Chorus 2018 full year result & annual report

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

Email: company.secretary@chorus.co.nz


STOCK EXCHANGE ANNOUNCEMENT

27 August 2018


Chorus 2018 full year result & annual report

The following are attached in relation to Chorus’ FY18 full year result and annual
report:

1. Media Release
2. Investor Presentation (including FY19 outlook and guidance)
3. Annual Report (including audited financial statements)
4. NZX Appendix 1
5. NZX Appendix 7
6. Corporate Governance Statement
7. Letter to investors

Chief Executive Officer Kate McKenzie, and Chief Financial Officer Andrew Carroll, will
discuss the FY18 full year result by webcast at 10.00am New Zealand time today. The
webcast will be available at www.chorus.co.nz/webcast.

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

---

MEDIA RELEASE


27 August 2018


Chorus full year result for FY18
Strategic initiatives see EBITDA above guidance

 Net profit after tax $85m (FY17: $113m)
 EBITDA $653m (FY17: $652m)
 Operating revenue of $990m (FY17: $1,040m)
 Final dividend 13 cents per share
 156,000 fibre installs in FY18, a 20 percent increase on FY17
 Fibre uptake increased from 35 percent to 45 percent
 Total fixed line connections down 5 percent to 1,526,000
 Broadband connections increased by 1,000 to 1,187,000

Chorus has today reported a net profit after tax (NPAT) of $85m and earnings
before interest, tax, depreciation and amortisation (EBITDA) of $653m for the
year ended 30 June 2018, modestly above the top end of its FY18 guidance
range of $625 million to $650 million.

Operating revenue for the period was $990m (FY17: $1,040m) and operating
expenses were $337m (FY17: $388m). Depreciation and amortisation for the
period was $387m (FY17: $339m), delivering earnings before interest and tax
(EBIT) of $266m (FY17: $313m).

Chorus’ financial results for the year to 30 June 2018 show the company's shift
to becoming an active wholesaler and concentration on tight cost management,
delivered on financial and operational targets.

Speaking about the results, Chorus' CEO Kate McKenzie said, "It's easy to
overlook the scale and pace of the technological change that we're bringing to
New Zealand communities.

"Demand for fibre was stronger than ever, and our ongoing fibre rollout means
there are now more than 900,000 homes and businesses with our fibre available
at their door. During the financial year, we completed a record 156,000 fibre
installations and this helped grow our fibre uptake from 35 percent to 45
percent.

During FY18 Chorus invested $20m in a project to upgrade copper broadband
performance for about 270,000 addresses across rural and local fibre company
areas. The deployment of vectoring and new VDSL broadband electronics saw a
more than 40 percent average increase in download speed for customers already
on VDSL and a further 85,000 rural addresses who could benefit from improved
broadband performance.

"Investing to promote better broadband that’s already available to many New
Zealanders – our role as an active wholesaler – has succeeded in slowing the
pace of connection decline. Continuing competition from wireless and other fibre
networks saw our total fixed line connections reduce, but the pace reduced
considerably with 76,000 connections lost compared to 125,000 last year," said
Kate.

“By June 2018, 64 percent of our broadband connections were on high
performing VDSL or fibre services, up nearly 20 percent on the previous year.

"In the same time, we've seen the average monthly bandwidth demand on our
network grow from 155 gigabytes per customer to 210 gigabytes. For fibre
customers this was greater still at 297 gigabytes per month.

“Much of this demand is occurring in the evening as more and more New
Zealanders shift to streaming video on demand services. We’ve seen the peak
usage on our network grow by nearly 40 percent at peak viewing times.”

Customer experience

Chorus’ number one operational priority remains a high quality connection
experience for customers connecting to fibre for the first time.

“We know we need to make things better if we’re to continue to encourage
customers to make the effort to upgrade to fibre,” said Kate. “While customer
satisfaction measures improved over the financial year achieving 7.5 we fell short
of hitting our target of 7.8 by the end of FY18.

“We need to keep improving our fibre installation process with initiatives like
‘fibre in a day’ for simple installs so we can both increase our productivity and
customers’ satisfaction with the experience.

“Given our essential role in the broadband ecosystem, achieving this in advance
of the online broadcast of sports events like the 2019 Rugby World Cup, will
require us to work even more collaboratively with our service company partners
and our retailers to get our processes and systems working in concert.”

Signalling a return to EBITDA growth

The strategic changes Chorus started in FY18, which continue through FY19, are
focused on achieving the company’s objective of a return to modest EBITDA
growth in FY20.

“Our return to broadband connection growth in FY18, together with strong
forecasts for urban housing development and underlying broadband trends, such
as fibre uptake and the demand for streamed video content, give us added
confidence in our strategy,” said Kate.

“By innovating for growth and optimising today's business, we believe our
infrastructure will continue to help make New Zealand better well into the
future.”

Innovation focus

In FY18 Chorus began trialling new ways to use our network to provide
compelling technology solutions for customers.

A successful ‘future of TV’ trial demonstrated the ability to broadcast live 4K
quality TV content, via the fibre network to customers’ TVs. With New Zealand’s
fibre footprint coverage exceeding that of terrestrial broadcasting by the end of
2022, this proved to be of strong interest to local broadcasters.

A proof of concept initiative took advantage of Chorus' existing network assets to
build an Internet of Things (IoT) network. Powered using re-purposed copper
cables with wireless access points on telephone poles, the network demonstrated
that localised, deep network coverage for a sensor network was feasible.

Progress towards the regulated utility model

Regulatory clarity remains critical to Chorus' focus on long-term shareholder
value. Chorus has worked throughout the year to assist the passage of the utility
style regulatory framework through Parliament and is now awaiting a revised Bill
for passage into legislation.

"We're looking forward to working with the Commerce Commission on a smooth
and timely transition to a framework that aligns the interests of customers and
investors through recognition of a fair return on investment", said Kate.

Dividend

Chorus will pay a final dividend of 13 cents per share, fully imputed, on 09
October 2018 to all shareholders registered at 5pm on 25 September 2018. A
supplementary dividend will be paid to non-resident shareholders. A dividend
reinvestment plan will apply for the final dividend at a discount rate of 3%.
Applications to participate must be received by 5pm (NZ time) on 26 September
2018.

FY19 guidance

EBITDA: $625 - $645 million
Capital expenditure: $820 - $860 million
Dividend: 23 cents per share, subject to no material adverse changes in
circumstances or outlook.

Chorus Chief Executive, Kate McKenzie, and Chief Financial Officer, Andrew
Carroll, will discuss the final results at a briefing in Wellington from 10.00am (NZ
time). The webcast will be available at www.chorus.co.nz/webcast.

ENDS


For further information:

Nathan Beaumont
Stakeholder Communications 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

---

27 August 2018
FY18 FULL YEAR RESULT

27 August 2018
FY18 FULL YEAR RESULT
Disclaimer
This presentation:
• Is provided for general information purposes and does not constitute investment advice or an offer of or invitation to purchase Chorus
securities.
• Includes forward-looking statements. These statements are not guarantees or predictions of future performance. They involve known
and unknown risks, uncertainties and other factors, many of which are beyond Chorus’ control, and which may cause actual resultsto
differ materially from those contained in this presentation.
• Includes statements relating to past performance which should not be regarded as reliable indicators of future performance.
• Is current at the date of this presentation, unless otherwise stated. Except as required by law or the NZX Main Board and ASX listing
rules, Chorus is not under any obligation to update this presentation, whether as a result of new information, future events or otherwise.
• Should be read in conjunction with Chorus’ audited consolidated financial statements for the year to 30 June 2018 and NZX and ASX
market releases.
• Includes non-GAAP financial measures including "EBITDA” and “adjusted EBITDA”. These measures do not have a standardised meaning
prescribed by GAAP and therefore may not be comparable to similar financial information presented by other entities. They shouldnot be
used in substitution for, or isolation of, Chorus' audited consolidated financial statements. We monitor EBITDA as a key performance
indicator and we believe it assists investors in assessing the performance of the core operations of our business. Refer to the appendices
of this presentation and Chorus’ FY18 results investor presentation for further detail relating to EBITDA measures.
• Has been prepared with due care and attention. However, Chorus and its directors and employees accept no liability for any errorsor
omissions.
• Contains information from third parties Chorus believes reliable. However, no representations or warranties (express or implied) are
made as to the accuracy or completeness of such information.

Agenda
>FY18 overview, connections and trends4-5
>Fibre rollout, uptake and data demand6-9
>Financial results10-13
>Capex 14-17
>Guidance: UFB, FY19 capex and EBITDA18-21
>Capital management, FY18 dividend, debt22-23
>Shaping our future: FY20 objective and FY19 focus24-34
Appendices
A: Pro forma FY17 net earnings36
B: Connection and market trends37-38
C: Market structure39
D: UFB1 uptake by area40
27 August 2018
Kate McKenzie, CEO
Andrew Carroll, CFO
Kate McKenzie, CEO
FY18 FULL YEAR RESULT

27 August 2018
FY18 FULL YEAR RESULT
FY18 results overview

▪broadband growth in Chorus UFB zone largely offset loss to alternative networks in rural and LFC zones
▪voice only disconnections driving most of decline (includes UCLL migration to fibre in our UFB zone)
▪64% of broadband connections on fibre or VDSL; fibre connections now exceed ADSL
27 August 2018
FY18 connections overview
INDICATIVE
CONNECTIONS
BY ZONE
Chorus
UFB zone*
Rural
(non-UFB)
zone
Local Fibre
Company
UFB zoneTOTAL
TOTAL
CONNECTIONS
1,123,000194,000191,0001,508,000**
Copper
connections: no
broadband
206,00051,00064,000321,000
Broadband:copper
+ fibre
917,000143,000127,0001,187,000
* Includes planned UFB1, 2 and 2+ coverage
**Excludes the 18k fibre premium and data services (copper) connections
Broadband demand grew strongly, slowing overall line loss from FY17 levels
FY18 FULL YEAR RESULT
-48
-12
-14
43
-10
-32
-60
-40
-20
0
20
40
60
Chorus UFBRuralLFC UFB
FY18 –net change by zone
Copper (no broadband)
Broadband (fibre or copper)
Connections
(‘000)
See Appendix Bfor FY18 connection movements by category

Fibre rollout: 66% complete
>45% UFB uptake at 30 June (FY17: 35%)
415,000 connections
932,000customers able to connect
700,000 premises passed (15k greenfields, 6k UFB2)
27 August 2018
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
UFB rollout and uptake
UFB connections
UFB available addresses
Planned footprint
% Uptake (RHS)
No. of
connections
Uptake
Premisesto pass by Dec 2022~1,054,000*
Customers able to connect ~1.36 million
*Includes estimated 43k greenfieldspremises for UFB1
Uptake
FY18 FULL YEAR RESULT

27 August 2018
Surging fibre demand
20% lift in fibre installations YOY
FY18 FULL YEAR RESULT
185 installation crews added
work in progress stable at ~30k
disappointing lift in customer satisfaction
to 7.5
achieving “fibre in a day” for 25%of
regular installations
12kmanaged migration installations

27 August 2018
Fibre uptake and usage
0
10
20
30
40
50
60
70
80
90
100
Jun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18
50Mbps100Mbps200MbpsGigabitEducationBusiness 100Mbps+
0
50
100
150
200
250
300
CopperFibreAverage
% of
plans
Data
usage
(GB)
Monthly average data usage
per connection on our network
Total mass market fibre uptake by plan type
▪30,000 connections now on gigabit plans
▪69% of mass market fibre connections on 100Mbps
▪100/20Mbps pricing increased to $45 monthly from 1 July
>Monthly average data usage per connection on our
network grew to 210GBfrom 155GB (FY17)
▪297GBon fibre (FY17: 222GB)
▪160GBon copper (FY17:134GB)
$41.50
monthly
$45
monthly
FY18 FULL YEAR RESULT

27 August 2018
Streaming and gaming driving data growth
FY18 FULL YEAR RESULT
Fortniteeffect: record
peak traffic 1,792Gbps
on 12 July 2018
June 2017
average peak throughput
June 2018
average peak throughput

Financial performance
Andrew Carroll, Chief Financial Officer
27 August 2018
FY18 FULL YEAR RESULT

Income statement
27 August 2018
FY18
$m
FY17
(adjusted)
$m
Operating revenue9901,048
Operating expenses(337)(338)
Earnings before interest, tax,
depreciation and amortisation (EBITDA)
653710
Depreciation and amortisation(387)(379)
Earnings before interest and income tax266331
Net interest expense(144)(147)
Net earnings before income tax122184
Income tax expense(37)(39)
Net earnings for the year85145
FY18 FULL YEAR RESULT
FY17 adjusted to show the illustrative impact if NZ
IFRS 9, 15 and 16 had applied

27 August 2018
FY18
$m
FY17
(adjusted)
$m
Fibre broadband (GPON)198123
Fibre premium (P2P)7879
Copper based voice133163
Copper based broadband421501
Data services copper2732
Field Services7084
Value added network
services
3334
Infrastructure2323
Other79
Total9901,048
FY18 FULL YEAR RESULT
FY17 adjusted to show the illustrative impact if NZ IFRS 15 and 16 had
applied
Copper revenues declining as customers migrate to Chorus fibre or
competing fibre/wireless networks
>Decline in copper installation, subdivision and 3
rd
party maintenance revenues
>Revenue growing as fibre uptake increases
>Movement from legacy services to lower price UFB services
Revenue

27 August 2018
FY18
$m
FY17
(adjusted)
$m
Labour 7369
Provisioning611
Network maintenance8787
Other network costs3427
IT5455
Rents, rates and
property maintenance
2422
Regulatory levies1313
Electricity1514
Consultants510
Insurance33
Other2327
Total337338
FY18 FULL YEAR RESULT
>12% reduction in staff from Aug 2017 peak but most impact in capex.
Labour includes $5m of one-off costs
>Provisioning reflects a smaller scope of activity and cessation of FY17 install
support costs
>Proactive maintenance and weather events offset volume reduction and
changed copper/fibre mix
FY17 adjusted to show the illustrative impact if NZ IFRS 15 and 16
had applied
Expenses
>Other costs declined with initiatives around travel and other corporate
expenses
>Increases in network costs reflects increased focus on proactive
maintenance and cost of maintaining network spares
>Reduced following FY17 strategic review

▪Rural areas are disproportionately more expensive to maintain than
urban areas
▪Copper costs don’t reduce in proportion to the number of connections –
there is a significant fixed element
▪Fibre share of maintenance will grow, but at a lesser rate than copper
because variable fault rate is lower on fibre (although costlier to fix)
▪In the long run, we think there is around an annual $10m saving from
full copper to fibre migration in Chorus UFB areas
Copper maintenance:
urban (indicative)
Exchange + feeder
cable
Cabinet to street
boundary
In boundary (excludes
home wiring)
Fixed30%70%0%
Variable20%40%40%
27 August 2018
Understanding network maintenance
Fibre uptake initially reduces variable copper costs only
% FY18 lines
Chorus UFB
Rural (non-UFB)
LFC UFB
% FY18 reactive
maintenance cost
8
31
36
FY18 reactive maintenance
spend $m
Fibre
Copper -
fixed
Copper -
variable
FY18 FULL YEAR RESULT

