000 end-users

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25 / PAGE 25
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Step 3
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Key parameters

Commerce Commission views to date

Asset valuation

July: Optimised replacement cost (ORC), irrespective of whether Chorus’ existing assets could be re-used. Scorched node.

Route optimisation

Most efficient route between node and premises.

Aerial deployment

No detailed views expressed to date.

Chorus views

Agree with the Commission’s position. Optimisation must be reasonable, realistic and achievable.

Optimisation must be reasonable, realistic and achievable.

Requires real world considerations given local conditions and restrictions. Chorus targeting 20% aerial distribution in UFB areas. Chorus’ actual network that delivers copper is substantially lower

/ PAGE 26

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Step 3
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Asset sharing

WACC

Tilted annuity

Key parameters

Commerce Commission views to date

July: Model will allow for asset sharing with third parties – such as use of electricity poles

Commission determined 75[th] percentile for electricity industry. This has been re-opened and the 67[th] percentile is under submission.

Tilted annuity methodology as a proxy for economic depreciation

Chorus views

Opportunities for sharing on third party assets should be considered but only if they are realistic given current NZ circumstances.

The HNE displaces Chorus, so no sharing can be assumed with Chorus.

Telecommunications higher risk than electricity industry due to technology change and network competition factors.

Tilted annuity based on past cost/price trends except where some future prices have been negotiated.

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Step 3
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Real world costs vary from area to area

As Chorus has found with its UFB deployment, costs vary widely from area to area reflecting: ▪ council and other authority conditions (e.g. aerial consent, reinstatement, conservation access)
▪ local geography (e.g. volcanic rock in Auckland)
availability and cost of access to other networks

Napier City Council is in talks with Unison and Chorus on the issue of fibre. The district plan prohibits new fixtures overhead and Chorus wishes to install overhead lines on new poles where it desires. “If there is an existing overhead line and if it is copper, then yes, but if there is no existing line it has to go underground,” Napier City Council chief executive Wayne Jack said.

/ PAGE 28

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Step 3
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Other key parameters and key considerations

– > Opex Chorus’ view is actual opex should be taken into account

Demand Chorus’ view is that migration off copper (e.g. to other LFCs) should be accounted for
Cost allocation Chorus’ view is that capacity based method is appropriate
Transaction charges currently under consultation
Backdating two phase process in the Act is well known and supports TSLRIC replacing “quick and cheap” initial benchmarked prices. Backdating is consistent with Court of Appeal judgement and investor and industry expectations.

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Section break

DOCUMENT TITLE / V 1.0 / XX DAY 2012 / PAGE 30

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Step 4
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What is the TSLRIC price?

Commission due to report draft prices 1 December
recent Commission letter anticipated completing FPP by April 2015
modelling being conducted for Commission by TERA (recently completed Danish modelling)
participants required to submit own models to Commission on 1 December

> Chorus has engaged Analysys Mason to undertake analysis of Chorus data

Chorus has consistently said it believes evidence does not support aggregate copper pricing below demerger levels
and UCLL pricing is too low, with rebalancing likely between Layer 1 (UCLL/UCLFS) and Layer 2 (UBA) pricing
The following scenarios are provided to assist understanding of parameters in the FPP process but there are obvious caveats:
- these reflect Chorus’ views, as detailed in submissions to date
- Commission is yet to articulate views on all parameters and Chorus scenarios do not necessarily reflect Commission approaches/modelling
- Chorus is competing with other fixed line and mobile networks and would take that into account if FPP pricing was materially above aggregate UBA+UCLL pricing at demerger (i.e. $45.92)

/ PAGE 31

Chorus scenarios overview

Current network replacement cost

this reflects replacement cost of the existing copper-based UCLL and UBA network with some optimisation assumed

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Scenario A
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reflects potential adjustments to the current network replacement cost
doubles the adjustment for optimisation and sharing
introduces a miscellaneous downward adjustment to allow for regulatory uncertainty

$45 case*

indicative of the type of adjustments necessary to produce today’s $44.98 aggregate pricing
arbitrary adjustments made to optimisation and miscellaneous downward adjustment factors