27 August 2018
Capex: Fibre
Total capex of $810m vs FY18 guidance of $780-$820m
FibrecapexFY18
$m
FY17
(adjusted)
$m
UFB communal231183
Fibre connections & layer 2294258
Fibre products & systems1717
Other fibre connections & growth6545
Customer retention costs134
Subtotal620507
>increase reflects $60m UFB2 rollout; $77m work in progress (FY17:
$41m)
>156,000 installations vs 129,000 in FY18
FY18 FULL YEAR RESULT
Cost per UFB1 premises passed (CPPP): ~$1,568 vs $1,500 -$1,600 guidance (FY17:$1,651)
Crown funding now claimed for ~15k greenfieldspremises (10k in FY18) representing capex to date of ~$17m
recognised in prior years ‘Other fibre connections & growth’
>growth in greenfieldsand backhaul (UFB2) spend, pole replacement
>reflects a full year of retention activity

27 August 2018
Capex: Fibre connections & layer 2
Fibre connections & layer 2 capexFY18 spendFY17 spend
Layer 2 (long run programmeaverage of $100 per connection)$32m$20m
Premium business fibre connections$11m: 1,400 connections
(FY18 estimate: 2,500)
$19m: 2,000 connections
Single dwelling units and apartments connections$163m: 156,000 connections
(FY18 estimate:152,000)
$144m: 129,000
connections
Backbonebuild: multi-dwelling units and rightsof way$88m: 13,100completed
(FY18 estimate: 12,000)
$75m: 11,300completed
TOTAL SPEND$294m$258m
Note: we estimate ~50-55% of MDUs and RoWsrequiring backbone build have been completed
Cost per UFB1 premises connected (CPPC): $1,037* vs $1,050 -$1,200 guidance (FY17: $1,122)
* excludes layer 2 and includes standard installations, some non-standard single dwellings and service desk costs
strong uplift in fibre demand year on year with more installations and backbone completed than forecast
increased layer 2 spend for UFB2/2+ rollout and bandwidth demand
Connections capex of $294m vs FY18 guidance of $260-$290m
FY18 FULL YEAR RESULT

27 August 2018
Capex: Copper and Common
CommoncapexFY18
$m
FY17
(adjusted)
$m
Informationtechnology3534
Building& engineering services2019
Other34
Subtotal5857
CoppercapexFY18
$m
FY17
(adjusted)
$m
Network sustain4529
Copperconnections24
Copper layer23444
Product42
Customer retention costs4746
Subtotal132125
network sustainreflects investment in poles,
proactive maintenance and roadworks projects
copper layer 2 included ~$20m VDSL vectoring
rollout completed in FY18
customer retention costs capitalised as per NZ
IFRS 15
FY18 FULL YEAR RESULT
continued to invest in own IT platforms/technology and
upgrading exchanges for power/regulatory
requirements

~120,000 brownfields premises across UFB1 and UFB2
expect to claim another ~18k UFB1 greenfieldspremises already passed in prior years
27 August 2018
UFB rollout –programme guidance recap
FY19 is peak communal build year
FY18 FULL YEAR RESULT
Programme guidanceNotes
UFB1 communal$1.75 -$1.8 billion
Tracking towards the top end of guidance
and excludes growth (e.g.additional splitter
investment)
UFB1 cost to
connect (CPPC)
$1,050 -$1,250
Fora standard residential connection,
including layer 2 and service desk costs,
and in 2011 dollars. Tracking towards the
top half of the range.
UFB2* communal$505 -$565 million
Combined guidance range for UFB2 and 2+
UFB2* cost to
connect
$1,650 -$1,850
In2017 dollars and including layer 2,
backbone costs for MDUs and rights of way
with 10 or fewer premises and service desk
costs
* combined UFB2 and 2+ rollout plans

27 August 2018
FY19 gross capex guidance
>$820m -$860m gross capex reflects:
Fibre $660m-$690m
$280-310m fibre connections & layer 2
$90-110m spend forecast for UFB2/2+ communal
continued greenfieldsand transport (UFB2) spend
~$10m pole programme continues
customer retention mix weighted more to fibre
Copper$90m-$110m
vectoring rollout complete
~$10m pole programme continues
Common: $55m-$70m
▪includes potential innovation spend
FY18FY19 GUIDANCE
FY18 vs FY19 illustrative capex profile
CommonCopperFibre
$810m
FY18 FULL YEAR RESULT
$820 -$860m
660-690
90-110
55-70
620
132
58

27 August 2018
FY19 EBITDA guidance
$625m to $645mEBITDAreflects:
expectations of market growth in broadband,
plus continued slowing in overall line loss
Incremental spend (above FY18 levels) of
$10 -$15 million on innovation activity,
regulatory processes, branding and other
transformation-related one-off costs.
Excluding this, we expect total costs to be
broadly consistent with FY18.
FY18 FULL YEAR RESULT

27 August 2018
FY19 guidance summary
FY19 guidance FY18 result
UFB1 Cost Per Premises
Passed (CPPP)
$1,500 -$1,600$1,568
UFB2/2+ communal capex
$90m -$110m
(based on estimated starting premises of 45,000 to 55,000 and premises
handed over of 25,000 to 35,000)
$61m
UFB1 Cost Per Premises
Connected
(CPPC)
$1,000 -$1,150
(excluding layer 2 and including standard installations and some non-
standard single dwellings and service desk costs)
$1,037
Fibre connections & layer 2
capex
$280 –$310m (based on mass market 155,000 –175,000 fibre
connections,and 14,000 backbone builds and including service desk costs)
$294m
FY19 Gross capex
$820 –$860m$810m
FY19 EBITDA
$625 –645m $653m
FY18 FULL YEAR RESULT

▪supplementary dividend of 2.2 cps payable to
non-resident shareholders
▪record date: 25 September 2018
▪payment date: 9October 2018
▪Dividend Reinvestment Plan applies with
3% discount to prevailing market price; open
to New Zealand and Australian resident
shareholders
27 August 2018
Capital management & FY19 dividend
FY18 final dividend of 13 cps, fully imputed
>The Chorus Board considers that a ‘BBB’ credit
rating or equivalent credit rating is appropriate
for a company such as Chorus. It intends to
maintain capital management and financial
policies consistent with these credit ratings.
>During the UFB build programme to 2020, the
Board expects to be able to provide shareholders
with modest dividend growth from a base of
20cps per annum, subject to no material adverse
changes in circumstances or outlook.
>FY19 dividend guidance of 23 cps, subject to
no material adverse changes in circumstances or
outlook.
FY18 FULL YEAR RESULT

27 August 2018
Debt
Term debt profile
As at
30 June 2018
$m
Borrowings1,922
+ PV of CFH debt
securities (senior)
129
+ Net leases payable238
Sub total2,289
-Cash(50)
Total net debt2,239
Net debt/EBITDA3.43 times
Financial covenants require senior debt ratio to be
no greater than 4.75 times
677
400
785
7070
105
134
16
35
62
75
0
100
200
300
400
500
600
700
800
CFH debt securities available
Face value of CFH debt securities issued
EUR EMTN
NZ Bond
GBP EMTN
>At 30 June, debt of $1,922m comprised:
▪Long term bank facilities $290m undrawn; $60m drawn
▪NZ bond $400m
▪Euro Medium Term Notes $1,462m (NZ$ equivalent at
hedged rates)
NZ
$M
FY18 FULL YEAR RESULT

Shaping our future
Kate McKenzie, Chief Executive Officer
27 August 2018
FY18 FULL YEAR RESULT

27 August 2018
FY18 FULL YEAR RESULT

27 August 2018
Our objective is to...
Return to
modest
EBITDA
growth in
FY20*
*subject to no material
changes in expected
regulatory environment or
competitive outlook
FY18 FULL YEAR RESULT
OPTIMISE
TODAY’S
BUSINESS
INNOVATE
FOR
GROWTH

27 August 2018
Innovation focus
Pipeline of opportunities identified
infrastructure re-use trialled for IoTdelivery and
moving to commercialisation
school trials proving wi-fipotential to bridge
digital divide
network edge computing: clear global trend
favouring exchange co-location; Wellington and
Christchurch sites under development for Q3 FY19
4K TV trial: clear medium term potential for
broadcasting role; pathway to other opportunities
as streaming accelerates data demands
FY18 FULL YEAR RESULT

27 August 2018
FY18 FULL YEAR RESULT
Live sports to drive streaming uptake

27 August 2018
Growing our broadband base
Strong premises growth
government forecasts suggest 39% growth in consents
we’ve redesigned processes for property developers
~3,000 premises pre-connected with fibre in FY18
Competitive network effects ebbing
LFC UFB1 rollouts complete
wireless customers returning as fibre rollout expands,
data demands grow
Wellington rollout entering significant off-net HFC suburbs
leveraging our vectoring VDSL rollout in LFC and rural
areas
FY18 FULL YEAR RESULT
MBIE National Construction Pipeline Report forecasts 39% growth in consents

systems pre-identification of ‘simple’ connections
to remove customer scoping visit
installation only visit will improve customer
experience
need to work in concert with retailers to reduce
reschedules
27 August 2018
Connecting fibre faster
Targeting up to 50% “fibre in a day” by Xmas
Migration campaigns ongoing
trials to support fibre in a day and future copper
migration
FY18 FULL YEAR RESULT

27 August 2018
Reschedules drive significant industry activity
FY18 FULL YEAR RESULT

27 August 2018
Automating open access information flows
FY18 FULL YEAR RESULT
API channel established: 6 APIs launched

27 August 2018
Planning for copper to fibre migration
0
100
200
300
400
500
600
700
800
# nodes
% penetration –pre 2018 areas
Fibre uptake by fibre node area
(brownfields), excluding off-net addresses
FY18 FULL YEAR RESULT
average UFB uptake of 45% understates
actual penetration given ongoing network
expansion and off-net connections
fibre penetration is >70% across 1,000 nodes
when exclude off-net connections
draft legislation contemplates copper
withdrawal in areas where fibre is available
withdrawal code to be developed in
consultation with industry and Commission
45% uptake across
our UFB area,
including off-net

27 August 2018
FY18 FULL YEAR RESULT
Shaping our future
For 2020 and beyond
utility style framework expected soon
copper>fibre migration
refining our product portfolio
review of service company model
evolving company culture
the rise of wholesale only networks

Appendices
27 August 2018
FY18 FULL YEAR RESULT

27 August 2018
FY18 FULL YEAR RESULT
Appendix A: Pro forma FY17 net earnings
For information purposes only. This appendix provides an approximate translation of FY17 to show the illustrative impact if NZ
IFRS 9, 15 and 16 had applied in FY17.
Income statementFY17
results
$m
NZ IFRS
impact
$m
FY17
(adjusted)
$m
Notes
Operating revenue1,04081,048
Broadbandmodem upgrade costs incurred in FY17,in FY18 these are
now capitalised and amortised in accordance with NZIFRS 15
Operating expenses(388)50(338)
$42m costs incurredin acquiring and retaining customers
(provisioning $32m, Labour $5m and IT $5m). These costs are now
capitalised and amortised in accordance with NZ IFRS 15 and
disclosed as separate items in fibre and copper capex.
$8m rent and rates are now recognised as a right of use asset with
the value capitalised and depreciated over the life of the lease.
EBITDA65258710
Depreciationand
amortisation
(339)(40)(379)
Increase in depreciation and amortisation inline with NZIFRS 15 and
16.
Net interestexpense(154)7(147)
NZ IFRS 9 and 16 impact to account for change in accounting
treatment for ineffectiveness and capitalisation of leases.
Income tax expense(46)7(39)
Net tax impacts associatedwith NZ IFRS changes.
Net earnings for the year 11332145

27 August 2018
30 June
2017
30 Sept
2017
31 Dec
2017
31 March
2018
30 June
2018
Unbundled
copper
82,00076,00068,00062,00053,000
Baseband
copper
(no broadband)
313,000302,000290,000279,000268,000
Fibre
broadband
(GPON)
292,000328,000362,000394,000433,000
VDSL
(includes naked)
244,000294,000320,000325,000321,000
Copper ADSL
(includes naked)
650,000562,000499,000465,000433,000
Data services
(copper)
8,0007,0007,0006,0006,000
Fibre premium
(P2P)
13,00013,00013,00012,00012,000
Total
connections
1,602,0001,582,0001,559,0001,543,0001,526,000
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
Data services (copper)Fibre premium (P2P)
Fibre broadband (GPON)VDSL
Copper ADSLUnbundled copper (no broadband)
Baseband copper (no broadband)
Fibre (GPON)
VDSL
Copper ADSL
Unbundled copper
Baseband copper
Appendix B: Connection and market trends
FY18 FULL YEAR RESULT

27 August 2018
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Broadband uptake by retailer (all technology)
SparkVodafoneVocus2degreesTrustpowerROM
Source: IDCSource: IDC
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
NZ broadband market –by technology
Chorus xDSLChorus mass market fibreChorus premium fibre
Local fibre companies (UFB)Other fibre networksOther xDSL
Vodafone cableFixed (mobile) wirelessLegacy fixed wireless, satellite
FY18 FULL YEAR RESULT

27 August 2018
Appendix C: Market structure
FY18 FULL YEAR RESULT

27 August 2018
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Jun-17Sep-17Dec-17Mar-18Jun-18
ROLLOUT COMPLETED IN
THESE AREAS
Note: % uptake can reduce in areas as the fibre
rollout passes more addresses in a period
45%
AVERAGE
UPTAKE
% uptake
relative to
capable
addresses
Appendix D: UFB1 uptake by area
FY18 FULL YEAR RESULT

---

Annual Report 2018
01 Chorus Board and
management overview
17 Management commentary
27 Financial statements
65 Governance and disclosures
92 Glossary

FY18 results overview
1 Earnings before interest, income tax, depreciation and amortisation (EBITDA) is a non-GAAP profit measure. We monitor this as a key performance
indicator and we believe it assists investors in assessing the performance of the core operations of our business.
2 Adjusted to reflect the effect the NZ IFRS accounting standards adopted in FY18 would have had if they had applied in FY17.
EBITDA
1
Adjusted
2
EBITDA
DividendEmployee engagement score
Fixed line connectionsBroadband connections
Fibre connectionsNet profit after tax
FY18
22cps
FY17
21cps
FY18
57%
FY17
81%
FY18
445,000
FY17
305,000
FY18
$85m
FY17
$113m
FY18
1,187,000
FY17
1,186,000
FY18
1,526,000
FY17
1,602,000
FY18
$653m
FY17
$710m
2
FY18
$653m
FY17
$652m

Annual Report 20181
Dear investors
We’ve made strong progress this year
in our quest to keep New Zealand new.
It is easy to overlook the scale and pace of the technological
change we’re bringing to New Zealand communities.
More than 900,000 homes and businesses now have fibre
at their gate and uptake has surged from 35% to 45% during
FY18. This has been achieved through our focus on the
more visible and challenging part of our broadband rollout
– the connection from the street into customers’ homes
and businesses. We didn’t get it right every time, but we’ve
continued to improve the experience for customers while
completing 156,000 fibre installations. That’s a 20% lift in
productivity from the previous year.
We ended the year with 64% of our broadband connections
on either fibre or high-speed VDSL broadband, up from
45% last year. This was driven by our shift to being an
active wholesaler, investing to promote awareness of
the better broadband options already available to many
New Zealanders through advertising, collaborative
campaigns with retailers and our own door knocking
initiatives. This new approach, combined with underlying
demand for broadband, helped us to turn last year’s
decline of 40,000 broadband connections into a gain of
1,000 connections for FY18. Although competition from
wireless and other fibre networks meant our total fixed line
connections continue to reduce, the pace slowed to 76,000
connections compared to 125,000 connections in FY17. This
reduction in connections was predominantly copper lines
outside of our fibre network areas.
Against this backdrop of declining connection numbers,
we took steps to implement a range of cost management
initiatives identified in our FY17 strategic review. This included
reducing our internal workforce by 12%, from peak August
2017 levels, as part of broader organisational change. We
achieved net profit after tax of $85 million and EBITDA
of $653 million, modestly above the top end of our initial
FY18 EBITDA guidance of $625 million to $650 million.
This compares with adjusted
1
FY17 EBITDA of $710 million,
reflecting the effect of fewer connections on our revenues.
1 Adjusted to reflect the effect the NZ IFRS accounting standards
adopted in FY18 would have had if they had applied in FY17.
A fully imputed final dividend of 13 cents per share will be
paid on 9 October 2018, bringing total dividends for FY18
to 22 cents per share.
Our focus on tight cost management meant we met our
fibre capital expenditure forecasts for another year, despite
a record year for fibre connections and inflation in the wider
construction market. Our commitment to investing in a fibre
future was evident in our August 2017 UFB2+ agreement
with the Government to take fibre even further. By the end
of 2022 we’ll have extended fibre to about three-quarters
of the 87% of New Zealanders to be covered by the UFB
programme. In the meantime, our investment in VDSL
broadband upgrades has helped narrow the digital divide,
improving potential broadband speeds for up to 85,000
rural addresses.
We invested in bridging the digital divides within urban
communities too. We worked with Network for Learning,
a government education group, to trial the extension
of a school wifi network to students in the surrounding
community, using our street poles and copper cables in
new ways. This was part of our innovation initiatives, focused
on identifying opportunities to use our network assets to
develop future products and services. We’ve also run trials
to develop connectivity options for the Internet of Things,
network edge computing and television broadcasting.
The success of these trials has increased our belief in the
potential socio-economic benefits our infrastructure can
bring to New Zealanders, while providing future alternative
sources of revenue for our business.
Regulatory clarity remains critical to our focus on long-term
shareholder value. We worked through the year to assist
the progress of the utility style regulatory framework, as
initially set out in draft legislation in August 2017, through
Select Committee and revised legislation is expected before
Parliament in FY19. We look forward to working with the
Commerce Commission on a smooth and timely transition
to a framework that aligns the interests of customers and
investors through recognition of a fair return on investment.
Kate McKenzie
Chief Executive
Patrick Strange
Chair
This report is dated 27 August 2018 and is signed on behalf of the Board
of Chorus Limited.

Annual Report 20182
Keeping
New Zealand new
As a utility network operator, we take a long
term view. We want to make New Zealand better,
keeping it at the cutting edge through our network
infrastructure and the connectivity we can
provide. Our network of fibre and copper cables
connects homes and businesses nationwide, via
our exchange buildings and cabinets. About 100
retailers use our network to deliver their services
to their customers. This includes using our fibre
network for backhaul connections to mobile
network towers.
Demand for broadband has been growing very strongly,
fuelled by the emergence of broadband as the fourth utility,
together with the rollout of fibre and ongoing premises
growth, particularly in New Zealand’s largest city, Auckland.
However, the continuing evolution of technology, market
dynamics and industry regulation means we operate in an
ever changing environment. To ensure we maintain our
leading network position and a sustainable business well
into the future, we’re focused on creating an environment
for our customers and our people that optimises today’s
business and allows for us to innovate for growth.
1.1 Transforming customer experience
It’s our belief that once a home or business owner has
connected to fibre, its technological superiority will ensure
they remain connected. This means we need to make it
as easy as possible for customers to connect to our fibre
network. Fibre installations can be challenging because
of the variability in conditions between every home and
business, as well as the layers of communication and
coordination required between us, our service companies,
retailers and their customers. We’ve made significant
progress in streamlining processes with our investment in
automated platforms, but we know we need to make things
better if we’re to continue to encourage customers to make
the effort to upgrade to fibre.
This is why our number one operational priority remains
a high quality connection experience for customers
connecting to our fibre network for the first time. We
set ourselves a customer satisfaction target of 7.8 out of 10
by the end of FY18, up from 7.4 in FY17, based on a rolling
three month average of scores from a survey of newly
connected customers each month from across a range
of retail service providers.
Although we ended the year with an improved score of 7.5,
this was below our target. However, the less than desired
improvement was achieved in the context of a year of
unprecedented demand where we recruited 185 additional
field crews to deal with strong fibre demand and complete
20% more fibre installations than the prior year. The passing
of new land access legislation in the first half of FY18 also
meant we’ve been connecting a backlog of orders where
the customers had gone through a drawn out and potentially
unsatisfactory experience.
Further, results varied widely between retailers, reflecting the
multiple customer touchpoints involved in the connection
process. Customer satisfaction levels can be influenced by
everything from the quality of initial communication between
customers and their retailer, through to our communication
and technicians turning up when expected, as well as the
quality of the installation itself. Some retailers achieved
customer satisfaction scores of more than 8 out of ten,
reflecting a focus on clear expectation setting with their
customers and well developed processes. Our technicians are
completing more than 700 installations a day and typically
achieve 8 out of ten on customer satisfaction surveys.
There’s clearly still more we can do to improve the
experience for customers and we have an extensive
programme of initiatives underway including:
• streamlining the connection process for simple fibre
connections so customer effort is reduced to one visit,
rather than two. In June 2018 we were already achieving
this goal of "fibre in a day" for about 25% of customers
connected. Our goal is to reach 100% by the end of FY19.
• increasing our joint targeted marketing campaigns
with retailers so we better coordinate service
company resources.
• running more of our own door knocking campaigns
so we better align our fibre installation work with initial
network rollout activity.
• continuing to clear the backlog of complex multi-
dwelling and rights of way connections following
changes to the land access legislation.
• reducing rescheduling and cancellations by proactively
managing fibre orders to better identify missing
information and complex installations.
• improving customer expectation setting with
enhanced installation and consent information.
1.0

Annual Report 20183
JUNE 16
7. 47. 56.9
JUNE 17JUNE 18
OUT OF 10
JUNE 16
4
%
4
%
7
%
JUNE 17JUNE 18
OF WORK IN
PROGRESSS
JUNE 16
615800524
JUNE 17JUNE 18JUNE 16
129k156k
93k
JUNE 17JUNE 18
JUNE 16
4
%
5
%
14
%
JUNE 17JUNE 18JUNE 16
221317
JUNE 17JUNE 18
(TARGET 7.8)
National weighted average lead times
Customer escalations
Technician reschedules
Customer satisfaction
Fibre installation crewsCompleted installations
DAYS

Annual Report 20184
1.2 Upgrading customers to better broadband
A reduction in the number or value of our connections
impacts our revenue and profitability. To mitigate these
risks, we’ve become an active wholesaler. This means we
are investing to raise consumer awareness of our network
footprint and service quality through advertising campaigns
and www.askforbetter.co.nz. We're also working with
retailers to encourage them to upgrade their customers to
better broadband options on our network. By the end of
FY18, 64% of our broadband connections were on VDSL or
fibre technology, up from 45% at the start of the period.
Customer recognition of the premium benefits of fibre
broadband speeds and consistent throughput capability is our
strongest competitive network advantage. We’ve seen early
evidence of customers returning to our network from wireless
alternatives as fibre becomes available. To that end, our
ongoing rollout of the UFB network remains by far the biggest
and most important investment we’re making in delivering
a better broadband experience for customers. We extended
our fibre footprint past another 150,000 homes and
businesses during the year and demand for fibre was stronger
than ever, with UFB uptake growing from 35% to 45%.
At the same time, we increased VDSL uptake by 77,000
connections. This was a positive outcome for customers
given the enhanced broadband speeds typically provided
by VDSL and the fact we charge the same rate for VDSL
and ADSL services. We invested $20 million in a project
to upgrade broadband performance for about 270,000
addresses across rural and local fibre company areas
through the deployment of vectoring technology and
new VDSL broadband electronics. We’ve seen a more than
40% average increase in download speed performance
for those customers who are now on VDSL broadband
plans and the upgrade could benefit about 85,000
rural addresses with improved broadband speeds.
1.3 Leveraging our technology advantage
Today, we can provide dedicated 1 gigabit per second
(Gbps) connections with no datacap constraints to more
than 900,000 customers across New Zealand’s largest
urban centres. By the end of 2022 we’ll have extended
that footprint to more than 1.3 million customers and
we’ve begun trialling the delivery of 10Gbps capability.
In contrast, mobile networks rely on shared capacity
and are more prone to congestion at peak times.
This difference is becoming all the more important as data
demand grows. More than 60% of New Zealand households
are estimated to be on unlimited broadband plans and
average monthly bandwidth demand on our network grew
from 155 gigabytes (GB) per customer to 210GB in the
12 months to the end of FY18. Usage for fibre customers was
higher again at an average of 297GB per month. Moreover,
much of this demand is occurring in the evening as more
New Zealanders shift to streaming video on demand services.
We’ve seen average peak usage on our network grow 37%
Figure 1:
Monthly average data usage per connection on our network
0
50
100
150
200
250
300
DEC 2015
DEC 2014DEC 2016
MAR 2017
JUN 2015
MAR 2015
SEP 2016
MAR 2016
JUN 2016
JUN 2017
SEP 2015
MAR 2018
SEP 2017
JUN 2018
DEC 2017
CopperFibreAverage
Data usage (GB)
from 1,084Gpbs at 9pm in June 2017 to 1,480Gbps at
9pm in June 2018. Record peak usage for FY18 occurred
just before 9pm on May 1st with 1,658Gbps, following
the release of an update for the online game Fortnite.
There are customers who do not currently use much
data and for whom wireless networks may provide a
viable network alternative. However, ever increasing data
demands and the evolution of new data hungry devices
and applications, particularly 4K television, are continuing
to fuel the demand for bandwidth. Currently, wireless
broadband retailers have monthly datacaps limited to
240GB and only offer these services in very specific areas.
There has been much speculation about the potential
future performance of 5G technology and what it means
for fixed line networks. We are monitoring developments
and have visited international telecommunications
operators to learn more about their 5G plans. Where
deployments are occurring overseas they tend to be
in areas where fibre to the premises networks aren’t
available. Some operators have questioned the economic
viability of 5G deployments in areas where a superior fibre
service is already available. A multitude of new wireless
base stations would be required to extend 5G capability
to lower density suburban areas. This is because of the
distance and line of sight limitations for each base station.
The timeframes for the development of global 5G
standards and consumer equipment, together with
spectrum requirements, suggests 5G deployments
in New Zealand are unlikely until 2020. These initial
deployments are likely to be limited to existing cell
towers or sites. We see a complementary future with 5G,
because fixed line infrastructure will also be needed for
backhaul and power to base stations. This may create
new revenue opportunities for our business over time.

Annual Report 20185
1.4 Identifying new uses for our infrastructure
During the year we began trialling new ways to use our
network to provide new technology solutions for customers.
We ran a successful trial that showed we can broadcast live
4K quality TV content, via our fibre network, to customers’
televisions. This is of strong interest to local broadcasters
as an alternative, higher quality and more interactive option
than traditional broadcast mechanisms. By the end of 2022,
New Zealand’s fibre footprint will have greater coverage of
the population than terrestrial broadcasting.
This broadcasting capability will also potentially require a
dispersed content distribution network. Based on the success
of our earlier data centre trial and the growth in demand for
network edge computing capability, we’ve already begun
expanding our data centre footprint to more exchanges.
We’ve started exploring the potential uses of our network
assets to meet the expected needs for low-powered
monitoring of sensors as the Internet of Things evolves.
This included a proof of concept trial for a Long Range
Wide Area Network. Our solution used a pole-mounted
wireless access point, powered by our copper network,
to enable monitoring of hard to access locations such as
underground wastewater or sewage pumping stations.
Figure 2:
37% growth in June traffic peak year on year
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
02:15
14:15
00:15
12:15
04:15
16:15
04:45
16:45
01:15
13:15
00:45
12:45
03:45
15:45
02:45
14:45
03:15
15:15
07:45
19:45
05:15
17:15
07:15
19:15
01:45
13:45
06:45
18:45
09:45
21:45
10:15
22:15
08:15
20:15
05:45
17:45
10:45
22:45
09:15
21:15
06:15
18:15
11:15
23:15
08:45
20:45
11:45
23:45
Time of day
Note: data represents average of traffic across all days in June, excluding corporate traffic.June 2018June 2017
Network throughput (Gbps)
Peak traffic
of 1,658 Gbps
on 1
st
May 2018

Annual Report 20186
Our market driversWhat we’re doing about these drivers
Strong population and premises growth,
particularly in Auckland.
We’ve increased our subdivision capability and are focused on installing
fibre so it’s available when customers move into their new homes.
Local fibre companies (Enable, Ultra-Fast Fibre,
Northpower) are overbuilding our existing copper
network with fibre as part of the Government’s
UFB programme.
We’ve invested in the deployment of VDSL vectoring capability to
improve the performance of our copper broadband network and
we continue to provide services on our pre-existing fibre network in
these areas.
Large vertically integrated retailers are encouraging
some of their customers to use their own fixed
wireless, cable and legacy fibre networks to reduce
their wholesale network costs.
We’ve become an active wholesaler, promoting awareness of the fibre
and VDSL options already available to many New Zealanders through
advertising, collaborative campaigns with retailers and our own door
knocking initiatives.
Traditional voice only connections are declining as
demographics and service options evolve, while legacy
business connections are migrating to new lower cost
inputs on our own or alternative provider networks.
We have an extensive innovation programme underway to identify
potential new uses for our network infrastructure, including
broadcasting capability, data centres and Internet of Things
connectivity.
Communications technology is evolving,
potentially increasing the capability of mobile/wireless
technologies as a fixed line alternative for some
customers.
We’re taking fibre to about three-quarters of the 87% of
New Zealanders to be covered by the UFB programme by the end of
2022 and we’re extending our VDSL footprint. Our network provides
dedicated capacity for customers at times of peak data consumption.
Figure 3:
Summary of key market trends