/ PAGE 32

Chorus network valuation scenarios: h brid co er MEA y pp

Parameter	Current network replacement cost	Scenario A assumptions	$45 case assumptions	Comment
Optimisation	10%	20%	50%	TSLRIC modelling may optimise network relative to current route
Misc adjustment	0%	10%	23%	Miscellaneous other downward adjustments in other assumption(s)
Sharing	5%	10%		Estimated 5% of Chorus distribution network is shared with utilities
Aerial deployment	20%			2% of Chorus communal network is aerial (excluding drops). Target of 20% for UFB. Any increase in aerial assumption implies an increase in opex.
Cost allocation methodology	Connections-based for trenching costs sharing between copper and UFB, capacity-based for some network elements			Simple and transparent allocation method.
Depreciation	Demand adjusted tilted annuity			Conventional technique for price smoothing and recovery of efficient costs over time
Opex	Chorus opex with appropriate allocation to UCLL and UBA			Conventional TSLRIC starting point
Demand	Chorus copper demand – flat			Conventional TSLRIC approach to use incumbent demand
UBA throughput	230 kbps average			Average throughput on Chorus network today
WACC	8.1% (post-tax nominal)			/ PAGE 33 Consistent with current WACC; some analysts higher

Chorus TSLRIC illustrative scenario outputs

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Current network
Scenario A $45 case
replacement cost
Network valuation Network valuation Network valuation
~$16bn ~$13bn ~$8bn
~$83 per month $69 per month $45 per month
UCLL ~$67 UCLL ~$55 UCLL ~$33
UBA ~$16^ UBA ~$14^ UBA ~$12^
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Note: Amounts above are not necessarily additive due to rounding

^ UBA pricing shown makes assumption Boost is available and reduces cost allocated to UBA
Involves arbitrary changes to parameters solely to achieve $45 outcome

/ PAGE 34

6 7 8 9 10 11 12 13 14 15 16 Telstra comparison Lines companies (RAB) Telecom op sep Chorus analysis $ billion Network valuation sense check  Commission info disclosure data indicates $8.98b in 2011 increased to ~$9.6b in 2013.  RAB uses ODV/DORC so ORC value would be higher  Excludes equivalent of Chorus  Various cost estimates for Telstra access network only.  Estimates adjusted forward and for NZ population. Converted to $NZ.  2010 op sep accounting replacement cost valuation for access services group – did not include UBA electronics  Pre-dated FTTN/RBI and trenching cost increases.  Replacement cost for UCLL + UBA assets only  Range shows valuation from Scenario A to $45 case Chorus analysis Telecom op sep Lines companies Telstra comparison $45 case Scenario A Current network replacement cost Valuation sense checks	6 7 8 9 10 11 12 13 14 15 16 Telstra comparison Lines companies (RAB) Telecom op sep Chorus analysis $ billion Network valuation sense check  Commission info disclosure data indicates $8.98b in 2011 increased to ~$9.6b in 2013.  RAB uses ODV/DORC so ORC value would be higher  Excludes equivalent of Chorus  Various cost estimates for Telstra access network only.  Estimates adjusted forward and for NZ population. Converted to $NZ.  2010 op sep accounting replacement cost valuation for access services group – did not include UBA electronics  Pre-dated FTTN/RBI and trenching cost increases.  Replacement cost for UCLL + UBA assets only  Range shows valuation from Scenario A to $45 case Chorus analysis Telecom op sep Lines companies Telstra comparison $45 case Scenario A Current network replacement cost Valuation sense checks	6 7 8 9 10 11 12 13 14 15 16 Telstra comparison Lines companies (RAB) Telecom op sep Chorus analysis $ billion Network valuation sense check  Commission info disclosure data indicates $8.98b in 2011 increased to ~$9.6b in 2013.  RAB uses ODV/DORC so ORC value would be higher  Excludes equivalent of Chorus  Various cost estimates for Telstra access network only.  Estimates adjusted forward and for NZ population. Converted to $NZ.  2010 op sep accounting replacement cost valuation for access services group – did not include UBA electronics  Pre-dated FTTN/RBI and trenching cost increases.  Replacement cost for UCLL + UBA assets only  Range shows valuation from Scenario A to $45 case Chorus analysis Telecom op sep Lines companies Telstra comparison $45 case Scenario A Current network replacement cost Valuation sense checks	6 7 8 9 10 11 12 13 14 15 16 Telstra comparison Lines companies (RAB) Telecom op sep Chorus analysis $ billion Network valuation sense check  Commission info disclosure data indicates $8.98b in 2011 increased to ~$9.6b in 2013.  RAB uses ODV/DORC so ORC value would be higher  Excludes equivalent of Chorus  Various cost estimates for Telstra access network only.  Estimates adjusted forward and for NZ population. Converted to $NZ.  2010 op sep accounting replacement cost valuation for access services group – did not include UBA electronics  Pre-dated FTTN/RBI and trenching cost increases.  Replacement cost for UCLL + UBA assets only  Range shows valuation from Scenario A to $45 case Chorus analysis Telecom op sep Lines companies Telstra comparison $45 case Scenario A Current network replacement cost Valuation sense checks	6 7 8 9 10 11 12 13 14 15 16 Telstra comparison Lines companies (RAB) Telecom op sep Chorus analysis $ billion Network valuation sense check  Commission info disclosure data indicates $8.98b in 2011 increased to ~$9.6b in 2013.  RAB uses ODV/DORC so ORC value would be higher  Excludes equivalent of Chorus  Various cost estimates for Telstra access network only.  Estimates adjusted forward and for NZ population. Converted to $NZ.  2010 op sep accounting replacement cost valuation for access services group – did not include UBA electronics  Pre-dated FTTN/RBI and trenching cost increases.  Replacement cost for UCLL + UBA assets only  Range shows valuation from Scenario A to $45 case Chorus analysis Telecom op sep Lines companies Telstra comparison $45 case Scenario A Current network replacement cost Valuation sense checks
	 Replacement cost for UCLL + UBA assets only  Range shows valuation from Scenario A to $45 case Chorus analysis	 2010 op sep accounting replacement cost valuation for access services group – did not include UBA electronics  Pre-dated FTTN/RBI and trenching cost increases. Telecom op sep	 Commission info disclosure data indicates $8.98b in 2011 increased to ~$9.6b in 2013.  RAB uses ODV/DORC so ORC value would be higher  Excludes equivalent of Chorus Lines companies	 Various cost estimates for Telstra access network only.  Estimates adjusted forward and for NZ population. Converted to $NZ. Telstra comparison
			Layer 2 assets and Transpower assets
/ PAGE 35