Annual Report 20187
We’re the major cornerstone partner in the
Government’s UFB initiative that will see a
fibre to the premises network available to
approximately 87% of New Zealanders by the
end of 2022. Our part in the network rollout
began in 2011 and will reach an estimated
1.36 million homes and businesses.
Building the communal fibre network past these homes
and businesses is estimated to cost $2.26 billion to $2.37
billion, excluding the significant cost avoided by re-using
our existing network assets such as ducts and poles.
In addition to communal network costs, we’re investing
significant capital expenditure to connect each customer
to the fibre network. The total cost of this will depend on
the level of uptake over time.
The Government is providing up to $1.33 billion in financing.
This financing was agreed to help make the business
case for building the UFB network ahead of demand and
acknowledging the significant risks involved, including
our delivery and operational obligations, as well as the
financial and step-in management remedies available
to the Government.
We receive the Government financing as the network is built
past premises according to our agreed deployment plan
and we issue debt and equity securities in return. The debt
will be redeemed in tranches from 2025 to 2036, while an
increasing portion of the equity securities attract dividend
payments from 2025 onwards. In the event that our credit
rating fell below investment grade we would require Crown
Infrastructure Partners approval to pay a dividend on our
ordinary shares and, after 2019, to continue accessing
Government financing for the UFB2 rollout.
We have fixed price contracts in place for the communal
network deployment and for subsequent connections to
customers. These contracts are with our third party service
company suppliers including Visionstream, Broadspectrum,
Downer and Universal Communications Group. We work
closely with our service company partners to maintain our
workforce at sustainable levels so we can meet customer
demand for fibre connections and deliver a good customer
experience. Technicians must undergo induction training,
including health and safety, before conducting any work on
our behalf. We also undertake regular spot checks to ensure
work meets our quality standards and customer experience
expectations.
During the year there were suggestions of isolated instances
in which some service company subcontractors may have
employed workers on a voluntary basis. We investigated
the claims and a service company subsequently ended a
subcontractor relationship. Our supplier contracts clearly
require workers to be employed according to New Zealand
law and we’re continuing to monitor compliance with our
supply chain requirements with all service companies.
2.0
The UFB
rollout
Figure 4:
UFB rollout and uptake
0
200
400
600
800
1,000
1,200
1,400
Number of connections
JUN
2015
DEC
2015
MAR
2016
MAR
2018
JUN
2018
DEC
2022
SEP
2017
DEC
2017
MAR
2017
JUN
2017
SEP
2016
DEC
2016
JUN
2016
40%
50%
60%
70%
80%
90%
100%
30%
20%
10%
0%
Uptake
SEP
2015
% Uptake (right axis)
000’s
Premises to pass by
end of 2022
̃
1,054,000*
Customers able to connect
̃
1.36 million
Estimated communal capital
expenditure to pass premises
$2.26 to 2.37 billion
Crown funding
(57:43 equity/debt)
up to $1.33 billion
Capital expenditure required
to connect premises
Subject to demand
UFB connections* Includes estimated 43,000
greenfields premises for UFB1
UFB available addressesPlanned footprint

Annual Report 20188
3.0
Regulatory
environment
We operate our wholesale only network within
the regulatory framework established by the
Telecommunications Act. The Act was amended
in 2011 to facilitate our demerger from Telecom
New Zealand (now Spark). We’re also subject
to the requirements of four open access deeds
of undertaking for copper, fibre and Rural
Broadband Initiative services that focus on the
provision of services on a non-discriminatory
or equivalent basis. This regime will remain in
place after 2020 except for matters that are
dealt with by the revised utility model now
being implemented by the Government.
Approximately 55% of our FY18 revenues were from
copper services with pricing and terms regulated by the
Commerce Commission (the Commission) under the Act.
The Commission set a five-year schedule of pricing for our
regulated copper services in December 2015, following
a detailed price review process.
Our fibre services aren’t currently regulated and most are
instead subject to contractual pricing and terms agreed
with the Government as part of our UFB contracts.
3.1 Moving to a regulated utility model
The pricing and terms on which we deliver copper and fibre
access services from 2020 onwards has been the subject of
a lengthy regulatory framework review. Final policy decisions
from this review were released on 1 June 2017 and a Bill was
introduced to Parliament on 8 August 2017. The Bill has been
reviewed by a Select Committee and we're now awaiting a
revised Bill for passage into legislation.
Under the proposed new framework our recent fibre
investment would be regulated according to a utility style
building block model from 2020. This model is already
used to regulate other New Zealand utility businesses,
such as electricity lines and gas networks. It is recognised
as supporting private sector investment to meet network
upgrades and increasing consumer demands through
ongoing incentives to innovate, invest and improve efficiency
for the long term benefit of customers. Moody’s Investor
Services has noted in a credit opinion that the transition to
a regulated utility model could support a higher leverage
profile within Chorus’ Baa2 credit rating.
Key features of the proposed regime are:
• deregulation of the copper network from 1 January 2020
in areas where fibre is available and withdrawal of copper
services subject to a consumer code.
• continued regulation of the copper network in areas
where fibre is not available, with copper pricing adjusted
for inflation.
• the regulated asset base for fibre will include unrecovered
losses incurred before 2020, with pre 2011 assets valued
at depreciated historical cost and post 2011 assets at
depreciated actual cost. Crown financing will be treated
according to its actual cost to Chorus.
• confirmation of the 100/20 Mbps fibre service as the
main anchor product with a price cap to start at the
2019 level and adjusted annually for CPI for the first
regulatory period – currently 2023.
• unbundling of the fibre network to be made available
on a commercial basis from 2020.
We’re now working with the Commission to facilitate
a smooth and timely transition to the new regime.
The Commission is required to establish the key input
methodologies that will determine the starting value of
our regulated asset base, the regulatory weighted average
cost of capital, cost allocations, expenditure allowances
and our maximum allowable revenue. If this process
extends beyond 1 January 2020, key fibre and copper
prices will be frozen at the then existing pricing levels,
adjusted for inflation, for up to 24 months.
3.2 Other regulatory reviews
The Commission is currently consulting industry on
the scope of a planned study of the mobile market in
New Zealand, to look at the competitive landscape and any
emerging competition issues. We consider topics worthy
of further analysis to include the relative pricing between
mobile and fixed wireless services, the comparatively
low penetration of mobile virtual network operators, and
the potential for shared open access infrastructure and
spectrum to benefit the rollout of 5G networks.
In addition, the Commission announced in January 2018
that it was restarting its study of the backhaul market to
explore whether the current regulation for backhaul is
fit for purpose.

Annual Report 20189
Figure 5:
Regulation: moving to a utility model
(Regulatory framework as set out in draft legislation)
Fibre – proposed utility framework
• Regulated asset base (RAB) with revenue cap, to
be set by Commerce Commission within two years
• Two anchor products (voice only + entry level broadband

– 100/20Mbps fibre) at 2019 prices + CPI and a price
cap for direct fibre access
• Three years after the new regime commences,
the Commission can review the revenue cap model,
as well as the anchor products, subject to specified
conditions and statutory criteria
Copper – proposed legacy framework
Where fibre is available:
• Copper network to be deregulated and
Telecommunications Service Obligation

(TSO) removed
• Chorus can withdraw copper service, subject

to minimum consumer protection requirements
Where fibre is not available:
• Copper remains regulated and TSO applies
• Copper pricing capped at 2019 levels

with CPI adjustments
• Commission required to review pricing

framework no later than 2025
Note: Fibre to the premises will cover ~87% of NZ population by the end of 2022
Figure 6:
The New Zealand fixed line market
Rationalisation, new entrants and new business models are disrupting the NZ market.
Power + BroadbandMobile networkWireless Broadband
Chorus
Nationwide network access
wholesaled to ~100 retail service providers;
Fibre to pass ~1.36m homes and businesses
Local Fibre Companies:
Enable – Ultrafast Fibre – Northpower
Fibre to pass ~430k homes and businesses
Retail Service
Providers:
Local Media:
(Broadcast)
Local Media:
(On Demand)
Fixed Line
Access
Networks:
TV3
3Now
BBC iPlayer Apple TV Google Play Netflix YouTube Hulu Amazon
International
media providers:
OnDemand
TVNZSky TV
Neon
via satellite and
IP set-top boxes
TrustpowerOthers:
e.g. Megatel
Contact Energy
MyRepublic
Stuff Fibre
NOW
Slingshot, Orcon, Flip
Vocus2degrees
Vodafone TV
Vodafone
HFC cable in
Wellington +
Christchurch
(~60k customers)
Lightbox
+Skinny
Spark

Annual Report 201810
4.0
Keeping communities
connected
We recognise the reliance New Zealanders place
upon our network both as a utility service for
their daily lives and businesses, as well as a critical
lifeline service in times of emergency. A large part
of our everyday work is to ensure the 1.5 million
connections on our network receive stable and
reliable service. Our people and technicians often
go the extra mile to keep communities connected
when extreme events occur.
We have a comprehensive insurance programme typical
of large scale infrastructure utilities and we undertake
probability based loss estimate modelling. Our network
has proven resilient, despite several earthquakes above
a 7 magnitude on the Richter scale in recent years, with
damage largely restricted to localised cables and
minimal damage to our exchange buildings.
Weather events can affect our network, through faults
generated by water entering copper cables, lightning strikes,
and wind damage to poles and aerial cabling. We consider
the potential near to medium term financial impact of
climate change effects to be low. Our newer fibre network
will provide greater resiliency because it is less susceptible
to water and lightning related faults. However, fibre faults
are likely to cost more to repair on average due to the
network architecture and work required.
Despite the challenges of some extreme weather events
and damage to cables by third parties, we managed to keep
the average duration of network interruptions to 21 hours
across our fibre and copper network in FY18. We met our
fibre service level targets as contracted with the Crown:
• Layer 1: actual downtime of 63 minutes
vs limit of 120 minutes
• Layer 2: actual downtime of 6 minutes
vs limit of 30 minutes
As a wholesale network operator our cybersecurity risks
are different from those of retail-facing network operators.
We have policies, processes, and registers to ensure
cybersecurity is contemplated and addressed through
technology selection, delivery practices, and ongoing
operations of our IT systems. Our insurances cover key
cybersecurity risks and we undertake regular reviews,
including external audits and ad-hoc reviews, to provide
assurance and feedback on our assessments and controls.

Annual Report 201811
5.2 Our people
As a core part of our business strategy, we’re committed to
providing an environment where all of our employees feel
enabled and have a sense of belonging. We believe greater
diversity within our business will maximise our collective
capability, allow us to leverage diversity of thought, and
better reflect and understand our diverse customer base.
This should in turn lead to better decision making and
higher shareholder value.
We invest in recruitment, development and wellbeing
programmes supporting a diverse and inclusive, safe,
transparent and rewarding workplace. We offer flexible work
options and 75% of employees believe they have access to
flexible working arrangement that meet their lifestyle needs.
We also provide volunteer days for employees to help in their
local community, through activities such as delivering lunches
to schools, native tree planting and assisting in local hospices.
While 82% of employees feel that Chorus values diversity,
we were disappointed that overall employee engagement
reduced from 81% to 57%.
1
While this is closer to the
New Zealand norm, we believe this reflects a period of
uncertainty for our people as we implemented organisational
changes to shift our business to a more cost effective and
customer focused culture. We’re working hard to increase
engagement in the year ahead.
We announced some changes to our executive team during
the year as we prepare for a future where the fibre build will
be largely complete and we seek to innovate for growth.
In September 2017, Shaun Philp joined us as the new General
Manager of People and Culture. In March 2018, Vanessa
Oakley transferred from General Counsel and Company
Secretary to lead our regulatory and business transformation
functions in the new role of General Manager of Strategy
and Business Operations. Ed Hyde, previously CEO of Spark
Ventures, started as our Chief Customer Officer in July 2018.
In August 2018, Elaine Campbell joined as the new General
Counsel and Company Secretary and our Chief Financial
Officer, Andrew Carroll, transferred to the role of General
Manager Network and Field Management.
2

1 Based on our annual Aon Hewitt engagement survey.
2 He will remain as CFO until a new appointment is made.
5.1 Health and safety
We place the utmost importance on keeping our people
healthy and safe. This includes our 933 employees and
the more than 4,000 people working on our behalf to
build, connect and maintain our network. Our health
and safety focus extends to anyone who is in, or in the
vicinity of, our workplaces.
We’ve established an open reporting culture and regularly
screen our contractors and suppliers to ensure their systems
and procedures meet our health and safety expectations.
New service company technicians must complete a work
training competency programme for field work, endorsed
by the New Zealand Qualifications Authority, before they
can work on our network.
The number of hours worked, including our service
companies, remained the same at 13 million for FY18.
There was a slight reduction in the number of lost time
injuries, while minor injuries increased slightly. This meant
the Lost Time Injury Frequency Rate (LTIFR) reduced from
1.23 in FY17 to 1.16 and the Total Recorded Injury Frequency
Rate (TRIFR) increased from 2.62 in FY17 to 3.10.
For FY19 we’re focusing our efforts on greater collaboration
and innovation with our service company partners to
enhance health and safety practices, as well as continued
development of our support for people working alone in
our offices and in the field.
5.0
Our people, communities
and the environment
Figure 7:
Injury frequency rates FY17 – FY18
0
1
2
3
4
5
6
Injury frequency rate
3.10
2.62
5.77
1.16
1.23
1.86
FY18FY17FY16
TRIFRLTIFR
LTIFR: number of lost time injuries + medical treatment injuries
+ restricted work injuries divided by total work hours × 1,000,000
TRIFR: number of lost time injuries divided by total work hours × 1,000,000

Annual Report 201812
5.3 Socio-economic benefits of broadband
Fibre optic networks are compared to the advent of
electricity in terms of the potential transformative effects for
communities and economies. We take a long-term view of
our network investments and are committed to delivering
an asset for New Zealand’s ongoing social and economic
development. This is aligned with the infrastructure-related
elements of the United Nations Sustainable Development
Goals, including sustainable communities, work and
economic growth, education and health.
As our fibre rollout reaches more suburban and remote
communities we’re already seeing the socio-economic
benefits grow. Fibre connections to schools and hospitals
around New Zealand were a rollout priority under our
urban and rural rollout contracts with Government. This has
reduced the digital divide for rural students, enabling access
to new learning resources and experiences. However, as
technology-based learning becomes more prevalent in
schools it has highlighted the divide that exists within
communities between those students that have broadband
at home and those who don’t.
We’ve begun working with Network for Learning, a
government education group, to explore the use of our
network infrastructure to solve the issue of students
who are unable to access high-quality broadband
at home. Our first trial in Christchurch showed wifi
terminals mounted on our poles could be used to
extend the reach of the Haeata Community Campus’
learning network to students in surrounding homes.
Based on this initial success, we’re expanding the trial
to Rata Street School in Lower Hutt. This will involve us
and Network for Learning working with the school, the
Te Awakairangi Access Trust, Hutt City Council and the
Ministry of Education, to connect 150 homes to fibre.
A wifi access point in the home will enable students
to bring their Chromebook device home from school
and access the school’s online learning network.
Health is another area in which better broadband is helping
bridge divides. Medical practitioners, for example, are
using improved video conferencing capability to provide
telemedicine consultations to their regional diabetic patients.
This is reducing travel demands on doctors and patients,
as well as improving the quality of patient monitoring.
Other groups or initiatives we’ve supported during the
year include:
• Digital Journey, a social enterprise that delivers digital
projects and initiatives to support the opportunity to
use, understand and benefit from digital services.
• the New Zealand Innovation Partnership, a network of
organisations that support digital innovation in New Zealand
across business, education and government.
• sponsorship of residential gigabit broadband services
at entry level wholesale prices through to July 2019
for Dunedin city, as part of winning of our Gigatown
competition prize.
• a GigStart Fund for Dunedin entrepreneurs and innovators
to deliver new fibre-based services.
• the GigCity Dunedin Community Fund, for groups using
fibre broadband to benefit their community.
• working with councils, business associations
and community beautification groups, such as
Keep New Zealand Beautiful, to have more than 100
of our street cabinets illustrated by local artists.
• a range of community support, learning and art
organisations which receive subsidised space within
our exchange buildings.
• a range of industry and government organisations –
TUANZ, InternetNZ, NZTech and the Local Government
New Zealand conference – that are focused on bridging
the digital divide and extending the reach of broadband.
$32.8B
$3.3B
In 2012 Alcatel Lucent’s Bell Labs found the UFB rollout
could contribute $32.8 billion in economic benefits to
New Zealand over 20 years.
In 2017 Sapere Research Group estimated wider social
benefits from maximum UFB uptake at about $2 billion
annually, on top of a $3.3 billion annual contribution to
New Zealand’s Gross Domestic Product from uptake
by businesses.

Annual Report 201813
0
10
20
30
40
Kilotonnes CO
2
e
FY12FY13FY14FY15FY16FY17FY18
Figure 9:
Carbon emissions
Electricity
Service company fleet
Travel
Refrigerant
Diesel generators
Other
Note: FY18 emissions have been estimated in advance of the release of official Government
data and guidance on emission factors. Service company fleet data excludes those vehicles
operated by subcontractors to service companies. Detailed data is unavailable
for these vehicles, but we estimate they account for between 5 to 10 kilotonnes-CO
2
e.
0
1
2
Kilotonnes CO
2
e
FY12FY13FY14FY15FY16FY17FY18
Figure 8:
Direct emissions
Diesel generators
Refrigerant
Company vehicles
Natural gas
Note: Service company fleet emissions are included in Scope 3 value chain emissions
because the vehicles are owned and operated by third parties.
0
1
2
Kilotonnes CO
2
e
FY12FY13FY14FY15FY16FY17FY18
Figure 8:
Direct emissions
Diesel generators
Refrigerant
Company vehicles
Natural gas
Note: Service company fleet emissions are included in Scope 3 value chain emissions
because the vehicles are owned and operated by third parties.
Our total emissions were 25 kilotonnes-CO2e in
FY18, up 8% from FY17 due to an increase in thermal
electricity generation. The national grid was 83%
renewable compared to 85% last year. Network
electricity consumption and our field service vehicle
fleet accounted for around 90% of our emissions.
We have an extensive waste minimisation process for
network activities. Waste ducting from our fibre rollout
is collected and re-used in the local manufacturing of new
duct. E-waste is processed to extract precious metals and
redundant network is recycled. We’ve almost completed our
programme to replace more than 850 air conditioning units
that relied on ozone depleting refrigerant. No significant
environmental incidents were recorded during FY18.
208
204
Tonnes
of ducting
recovered
for recycling
Tonnes
of metal
recovered for
recycling
5.4 A low carbon business
Better broadband networks help establish a platform
for low carbon communities, enabling communications
options that enhance social interaction and change the
way businesses operate, including teleworking and less
car or plane travel. We’ve embraced the use of our own
technology, installing enhanced video conferencing
capability in meeting rooms throughout our regional
offices. This is fostering employee collaboration and
contributed to a 28% reduction in air travel in FY18.
We’re committed to a sustainable operating model and
we report our carbon emissions annually to CDP, a global
organisation that collects self-reported environmental
information. Our benchmarking shows we’re a low carbon
business compared to businesses internationally both
within and beyond the telecommunications industry.
This year’s emissions were 29% lower than the base year.
Annual reductions achieved in the last six years have
avoided a net cumulative 44 kilotonnes of carbon dioxide
equivalent emissions (CO2e). These reductions include
3 kilotonnes of Scope 1 direct emissions due to lower diesel
use for generators, 29 kilotonnes of Scope 2 electricity
emissions, and 12 kilotonnes of Scope 3 value chain
emissions. The net reductions in Scope 2 and 3 emissions
are mainly due to a greening national electricity grid and
energy efficiency improvements.

Annual Report 201814
It’s more than a decade since Chorus was first set
up as a business unit within Telecom New Zealand.
We decided it’s time to speak a little more loudly
about our place in the world and have refreshed
our brand, as well as our company purpose.
This heralds the transformation going on within
our business. With a new regulatory regime to
apply from 2020 and the end of our UFB rollout
shortly thereafter, we’ve begun reshaping the
way we operate with an eye to the future.
This financial year, FY19, will be the peak year of our fibre
rollout with a large step up in the number of premises to be
passed. Auckland and Wellington are expected to be largely
complete by the end of the financial year, while the UFB2
rollout will see us bridging the digital divide in a growing
number of smaller towns and communities. We need to
maintain our relentless focus on keeping the rollout on
time and on budget, so that we deliver on our contractual
commitments and the expectations of customers keenly
awaiting access to fibre.
We expect customer demand for fibre connections to
maintain its strong momentum. In larger centres where
we are approaching the end of the UFB1 rollout, awareness
of fibre is already high and there are a lot of people
keen to connect after seven years of waiting. For smaller
communities, the rollout of fibre is a high profile event that
generates strong interest of its own accord, as well as an
opportunity for retailers to compete in areas they may not
have previously marketed to. We need to keep improving
the fibre installation process so we both increase our
productivity and customers’ satisfaction with the experience.
We’ve already raised the bar by setting ourselves the target
of reducing customer effort to a single visit for a large
proportion of customers. Achieving this requires us to
work even more collaboratively with our service company
partners and retailers to get our processes and systems
working in concert.
At the same time, retailers and broadcasters are continuing
to raise New Zealanders’ awareness of online viewing options.
Spark, for example, plans to broadcast the 2019 Rugby World
Cup online. Compelling content means the utility value of our
network will grow, along with peak time data demand.
Increasing uptake of 4K televisions and ultra-high definition
programming will only add to the scale of this nightly peak
in traffic. This gives us confidence that our fixed line network,
whether copper or fibre, will remain a superior service than
wireless for most customers. While talk of 5G and wireless
technology advances will no doubt continue in FY19, the
reality is that the business case for deploying small suburban
cell sites looks even more challenging when fibre is already
available to most premises and we provide dedicated
capacity to customers at a lower cost per gigabit.
We’re not alone in this view. Fibre continues to be
acknowledged globally as the most desirable form of
network connectivity. In Europe, we’re seeing fibre to the
premises deployments gain unprecedented momentum as
network operators, governments and infrastructure investors
seek to make gigabit services a reality for their markets.
As we’ve found, a long-term infrastructure focus drives
a different investment model to that typical of incumbent
telecommunications retailers, especially when the network
can leverage multiple retailers. It’s little wonder that the
New Zealand model of wholesale network access is now
regularly cited internationally as a leading example of how
to bridge the economic challenges of fibre investment.
Our network infrastructure is an amazing asset for
New Zealand and its uses are only beginning to be tapped
into. The rise of the Internet of Things and network edge
computing will keep driving the need for more connectivity
options and data capacity. Our challenge is to now turn these
emerging opportunities into commercial reality. This may
mean collaborating with entirely new classes of wholesale
customers, whether broadcasters or infrastructure service
providers, as technology advances and our open access
network create a platform for the delivery of innovative
new solutions for New Zealand homes and businesses.
The strategic changes we started making in FY18 and
are continuing through FY19 are focused on achieving
our objective of a return to modest EBITDA growth in
FY20. This aspiration is subject to no material changes
in the expected regulatory environment or competitive
outlook. Our return to broadband connection growth in
FY18, together with strong forecasts for urban housing
development and the underlying broadband trends identified
above – such as fibre uptake and the demand for streamed
video content – give us added confidence in our strategy.
By innovating for growth and optimising today’s business,
we believe our infrastructure will continue to help make
New Zealand better well into the future.
6.0
Outlook
62%
of New Zealanders now stream video
on demand, up from 12% in 2014
– NZ On Air

Annual Report 201815
Shaping
our future
INNOVATION
New revenue
opportunities
PEOPLE
We're committed to
enabling our people
OPTIMISATION
We improve by getting
better at what we do
DIGITAL
Nothing happens
if it's not digital
WE’RE FOCUSSED ON
CUSTOMER
Transform customer
experience
Creating an
environment for
our customers and
our people that
optimises today’s
business and allows
us to innovate for
growth
WE’LL GET THERE BY
MAKE
NEW ZEALAND
BETTER
BECAUSE WE WANT TO
KEEP
NEW ZEALAND
NEW
WE’RE GOING TO

Annual Report 201816

Annual Report 201817
Management
commentary
18 In summary
19 Revenue commentary
20 Expenditure commentary
24 Capital expenditure commentary
25 Long term capital management

Annual Report 201818
2018
$M
2017
$M
Operating revenue 990 1,040
Operating expenses (337) (388)
Earnings before interest, income tax, depreciation and amortisation 653 652
Depreciation and amortisation (387) (339)
Earnings before interest and income tax 266 313
Net interest expense (144) (154)
Net earnings before income tax 122 159
Income tax expense (37) (46)
Net earnings for the year 85 113
In summary
We report earnings before interest, income tax, depreciation
and amortisation (EBITDA) of $653 million for the year ending
30 June 2018 (FY18), an increase of $1 million on the prior year
(FY17). Net earnings decreased by $28 million year on year.
Results for FY18 largely reflect the annualised revenue impact
of declining connections from FY17, the adoption of three new
accounting standards (NZ IFRS 9, 15, and 16), and costs incurred
as part of an organisational transformation programme.
Capital expenditure of $810 million was at the top end of
the FY18 guidance range of $780 million to $820 million.
The increase from FY17 capital expenditure of $639 million
reflected growing demand for connections to our fibre
network, with about 76% of our capital spend fibre related,
as well as capitalisation of customer retention costs and
operating leases under the new accounting standards.
We will pay a final dividend of 13 cents per share on
9 October 2018 and the dividend reinvestment plan will
be available. We expect to pay a dividend of 23 cents per
share for FY19, subject to no material adverse changes in
circumstances or outlook.
Connections
30 Jun 2018
Connections
31 Dec 2017
Connections
30 Jun 2017
Fibre broadband (GPON)433,000362,000292,000
Fibre premium (P2P)12,00013,00013,000
Copper VDSL321,000320,000244,000
Copper ADSL433,000499,000650,000
Data services over copper6,0007,0008,000
Unbundled copper53,00068,00082,000
Baseband copper268,000290,000313,000
Total fixed line connections1,526,0001,559,0001,602,000
Management commentary

Annual Report 201819
Revenue commentary
2018
$M
2017
$M
Fibre broadband (GPON)198123
Fibre premium (P2P)7879
Copper based voice133163
Copper based broadband421501
Data services over copper2732
Value added network services3334
Infrastructure2323
Field services products7076
Other79
Total revenue9901,040
Revenue overview
Our product portfolio encompasses a broad range of
wholesale broadband, data and voice services across a
mix of regulated and commercial products. Revenues
of $990 million were down compared to revenue of
$1,040 million for the prior period. This largely reflects the
continued reduction in total fixed line connections from
FY17, albeit at a slower rate in FY18, as customers migrated
to alternative fibre and wireless networks.
Fibre broadband (GPON)
Fibre broadband revenues continue to grow as customers
migrate to our growing fibre network and broadband
penetration increases. Connections grew by 48% to 433,000,
with about 69% of connections now on 100/20 Mbps plans.
Demand for 1 Gbps plans doubled during the year, reflecting
a shift in retailer marketing, and we ended the period with
about 30,000 connections. About half of these customers
are in the Dunedin ‘gigatown’ area where we are providing
sponsored pricing at entry level fibre prices until July 2019.
Fibre premium (P2P)
Fibre premium (point to point) revenues reduced slightly
as connection numbers declined, reflecting the migration
of customers from legacy HSNS Premium and Bandwidth
Fibre Access Service connections to lower cost inputs, or
alternative fibre networks. Direct Fibre Access Service and
other backhaul connections increased modestly.
Copper based voice
Copper based voice revenues continue to decline as
customers migrate from copper to either a fibre based
connection on our network, or to alternative fibre and
wireless networks. This technology driven change saw
baseband copper connections reduce by 45,000 lines
during the period and unbundled copper connections
decline by 29,000.
Data services over copper
Data services over copper connections continued to decline
as retailers transition business customers from legacy services
to cheaper fibre based services, either on our fibre network,
or on alternative local and CBD fibre networks.
Copper based broadband
Copper based broadband revenues are declining as
customers migrate from our ADSL and VDSL broadband
services to either our fibre network, or alternative fibre
and wireless networks. ADSL connections reduced
significantly during the period as we encouraged retailers to
upgrade customers to better VDSL or fibre services. VDSL
connections increased for much of the period as a result of
our initiatives, although much of this increase was in the first
half of the year. Total VDSL connections began to decline
towards the end of FY18 as retailer migrations of their ADSL
customers slowed and our ongoing fibre rollout enabled
more VDSL customers to upgrade to fibre.