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Valuation
sense checks
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FTTP rollouts as a proxy for TSLRIC

General rule of thumb that rural rollouts cost same amount again as urban
Treasury FTTP cost study (2009) estimated rollout to 75% at ~$5b-$8.6b
Nordic state comparison (favoured by NBN) suggests NZ 100% rollout of NZ$8b-$13b

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European Commission FTTP costs per premises for commercial deployment and full coverage – Western Europe

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Valuation
sense checks
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Telecom 2010 accounting separation valuation

Commission’s “high level” bottom-up review (2011) of Telecom’s $14 billion passive network valuation:
recognised multiple trenches are common and justified in CBDs
said Telecom route distances were “consistent with a modern copper or fibre network design”
applied significant (34%) trenching price adjustment to reflect anticipated “major works prices”
Chorus’ UFB rollout experience supports Telecom’s 2010 trenching cost views

▪ reversing 34% adjustment implies Telecom 2010 valuation of ~$10b

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Pricing sense
checks
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UCLL/UCLFS pricing out of step

Spark Homeline charges and average electricity lines distribution charges* have increased significantly from 2007-2013
Chorus regulated line charges have declined over same period despite substantial network investment (urban FTTN and RBI)
Based on MBIE Quarterly Survey of Domestic Electricity Prices data for distribution across New Zealand and the average price for a modelled consumer using 8000kWh per year

Monthly charge comparison (2007-2013)

$60.00 $50.00

$40.00 $30.00 $20.00 $10.00 UCLL/UCLFS benchmark price reduction Dec 2012 $0.00 2007 2009 2011 2013 Spark Homeline (excl Akld, Wgtn, Chch) Electricity lines distribution charge Chorus UCLL/UCLFS *

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Pricing sense
checks
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UFB pricing was set relative to copper