Annual Report 201820
Value added network services
There was a slight decline in value added network services
revenue. The main driver for this category is national data
transport services, which provides network connectivity
across legacy backhaul links and aggregation handover links.
Infrastructure
Infrastructure revenues remain flat year on year and relate
to services that provide access to our network assets, such
as renting exchange space, both for unbundled copper
and commercial co-location purposes. There was ongoing
growth in demand for commercial access to our exchanges,
but this was offset by a reduction in access space for
unbundled copper. This reflected the decrease in unbundled
copper connections.
Field services
Field services revenue was down $6 million relative to FY17.
This largely reflects a continued reduction in chargeable
copper provisioning work as more customers migrate to fibre
services, where first time connections are treated as capital
expenditure. Field services revenues also include subdivision
work, chargeable cable location services, maintaining retailer
networks and relocating our network on request. Revenue
in this category is more difficult to forecast as a portion of
it is dependent on third party demand or cost recovery for
damage to our network.
Other
Other income largely consists of revenue generated from
the provision of billing and network management services
to Spark, which has decreased from FY17 in line with a
reduction in services provided. Other items include dividends
received from electricity trusts that supply us with electricity
and any other minor income.
Expenditure commentary
Operating expenses
2018
$M
2017
$M
Labour7374
Provisioning643
Network maintenance8787
Other network costs3427
Information technology5460
Rent and rates917
Property maintenance1513
Electricity1514
Insurance33
Consultants510
Regulatory levies1313
Other2327
Total operating expenses337388
Operating expenditure of $337 million is lower
than FY17 largely due to the adoption of NZ IFRS 15
and 16, which resulted in provisioning ($27 million),
information technology ($10 million), labour ($6 million)
and rental expenses ($6 million) being capitalised as
assets and subsequently depreciated or amortised
in accordance with the appropriate asset life.
Labour
Labour of $73 million represent staff costs that are not
capitalised. At 30 June 2018 we had 933 permanent and fixed
term employees, a 12% reduction from peak August 2017
levels and down from 1,032 employees at 30 June 2017.
The reduction in employees followed greater retailer
adoption of automated fibre provisioning, together with
other process and system improvements, and a wider review
of our business support function requirements. There were
one-off restructuring costs of around $5 million in FY18.

Annual Report 201821
Provisioning
Provisioning costs reduced significantly during the year.
This is because less truck rolls are required to provision
changes in service once homes and businesses are
connected to the fibre network and the adoption of
NZ IFRS 15 resulted in the capitalisation of $27 million in
costs associated with customer acquisition and retention.
Network maintenance
Network maintenance costs were flat compared to FY17.
This was despite the total number of faults on our network
decreasing as total connections declined and customers
moved to the new fibre network. The level of spend reflected
more investment in proactive fault management during the
year, a series of extreme weather events, a higher incidence of
underground faults leading to a higher average cost per fault
and inflation related increases for service company costs.
Other network costs
Other network costs relate to costs associated with service
partner contracts, engineering services, fibre access
costs from third parties, warehousing costs, fibre order
cancellation costs and the cost of network spares. The nature
of other network costs tends to be more variable in nature,
with the value incurred in the year dependent on various
project related activities incurred. For FY18 there has been an
increased focus on proactive fault management which has
increased network spares costs from the prior year. We have
also seen an increase in costs for fibre access from third
parties to support an expanded backhaul product portfolio.
Information technology
Information technology costs were $54 million and have
reduced slightly from FY17. This is mainly due to changes
in capitalisation due to NZ IFRS 15 and a tight cost control
focus to offset increasing costs from inflation. Maintenance
and support costs were largely consistent, with Spark
shared systems continuing to be replaced and offset by
our own solutions.
Rent and rates
Rent and rates costs relate to the operation of our network
estate including exchanges, radio sites and roadside cabinets.
These costs include rates that are levied on network assets
both above and below ground. The adoption of NZ IFRS 16
means most rental leases are now capitalised as a right of
use asset and subsequently depreciated over the life of the
lease, and rental payments are recognised between interest
expenses and repayment of lease liability.
Property maintenance
Property maintenance costs have continued to increase
consistent with the trend in FY17 as we complete previously
deferred maintenance activity.
Electricity
Electricity costs were slightly higher in FY18 due to increased
consumption across the electronic equipment within our
network sites. About 50% of our electricity requirements have
been hedged, with a current end date of March 2019.
Consultant
Consultant costs decreased following a one-off cost in FY17
for a strategic review of the company.
Regulatory levy
Regulatory levy reflects the amount paid for the
Telecommunications Development Levy and the
Telecommunications Regulation Levy. The expense for
the current year reflects the estimated liability for FY18.
Other
Other costs includes expenditure on general costs such as
advertising, telecommunications, travel, training and legal
fees. A programme of tight cost control was implemented
across areas such as travel and general corporate expenses.

Annual Report 201822
Depreciation and amortisation
2018
$M
2017
$M
Estimated
useful life (years)
Weighted average
useful life (years)
Depreciation
Fibre cables
78722020
Ducts and manholes423920–5049
Copper cables515310–3022
Cabinets41455–2014
Property15195–5025
Network electronics65672–259
Right of use assets13–10–5028
Other––2–106
Less: Crown funding(22)(21)
Total depreciation283274
Amortisation
Software
61652–84
Customer retention43–0–32
Other intangibles––6–2121
Total amortisation10465
The weighted average useful life represents the useful life in
each category weighted by the net book value of the assets.
During the year ended 30 June 2018, $810 million
of expenditure on network assets and software was
capitalised, along with $33 million of additional leases.
The ‘UFB communal’ and ‘Fibre connections and fibre
layer 2’ included in ‘fibre’ capital expenditure was largely
capitalised against the network assets categories of fibre
cables (43%) and ducts and manholes (40%). The average
depreciation rate for UFB communal infrastructure spend
is based on an estimated life of 39 years, reflecting the very
high proportion of long life assets being constructed.
Software and other intangibles largely consist of the software
components of billing, provisioning and operational systems,
including spend on Spark-owned systems and customer
retention assets capitalised under NZ IFRS 15.
Chorus expects that incremental costs incurred in acquiring
new contracts with new and existing customers are
recoverable, and capitalised these as customer retention
assets. In the comparative period, such costs were
recognised as operating expenses when incurred. Capitalised
customer retention assets are amortised when related
revenues are recognised either upfront or over the life of
the contract (currently estimated to be within a maximum
of three years). In the period to 30 June 2018, the amount
of amortisation was $43 million and there was no impairment
in relation to the costs capitalised.
Our depreciation profile is expected to continue to change,
reflecting the greater mix of longer dated assets for the
UFB and RBI rollouts, while our amortisation profile is
expected to remain consistent. The amortisation of Crown
funding is expected to increase over time and will continue
to offset depreciation.

Annual Report 201823
Finance income and expense
(Income)/expense
2018
$M
2017
$M
Finance income (7) (10)
Finance expense
Interest on syndicated bank facility
4 16
Interest on EMTN – GBP 53 53
Interest on EMTN – EUR 39 27
Interest on fixed rate NZD bonds 18 18
Other interest expense 22 18
Capitalised interest (4) (4)
Interest costs 132 128
Fair value adjustment on interest rate swaps not in hedge relationship (3) 6
Ineffective portion of changes in fair value of cash flow hedges 5 17
Total finance expenses excluding CIP securities (notional) interest 134 151
CIP securities (notional) interest 17 13
Total finance expense 151 164
Interest costs increased by $4 million year on year. The increase
is due to a full year of interest being incurred for the EUR EMTN
issued during FY17. This increase was largely offset by a
reduced syndicated bank facility debt held during the course
of the year and a decreased weighted effective interest rate
on debt at 5.96% (30 June 2017: 6.1%).
Other interest expense includes lease interest of $18 million
(30 June 2017: $14 million) due to the change in treatment
of leases under NZ IFRS 16, and $3 million amortisation
(30 June 2017: $3 million) arising from the difference
between fair value and proceeds realised from the GBP
EMTN interest rate swap reset.
At a minimum, we aim to maintain 50% of our debt
obligations at a fixed rate of interest. We have fully hedged
the foreign exchange exposure on the GBP and EUR EMTNs
with cross currency interest rate swaps. The floating interest
on the GBP cross currency interest rate swaps has been fully
hedged using interest rate swap instruments, along with a
portion of the floating interest on the EUR cross currency
interest rate swaps.
Ineffectiveness
The decrease in total finance expense is mainly due to the
change in accounting treatment under NZ IFRS 9 of currency
basis risk, arising from the EUR EMTN hedging arrangements.
During FY17 (under NZ IAS 39), the expense associated
with this (2017: $10 million pre-tax) flowed through
ineffectiveness in finance expense – whereas in FY18 this
expense ($4 million pre-tax) is moved to the cost of hedging
reserve in equity.
The foreign exchange exposure on the EUR EMTN has been
fully hedged and interest rate exposure partially hedged.
For hedge accounting purposes the hedging relationship
consists of a fair value hedge and two cash flow hedges.
The GBP EMTN hedging relationship was reset with a fair
value of $49 million on 9 December 2013 following the
close out of the interest rate swaps relating to the EMTN.
This amount is being amortised over the life of the derivative
and flows as ineffectiveness in the income statement. As at
30 June 2018 a further $8 million remains in the hedge
reserve to be amortised in relation to this reset. In FY18,
ineffectiveness of $7 million (30 June 2017: $6 million)
flowed through interest expense relating to the amortisation
of this reset. This was offset by a $2 million credit from
a risk adjustment on the EUR EMTN, following the NZ
IFRS 9 transition.
Taxation
The 2018 effective tax rate of 28% equates to the statutory
rate of 28%. There are no material permanent differences
between net earnings before income tax and what is, or will
be, taxable for the year to 30 June 2018.

Annual Report 201824
Capital expenditure commentary
2018
$M
2017
$M
Fibre620503
Copper13279
Common5857
Gross capital expenditure810639
Gross capital expenditure for the year to 30 June 2018 was
$810 million. This was in the top half of the FY18 guidance
range of $780 million to $820 million because of strong
demand for fibre connections. The additional step up in
gross capital expenditure from FY17 was the result of the
capitalisation of $60 million in customer retention costs
following the adoption of NZ IFRS 15.
Chorus expects that incremental costs incurred in acquiring
new contracts with new and existing customers are
recoverable, and capitalised these as customer retention
assets. In the comparative period, such costs were
recognised as operating expenses when incurred.
Fibre capital expenditure
2018
$M
2017
$M
UFB communal231183
Fibre connections and fibre layer 2
1
294258
Fibre products and systems1717
Other fibre connections and growth6545
Customer retention costs13–
Total fibre capital expenditure620503
1 Layer 2 equipment, such as gigabit capable passive optical network ports, is installed ahead of demand as the UFB footprint expands.
Fibre capital expenditure includes spend specifically focused
on fibre assets and represents about 76% of our FY18 gross
capital expenditure.
The cost of the deployment of the UFB communal network
for the year was $231 million. This included $77 million
for communal network scheduled to be submitted to CIP
for testing in FY19. About $60 million was spent on UFB2
deployment in FY18. The average cost per UFB1 premises
passed during the year was about $1,570. This was in the top
half of FY18 guidance for an average cost of $1,500 to $1,600.
Fibre connections and layer 2 spend was $294 million with fibre
connections installed for 156,000 customers nationwide. This
was an increase of 27,000 installations year on year, reflecting
the addition of more fibre field crews to support the strong
demand for fibre as our fibre footprint continues to expand.
About $89 million was upfront investment for ‘backbone’
network to enable the connection of multiple customers
located along rights of way or in multi dwelling units.
The average UFB1 cost per premises connected for standard
residential premises and some non-standard single dwelling
unit installations and service desk costs was $1,037, excluding
the long run average cost of layer 2 equipment. This was
below the lower end of the expected FY18 cost range of
$1,050 to $1,200, reflecting service desk costs spread across
a higher volume of connections. Only a small number of
UFB2 connections have been completed to date.
Investment in other fibre connections and growth increased by
$20 million as we undertook a pole replacement programme in
UFB areas, backhaul fibre was deployed to UFB2 communities
and demand for greenfields fibre connectivity continued to grow.

Annual Report 201825
Copper capital expenditure
2018
$M
2017
$M
Network sustain4529
Copper connections24
Copper layer 23444
Product fixed42
Customer retention47–
Total copper capital expenditure13279
Copper capital expenditure during the year was $132 million.
The increase of $53 million from FY17 was largely the result
of $47 million of customer retention costs being capitalised
following the adoption of NZ IFRS 15.
Network sustain expenditure increased by $16 million to
$45 million as a result of more proactive maintenance, a pole
replacement programme outside our fibre areas and roadworks
related projects undertaken on a cost recovery basis.
Capital expenditure on copper connections has reduced
markedly as customer demand shifts to our fibre network or
alternative networks.
Copper layer 2 spend included an approximately $20 million
programme of work to enhance copper broadband
performance in selected areas through the deployment of
VDSL vectoring technology.
Common capital expenditure
2018
$M
2017
$M
Information technology3534
Building and engineering services2019
Other34
Total common capital expenditure5857
Common capital expenditure of $58 million was consistent
with spend for FY17. Information technology spend increased
slightly from FY17 as we continue to invest in establishing our
own supporting platforms and technologies. Building and
engineering services was also at similar levels to FY17 as we
continued to upgrade certain exchanges to meet increasing
power and regulatory requirements. ‘Other’ common capital
expenditure includes items such as office accommodation
and equipment and was slightly down on FY17.
Contributions to capital expenditure
We received $6 million in contributions towards our gross
capital expenditure in FY18 for instances where central or
local government authorities asked us to relocate or rebuild
existing network. These contributions are included as part
of Crown funding.
Long term capital management
We will pay a final dividend of 13.0 cents per share on
9 October 2018 to all holders registered at 5.00pm
25 September 2018. The shares will be quoted on an
ex -dividend basis from 24 September 2018. The dividends
paid will be fully imputed, at a ratio of 28/72, in line with
the corporate income tax rate. In addition, a supplementary
dividend of 2.2 cents per share will be payable to
shareholders who are not resident in New Zealand.
The dividend reinvestment plan will remain in place for the
final dividend at a discount rate of 3%. Shareholders who have
previously elected to participate in the dividend reinvestment plan
do not need to take any further action. For those shareholders
who wish to participate, election notices to participate must be
received by 5.00pm (NZ time) on 26 September 2018.
During the UFB build programme to 2020, the Board expects
to be able to provide shareholders with modest dividend
growth from a base of 20 cents per share paid for FY16, subject
to no material adverse changes in circumstances or outlook.
For FY19, Chorus expects to pay a dividend of 23 cents
per share, subject to no material adverse changes in
circumstance or outlook.
The Board considers that a ‘BBB’ or equivalent credit rating
is appropriate for a company such as Chorus. It intends to
maintain capital management and financial policies consistent
with these credit ratings. At 30 June 2018, we had a long term
credit rating of BBB/stable outlook by Standard & Poor’s and
Baa2/stable by Moody’s Investors Service.