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Source : Graham Mitchell, CEO of Crown Fibre Holdings “ Progress & Opportunities, New Zealand’s Ultrafast Broadband FTTH Initiative ”, presentation to the FTTH Council Asia Pacific Conference

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Contracted UFB prices vs copper
$60.00
$55.00
$49.90
$50.00
$45.92
$44.98
$45.00
$42.50
$40.00 $41.50
$40.50
$39.50
$38.50
$35.00
$30.00
July-12 July-13 July-14 July-15 July-16 July-17 July-18 July-19
100/50Mbps (existing) 30/10Mbps (existing) Copper (UBA+UCLL)
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Section break

DOCUMENT TITLE / V 1.0 / XX DAY 2012 / PAGE 40

Regulatory calendar

Boost and UBA process

cess Final pricing principle pro

Proposed UBA changes – 29 October draft report 11 November Submissions on draft report Final report 25 November

Submissions on service transaction 9 October charges Cross-submissions on service 16 October transaction charges

Draft determination due and interested parties cost models to 1 December Commission Submissions on draft 2 February determination due

Commission conference on FPP

3-6 March

Final determination due

1-30 April

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New Government initiatives

UFB

RBI

Pre-election announcement:

Expand UFB from 75% to 80% of population
Crown funding of $152m to $210m
Competitive bid process to consider cost of deployment, consumer demand and regulatory and other assistance from local authorities
$100m additional funding from Telecommunications Development Levy
Contestable funding available June 2016 to June 2019
Objective to improve community connectivity through fixed broadband to homes and businesses
Separate $50m available to extend mobile phone coverage in remote areas

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Delivering better broadband, faster

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Consents
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Post 2020 framework
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TSO review
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Any questions?

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= Zones 1 to 3

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= Zones 1 to 3

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AI assistant

CHORUS LIMITED — Investor Presentation 2014

64680_rns_2014-10-06_94e5b10e-01e0-4833-b12d-6f90ba61fe13.pdf

7 October 2014

STOCK EXCHANGE ANNOUNCEMENT

Chorus updates connection numbers and gives regulatory update

Connection Update

TSLRIC modelling choices

Disclaimer

Forward-Looking Statements

Not an offer of securities

Investment Advice

Agenda

>Introduction

>Connections and market update

Fixed line connections

> Total connections increased by 6,000 lines

Continuing broadband growth

Q1 change in broadband connections

> 15,000 broadband connections added

Steady migration to broadband, data & fibre

Demand for high speed broadband is growing

Changing product mix

Deployment programmes update

> Rural Broadband Initiative

Broadband provisioning mix

Significant investment in broadband is delivering results

Connection speed and connection volume

Average connection speed has increased steadily

NZ is outperforming Australia on speed, not uptake

Sustained HD video impacts throughput

Moving forward – latest product proposals

Boost VDSL

> Proposing to launch 1 December

Basic VDSL

> Existing basic VDSL to continue to be available from 1 Dec

Boost HD

> On hold

> UBA currently best efforts and unmanaged

> Chorus will reassess once FPP outcomes known

Section break

Regulatory update Anna Moodie

Total Service Long Run Incremental Cost (TSLRIC)

The service :

MEA Options :

Key parameters:

Price includes:

The UCLL & SLU services

The service :

Understanding Chorus’ network reach

Fibre to the node (FTTN) zones summary

This is the UBA service

> An RSP wanting to replicate the UBA service would:

The Modern Equivalent Asset (MEA)

Commerce Commission views to date

Chorus views

Civil costs are common across MEA choices

Key parameters

Commerce Commission views to date

Chorus views

Asset sharing

Key parameters

Commerce Commission views to date

Chorus views

Real world costs vary from area to area

Other key parameters and key considerations

Section break

What is the TSLRIC price?

> Chorus has engaged Analysys Mason to undertake analysis of Chorus data

Chorus scenarios overview

Chorus network valuation scenarios: h brid co er MEA y pp

Chorus TSLRIC illustrative scenario outputs

FTTP rollouts as a proxy for TSLRIC

Telecom 2010 accounting separation valuation

UCLL/UCLFS pricing out of step

UFB pricing was set relative to copper

Regulatory calendar

Boost and UBA process

cess Final pricing principle pro

New Government initiatives

CHORUS LIMITED Investor Presentation 2014