Annual Report 201826

Annual Report 201827
Financial
statements
28 Independent auditor’s report
31 Income statement
31 Statement of comprehensive income
32 Statement of financial position
33 Statement of changes in equity
34 Statement of cash flows
36 Notes to the financial statements

Annual Report 201828
Independent auditor’s report
To the shareholders of Chorus Limited
Report on the consolidated financial statements
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with
Professional and Ethical Standard 1 (Revised) Code of Ethics
for Assurance Practitioners issued by the New Zealand
Auditing and Assurance Standards Board and the
International Ethics Standards Board for Accountants’
Code of Ethics for Professional Accountants (IESBA Code),
and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in
the Auditor’s responsibilities for the audit of the consolidated
financial statements section of our report.
Our firm has also provided other services to the Group
in relation to regulatory audit services, tax compliance
services and other assurance services. Subject to certain
restrictions, partners and employees of our firm may also
deal with the Group on normal terms within the ordinary
course of trading activities of the business of the Group.
These matters have not impaired our independence as
auditor of the Group. The firm has no other relationship
with, or interest in, the Group.
Materiality
The scope of our audit was influenced by our application
of materiality. Materiality helped us to determine the nature,
timing and extent of our audit procedures and to evaluate
the effect of misstatements, both individually and on the
consolidated financial statements as a whole. The materiality
for the consolidated financial statements as a whole
was set at $7.7 million, determined with reference to
a benchmark of Group profit before tax. We chose this
benchmark because, in our view, this is a key measure
of the Group’s performance.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements in the current period.
We summarise below those matters and our key audit
procedures to address those matters, in order that the
shareholders as a body may better understand the process
by which we arrived at our audit opinion. Our procedures
were undertaken in the context of, and solely for the
purpose of, our statutory audit opinion on the consolidated
financial statements as a whole and we do not express
discrete opinions on separate elements of the consolidated
financial statements
The key audit matterHow the matter was addressed in our audit
Capitalisation of assets
Refer to Note 2 to the Financial Statements.
During the year ended 30 June 2018 the Group has spent
$721 million in network asset additions as it continues
with its purpose of bringing better broadband to
New Zealanders. Capitalisation of these costs and useful
lives assigned to these assets are a key audit matter due to
the significance of network assets to the Group’s business,
and due to the judgement involved in the:
Our audit procedures included:
—Examining that the controls to recognise capital projects in the
fixed asset register are effective and the approval of the asset life
annual review.
—Assessing the nature of costs incurred in capital projects by checking
a sample of costs to invoice to determine whether the description
of the expenditure met the capitalisation criteria.
Opinion
In our opinion, the accompanying consolidated financial
statements of Chorus Limited (the company) and its
subsidiaries (the Group) on pages 31 to 63:
i. present fairly in all material respects the Group’s financial
position as at 30 June 2018, its financial performance
and cash flows for the year ended on that date; and
ii. comply with New Zealand Equivalents to International
Financial Reporting Standards (NZ IFRS) and
International Financial Reporting Standards.
We have audited the accompanying consolidated financial
statements which comprise:
— the consolidated statement of financial position as at
30 June 2018;
— the consolidated income statement, statements of
other comprehensive income, changes in equity and
cash flows for the year then ended; and
— notes, including a summary of significant accounting
policies and other explanatory information.

Annual Report 201829
The key audit matterHow the matter was addressed in our audit
Capitalisation of assets (continued)
—decision to capitalise or expense costs relating to
the network. This decision depends on whether the
expenditure is considered to enhance the network (and
therefore capital), or to maintain the current operating
capability of the network (and therefore an expense);
—estimation of the stage of completion of assets under
construction; and
—estimation of the useful life of the asset once the costs
are capitalised. There is also judgment when estimating
asset lives due to the uncertainty of the impact of
technological change.
—Evaluating a sample of assets under construction in which no costs
had been incurred in the final three months of the financial reporting
period. We challenged the status of those assets under construction
to determine whether they remained appropriately capitalised.
—Assessing, on a sample basis, whether the accruals recorded for assets
under construction were calculated in accordance with the progress
of construction and the arrangements with external suppliers.
—Assessing the useful economic lives of the assets, by comparing
to industry benchmarks and our knowledge of the business and
its operations.
Chorus funding
Refer to Notes 4, 6, 7 and 19 to the Financial Statements.
The CIP securities and interest rate derivatives are
a key audit matter due to their significance to the
Group’s consolidated statement of financial position. There
is complexity and judgement involved in determining the
appropriate valuation and accounting treatment for the
interest rate derivatives and the CIP securities, including
consideration of transition and disclosure impacts
following Chorus’ early adoption
of NZ IFRS 9 Financial Instruments.
Our audit procedures to assess the valuation and accounting treatment
for the Group’s interest rate derivatives and CIP securities included:
—Our financial instrument specialists re-valuing all interest rate
derivatives using valuation models and inputs independent from
those utilised by management. The valuations considered new
accounting requirements following Chorus’ transition to NZ IFRS 9.
—Evaluating the hedge effectiveness of the interest rate derivatives
hedging the GBP and EUR denominated Euro Medium Term Notes.
In both instances, our financial instrument specialists assessed the
effectiveness of these hedges, following NZ IFRS 9 requirements,
by independently modelling the future changes in the value of these
instruments to assess whether the underlying derivatives were effective.
—Our financial instrument specialists reviewing the adjustment
to opening retained earnings and new disclosure requirements
following Chorus’ transition to NZ IFRS 9.
—Assessing the accounting treatment of the CIP securities. We read
the underlying loan agreement and analysed the various features of
the loan agreement to determine whether the CIP securities were a
debt or equity instrument.
—Evaluating the valuation of the CIP securities. Our valuation
specialists assessed the methodology used by management for
determining the amounts allocated to debt and government grant.
—Assessing the inputs used in the valuation of the CIP securities.
On a sample basis we compared interest rates and credit spreads
to independent sources of information to determine an acceptable
range of valuation inputs.
Revenue recognition
Refer to Note 9 to the Financial Statements.
Accuracy of revenue is considered to be a key audit matter
due to the nature of the underlying billing processes that
existed following the Chorus demerger from Spark in 2011.
There are certain legacy products where the billing is
based on network consumption which cannot be easily
linked to a physical end user connection. There is a risk that
revenue billed on this basis may be disputed by Chorus’
customers who have a different view of their consumption
of the Chorus network. Due to the legacy nature of these
products, the volumes are decreasing each year and are
approximately 13% of revenue in the current financial year.
In the year ended 30 June 2018 Chorus has early adopted
NZ IFRS 15 Revenue from Contracts with Customers.
The early adoption of this standard has impacted how
Chorus treat certain costs to obtain/fulfil customer
contracts. Incremental costs incurred to obtain/fulfil
a customer contract are now capitalised and amortised
over the expected life of the relationship with that customer.
Previously these costs were expensed as incurred.
Our audit procedures included:
—Evaluating the Group’s recognition of revenue by assessing any
revenue disputes recorded in the industry’s dispute reporting tool
by Chorus customers. We compared the disputes raised by Chorus
customers to the revenue recorded by Chorus and checked a
sample of settled disputes to the final settlement agreements.
—Independently confirming the accuracy of a sample of outstanding
debtor balances with Chorus customers.
—Agreeing a sample of revenue adjustments recorded during the year
to authorised credit notes.
With respect to incremental costs incurred to obtain/fulfil a customer
contract, our sample testing included:
—Agreeing these costs to invoice and other supporting documentation
to ensure that the costs were incremental in nature and incurred in
the process of obtaining/fulfilling a customer contract;
—Assessing whether incremental costs are appropriately amortised
over the expected life of the relationship with the customer; and
—Evaluating the appropriateness of the expected life of the relationship
with the customer by observing historical customer information.

Annual Report 201830
Other information
The Directors, on behalf of the Group, are responsible
for the other information included in the entity’s Annual
Report. Other information includes the Chorus Board
and management overview, management commentary,
disclosures relating to corporate governance and statutory
information. Our opinion on the consolidated financial
statements does not cover any other information and we
do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements our responsibility is to read the other information
and, in doing so, consider whether the other information
is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or
otherwise appears materially misstated. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Use of this independent auditor’s report
This independent auditor’s report is made solely to the
shareholders as a body. Our audit work has been
undertaken so that we might state to the shareholders
those matters we are required to state to them in the
independent auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the shareholders
as a body for our audit work, this independent auditor’s
report, or any of the opinions we have formed.
Responsibilities of the Directors for the
consolidated financial statements
The Directors, on behalf of the Group, are responsible for:
— the preparation and fair presentation of the consolidated
financial statements in accordance with generally accepted
accounting practice in New Zealand (being New Zealand
Equivalents to International Financial Reporting Standards)
and International Financial Reporting Standards;
— implementing necessary internal control to enable the
preparation of consolidated financial statements that are
fairly presented and free from material misstatement,
whether due to fraud or error; and
— assessing the ability to continue as a going concern.
This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless they either intend to liquidate or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
consolidated financial statements
Our objective is:
— to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or
error; and
— to issue an independent auditor’s report that includes
our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs NZ will always detect a material misstatement
when it exists.
Misstatements can arise from fraud or error. They are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit
of these consolidated financial statements is located
at the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-
practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this
independent auditor’s report is Ed Louden.
For and on behalf of
KPMG
Wellington
27 August 2018

Annual Report 201831
Income statement
For the year ended 30 June 2018
(Dollars in millions)Notes
2018
$M
2017
$M
Operating revenue9 990 1,040
Operating expenses1,10 (337) (388)
Earnings before interest, income tax, depreciation and amortisation 653 652
Depreciation1,2 (283) (274)
Amortisation1,3 (104) (65)
Earnings before interest and income tax 266 313
Finance income 7 10
Finance expense1,4 (151) (164)
Net earnings before income tax 122 159
Income tax expense14 (37) (46)
Net earnings for the year 85 113
Earnings per share
Basic earnings per share (dollars)
170.20 0.28
Diluted earnings per share (dollars)170.16 0.23
Statement of comprehensive income
For the year ended 30 June 2018
(Dollars in millions)Notes
2018
$M
2017
$M
Net earnings for the year 85 113
Other comprehensive income
Items that will be reclassified subsequently to the income statement when specific
conditions are met
Ineffective portion of changes in fair value of cash flow hedges
19 (3) 12
Effective portion of changes in fair value of cash flow hedges19 – (7)
Amortisation of de-designated cash flow hedges transferred to income statement19 (1) (1)
Movement in cost of hedging reserve19 (3) –
Other comprehensive income net of tax (7) 4
Total comprehensive income for the year net of tax 78 117
The accompanying notes are an integral part of these financial statements.

Annual Report 201832
Statement of financial position
As at 30 June 2018
(Dollars in millions)Notes
2018
$M
2017
$M
Current assets
Cash and call deposits
15 50 170
Income tax receivable14 12 1
Trade and other receivables11 154 139
Derivative financial instruments19 3 1
Finance lease receivable5 5 5
Total current assets 224 316
Non-current assets
Derivative financial instruments
19 74 –
Trade and other receivables11 7 7
Software and other intangibles3 182 142
Network assets2 4,439 3,973
Total non-current assets 4,702 4,122
Total assets 4,926 4,438
Current liabilities
Trade and other payables
12 370 346
Lease payable5 6 –
Derivative financial instruments19 19 46
Total current liabilities excluding Crown funding 395 392
Current portion of Crown funding7 21 19
Total current liabilities 416 411
Non-current liabilities
Derivative financial instruments
19 210 231
Lease payable5 237 159
Debt4 1,807 1,609
Deferred tax payable14 224 202
Total non-current liabilities excluding CIP and Crown funding 2,478 2,201
Crown Infrastructure Partners (CIP) securities6 273 203
Crown funding7 737 679
Total non-current liabilities 3,488 3,083
Total liabilities 3,904 3,494
Equity
Share capital
16 590 520
Reserves19(36)(22)
Retained earnings 468 446
Tot al e quit y 1,022 944
Total liabilities and equity 4,926 4,438
The accompanying notes are an integral part of these financial statements.
The financial statements are approved and signed on behalf of the Board.
Patrick Strange
Chair
Authorised for issue on 27 August 2018
Kate McKenzie
Chief Executive Officer and Managing Director

Annual Report 201833
Statement of changes in equity
For the year ended 30 June 2018
(Dollars in millions)Notes
Share capital
$M
Retained
earnings
$M
Hedging-related
reserves
$M
Total
$M
Balance at 1 July 2016 481 416 (26) 871
Comprehensive income
Net earnings for the year
– 113 – 113
Other comprehensive income
Ineffective portion of changes in fair value of cash flow hedges
19 – – 12 12
Effective portion of changes in fair value of cash flow hedges19 – – (7) (7)
Amortisation of de-designated cash flow hedges transferred to
income statement
19 – – (1) (1)
Total comprehensive income – 113 4 117
Contributions by and (distributions to) owners:
Dividends
16 – (83) – (83)
Supplementary dividends – 9 – 9
Tax credit on supplementary dividends – (9) – (9)
Dividend reinvestment plan16 40 – – 40
Employee share plan 16 (1) – – (1)
Total transactions with owners 39 (83) – (44)
Balance at 30 June 2017 520 446 (22) 944
Impact of adopting NZ IFRS 9 at 1 July 2017 (net of tax)1 – 7 (7) –
Impact of adopting NZ IFRS 15 at 1 July 2017 (net of tax)1 – 20 – 20
Balance at 1 July 2017 520 473 (29) 964
Comprehensive income
Net earnings for the year
– 85 – 85
Other comprehensive income
Ineffective portion of changes in fair value of cash flow hedges
19 – – (3) (3)
Amortisation of de-designated cash flow hedges transferred to
income statement
19 – – (1) (1)
Movement in cost of hedging reserve19 – – (3) (3)
Total comprehensive income – 85 (7) 78
Contributions by and (distributions to) owners:
Dividends
16 – (90) – (90)
Supplementary dividends – 10 – 10
Tax credit on supplementary dividends – (10) – (10)
Dividend reinvestment plan16 47 – – 47
Issue of new shares16 23 –– 23
Total transactions with owners 70 (90) – (20)
Balance at 30 June 2018 590 468 (36) 1,022
The accompanying notes are an integral part of these financial statements.

Annual Report 201834
Statement of cash flows
For the year ended 30 June 2018
(Dollars in millions)Notes
2018
$M
2017
$M
Cash flows from operating activities
Cash was provided from/(applied to):
Cash received from customers
1,002 1,070
Finance income 3 6
Payment to suppliers and employees (350) (397)
Taxation paid 14 (30) (38)
Interest paid (117) (117)
Net cash flows from operating activities 508 524
Cash flows applied to investing activities
Cash was applied to:
Purchase of network and intangible assets
(766) (638)
Capitalised interest paid (4) (4)
Net cash flows applied to investing activities (770) (642)
Cash flows from financing activities
Cash was provided from/(applied to):
Net inflow/(outflow) from leases
(15) 3
Crown funding (including CIP securities) 117 117
Issuance of share capital 23 –
Proceeds from debt 70 785
Repayment of debt (10) (675)
Dividends paid (43) (44)
Net cash flows from financing activities 142 186
Net cash flow (120) 68
Cash at the beginning of the year 170 102
Cash at the end of the year15 50 170
The accompanying notes are an integral part of these financial statements.

Annual Report 201835
Reconciliation of net earnings to net cash flows from operating activities
2018
$M
2017
$M
Net earnings for the year 85 113
Adjustment for:
Depreciation charged on network assets
305 295
Amortisation of Crown funding (22) (21)
Amortisation of software and other intangible assets 104 65
Deferred income tax 21 6
Ineffective portion of changes in fair value of cash flow hedges (pre-tax) 5 17
Movement in cost of hedging reserve 3 –
Other5 27
506 502
Change in current assets and liabilities:
Increase in trade and other receivables
15 19
Increase in trade and other payables(24) 1
Increase in income tax receivable 11 2
2 22
Net cash flows from operating activities 508 524
Reconciliation of movements of liabilities to cash flows arising from financing activities
Debt
$M
Crown funding
$M
CIP securities
$M
Lease payable
$M
Share capital
$M
Retained earnings
$M
Balance at 1 July 20171,609 698 203 159 520 473
Movements from cash flows
Payment of lease liabilities
– – – (15) – –
Proceeds from funding70 76 41 – – –
Proceeds from repayment of borrowings(10) – – – – –
Proceeds from issue of share capital – – – – 23 –
Dividends paid – – – – – (43)
Total changes from financing cash flows60 76 41 (15)23 (43)
Non-cash movements
Movements in fair value
(including foreign exchange rates)
135 – – – – –
Transaction costs and amortisation
related to financing
3 (22)17 – – –
Accruals–6 12 – – –
Dividend reinvestment plan – – – – 47 (47)
Impact of adopting NZ IFRS 9, 15, 16 – – – 47 – –
Lease additions – – – 52 – –
Net earnings for the year – – – – – 85
Balance at 30 June 20181,807 758 273 243 590 468
The accompanying notes are an integral part of these financial statements.

Annual Report 201836
Notes to the financial statements
Reporting entity and statutory base
Chorus includes Chorus Limited together with its subsidiaries.
Chorus is New Zealand’s largest fixed line communications
infrastructure services provider. It maintains and builds a
network predominantly made up of copper and fibre cables,
local telephone exchanges, and cabinets.
Chorus Limited is a profit-orientated company registered
in New Zealand under the Companies Act 1993 and a FMC
Reporting Entity for the purposes of the Financial Markets
Conduct Act 2013. Chorus Limited was established as a
standalone, publicly listed entity on 1 December 2011, upon its
demerger from Telecom Corporation of New Zealand Limited
(Telecom), now known as Spark New Zealand Limited (Spark).
The demerger was a condition of an agreement with Crown
Infrastructure Partners Limited (previously Crown Fibre Holdings)
to enable Chorus Limited to provide the majority of the Crown’s
Ultra-Fast Broadband (UFB). Chorus Limited is listed and its
ordinary shares quoted on the NZX main board equity security
market (NZX Main Board) and on the Australian Stock Exchange
(ASX) and has bonds quoted on the NZX debt market. American
Depositary Shares, each representing five ordinary shares (and
evidenced by American Depositary Receipts), are not listed but
are traded on the over-the-counter market in the United States.
These financial statements have been prepared in accordance
with generally accepted accounting practice in New Zealand
(NZ GAAP) and part 7 of the Financial Markets Conduct Act 2013.
They comply with New Zealand equivalents to International
Financial Reporting Standards (NZ IFRS) as appropriate for
profit-oriented entities, and with International Financial
Reporting Standards.
These financial statements are expressed in New Zealand dollars.
All financial information has been rounded to the nearest million,
unless otherwise stated.
The measurement basis adopted in the preparation of
these financial statements is historical cost, modified by the
revaluation of financial instruments as identified in the specific
accounting policies below and the accompanying notes.
Accounting policies and standards
Accounting policies that summarise the measurement basis used
and are relevant to the understanding of the financial statements
are provided throughout the accompanying notes.
A number of new accounting standards, NZ IFRS 9: ‘Financial
Instruments’, NZ IFRS 15: ‘Revenue from Contracts with Customers’
and NZ IFRS 16: ‘Leases’ have been issued. Chorus has elected to
early adopt these standards from 1 July 2017. Further information is
detailed below and comparative information is presented in note 1.
The accounting policies adopted and methods of computation
have been applied consistently throughout the periods presented
in these financial statements, except for the three new
accounting standards.
NZ IFRS 9 Financial Instruments
NZ IFRS 9 addresses the classification and measurement
of financial assets and financial liabilities, the impairment
of financial assets and hedge accounting. The only material
impact on Chorus of adopting this standard is in relation to
hedge accounting, where new rules more closely align hedge
accounting with Chorus’ risk management activities, with the
result being less reported volatility in the income statement.
Changes in the fair value of the cost to convert foreign currency
to NZD of Chorus’ cross currency interest rate swaps are now
separately accounted for as a cost of hedging and recognised
in a new reserve within equity (cost of hedging reserve).
This accounting treatment was not possible under the previous
accounting rules, where such changes in fair value were
recognised within the income statement.
Chorus has early adopted NZ IFRS 9 with a date of initial
application of 1 July 2017. As a result, Chorus has changed its
accounting policy for certain financial instruments. Chorus has
elected to apply NZ IFRS 9 on a retrospective basis (as if the new
standard always existed), however has not restated comparative
information. Instead, the impact of adopting the new standard on
financial instruments is reflected in opening equity on 1 July 2017.
NZ IFRS 15 Revenue from Contracts with Customers
Chorus has early adopted NZ IFRS 15 with a date of initial
application of 1 July 2017. As a result, Chorus has changed
its accounting policy for customer retention costs as
detailed below.
Chorus has recognised the cumulative effect of initially applying
NZ IFRS 15 as an adjustment to the opening balance of equity at
1 July 2017. Comparative information has not been restated and
continues to be reported under NZ IAS 18.
Customer retention costs
Chorus previously recognised costs when acquiring new
contracts with new and existing customers as expenses when
they were incurred. Under NZ IFRS 15, Chorus capitalises these
as costs of obtaining a contract (collectively referred to as
customer retention costs) when they are incremental and, if they
are expected to be recovered, it amortises them consistently
with the pattern of revenue for the related contract.

Annual Report 201837
NZ IFRS 16 Leases
Chorus has early adopted NZ IFRS 16 with a date of initial
application of 1 July 2017 and has not restated comparative
information. As a result, Chorus has changed its accounting
policy for lease contracts as described below.
As a lessee
As a lessee, Chorus previously classified leases as operating or
finance leases based on its assessment of whether the lease
transferred substantially all the risks and rewards incidental to
ownership of the underlying asset to Chorus. Under NZ IFRS 16,
Chorus recognises right of use assets and lease liabilities on
balance sheet for most leases.
(i) Leases previously classified as operating leases under
NZ IAS 17: Leases
On 1 July 2017, lease liabilities were measured at the present
value of the remaining lease payments, discounted at Chorus’
incremental borrowing rate at that date.
Right of use assets were measured at an amount equal to the
lease liability. The right of use asset is subsequently depreciated
using the straight line method over the shorter of the estimated
useful lives of the right of use asset or the remaining estimated
lease term. The estimated useful lives of right of use assets are
determined on the same basis as those of property and equipment.
Chorus presents right of use assets in Network Assets (note 2)
and lease liabilities (note 5) separately on the face of the
Statement of financial position.
Chorus used the following practical expedients when applying
the new lease standard NZ IFRS 16 to leases previously classified
as operating leases under NZ IAS 17:
• Applied a single discount rate to a portfolio of leases with
similar characteristics; and
• Applied the exemption not to recognise right of use assets and
liabilities for leases with less than 12 months of lease term.
(ii) Leases previously classified as finance leases under
NZ IAS 17: Leases
For leases that were previously classified as finance leases under
NZ IAS 17, the carrying amount of the right of use asset and the
lease liability at 1 July 2017 (transition date) are determined at the
lease asset and lease liability under NZ IAS 17 immediately before
that date.
As a lessor
Chorus is not required to make any adjustments on transition
to NZ IFRS 16 for leases in which it acts as a lessor.
Reclassification and re-statement of comparatives
Management have reclassified the revenue streams (note 9)
from prior periods to simplify reporting and align with
the products and services of Chorus, and provide greater
transparency to readers. This recognises the evolving nature of
the industry from being copper to fibre based, and is consistent
with internal management reporting provided to Senior
Management and the Board.
Crown Fibre Holdings renamed
During July 2017 the New Zealand Government repurposed
Crown Fibre Holdings (CFH) and changed the name to Crown
Infrastructure Partners (CIP). The repurpose has no material
impact on Chorus’ relationship.
Accounting estimates and judgements
In preparing the financial statements management has made
estimates and assumptions about the future that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue
and expenses during the period. Actual results could differ
from those estimates.
Estimates and assumptions are regularly evaluated and are
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. The principal areas of judgement in
preparing these financial statements are set out below.
Network assets (note 2)
Assessing the appropriateness of useful life and residual value
estimates of network assets requires a number of factors to be
considered such as the physical condition of the asset, expected
period of use of the asset, technological advances, regulation
and expected disposal proceeds from the future sale of the asset.
Software and other intangibles (note 3)
Assessing the appropriateness of the period over which
customer retention costs are amortised requires a number of
factors to be considered such as the product the customer
retention costs relate to, technological advances, retail service
provider activities and regulation.
Leases (note 5)
Chorus assesses at lease commencement whether it is
reasonably certain to exercise extension options where included
in the contract, and where it is reasonably certain, the extension
period has been included in the lease liability calculation.
CIP securities (note 6)
Determining the fair value of the CIP securities requires
assumptions on expected future cash flows and discount rates
based on future long dated swap curves.
Crown funding (note 7)
Exercising judgement when recognising Crown funding to
determine if conditions of the funding contract have been
satisfied. This judgement will be based on the facts and
circumstances that are evident for each contract at the time
of preparing the financial statements.
Financial risk management (note 20)
Credit valuations are adjusted to reflect credit risk as required
by NZ IFRS 9: Financial Instruments. The effect of credit risk
is quantified using an expected future exposure methodology
where credit default swap prices are used to represent the
probability of default.

Annual Report 201838
Note 1 – Comparative information for transition to new NZ IFRS standards
To provide further information and increased transparency, adjusted comparative totals are disclosed below.
NZ IFRS 9 Financial Instruments
On transition to NZ IFRS 9, Chorus recognised a cost of
hedging reserve within equity of $6 million (net of tax)
and an adjustment to the cash flow hedge reserve of
$1 million (net of tax). Opening retained earnings was
also adjusted accordingly. Had NZ IFRS 9 applied to the
comparative periods presented, $10 million for the year
ended 30 June 2017 of hedge ineffectiveness (recorded
within finance expense) would have gone to the new
cost of hedging reserve within equity, pre-tax.
Cost of hedging
reserve
$M
Cashflow
hedge reserve
$M
Total NZ IFRS 9
adjustments
$M
Transfer from FY17 interest expense 8 2 10
Tax at 28% (2) (1)(3)
Net NZ IFRS 9 adjustment to retained earnings on 1 July 2017 6 1 7
NZ IFRS 15 Revenue from Contracts with Customers
On transition to NZ IFRS 15, Chorus recognised an additional
$27 million of customer retention assets (included within
‘Software and other intangibles’) relating to open contracts on
transition date. This was adjusted for tax and booked directly
to retained earnings. These costs, including additional costs
incurred and capitalised post-transition date, are amortised
over the life of the contract, which management have assessed
as up to three years in tenure.
The following tables summarise the impact of adopting
NZ IFRS 15 on Chorus’ consolidated financial statements
for the period ended 30 June 2018.
Recognised on 1 July 2017:
$M
Prior periods customer retention assets (note 2) 38
Amortisation of prior periods customer retention assets (note 2) (11)
Customer retention costs net of amortisation 27
Tax at 28% (7)
Net NZ IFRS 15 adjustment to retained earnings on 1 July 2017 20
Impacts for the year ended 30 June 2018:
As reported
$M
NZ IFRS 15
adjustment
$M
Balance without
adoption of
NZ IFRS 15
$M
Income statement:
Amortisation
(104) 43 (61)
Operating expenses (337) (60) (397)
Tax expense (37)– (37)
Note 10 – Operating expenses:
Labour
(73) (6) (79)
Provisioning (6) (27) (33)
Information technology costs (54) (10) (64)
Other (modem upgrades)– (17) (17)
Balance sheet:
Deferred tax
224 (12) 212
Software and other intangibles 182 (42) 140
Had NZ IFRS 15 applied to comparative periods presented,
operating expenses would have decreased by $50 million for
the year ended 30 June 2017 with a corresponding increase to
‘Software and other intangibles’, and an increase to amortisation
of approximately $34 million.
NZ IFRS 16 Leases
On transition to NZ IFRS 16, Chorus recognised $206 million (net
of amortisation) of right of use assets and lease liabilities. There
was no difference to recognise in retained earnings. Included in
this was right of use assets previously relating to finance leases
under NZ IAS 17 of $157 million.

Annual Report 201839
When measuring lease liabilities, Chorus discounted lease
payments using its incremental borrowing rates at 1 July 2017.
The weighted average rate applied is 6.06%.
The following table reconciles the value of right of use assets
that came on to the balance sheet at 1 July 2017:
$M
Operating leases
Commitment – 30 June 2017
64
Discounted value – 1 July 2017 49
Finance leases
Finance Lease Liability – 30 June 2017
159
Lease reset (2)
Discounted value – 1 July 2017 157
Total lease liabilities recognised at 1 July 2017 (net of amortisation) 206
Had NZ IFRS 16 applied to comparative periods presented for
the year ended 30 June 2017, the depreciation charge would
have increased by $6 million, and finance expense would have
increased by $3 million. Offsetting these increases would have
been a corresponding decrease in rent and rates of $8 million.
Note 2 – Network assets
In the statement of financial position, network assets are stated
at cost less accumulated depreciation and any accumulated
impairment losses. The cost of additions to network assets
and work in progress constructed by Chorus includes the
cost of all materials used in construction, direct labour costs
specifically associated with construction, interest costs that are
attributable to the asset, resource management consent costs
and attributable overheads.
Repairs and maintenance costs are recognised in the income
statement as incurred.
Estimating useful lives and residual values of network assets
The determination of the appropriate useful life for a particular
asset requires management to make judgements about,
amongst other factors, the expected period of service potential
of the asset, the likelihood of the asset becoming obsolete as
a result of technological advances, the likelihood of Chorus
ceasing to use the asset in our business operations and the
effect of government regulation.
Where an item of network assets comprises major components
having different useful lives, the components are accounted for
as separate items of network assets.
Where the remaining useful lives or recoverable values have
diminished due to technological, regulatory or market condition
changes, depreciation is accelerated. The assets’ residual values,
useful lives, and methods of depreciation are reviewed annually
and adjusted prospectively, if appropriate.
Depreciation is charged on a straight-line basis to write down the
cost of network assets to their estimated residual value over their
estimated useful life. Estimated useful lives are as follows:
Fibre cables20 years
Ducts, manholes and poles20–50 years
Copper cables10–30 years
Cabinets5–20 years
Property5–50 years
Network electronics2–25 years
Right of use assets10–50 years
Other2–10 years
Other network assets include motor vehicles, network
management and administration systems and radio infrastructure.
Any future adverse impacts arising when assessing the carrying
value or lives of network assets could lead to future impairment
losses or increases in depreciation charges that could affect
future earnings.
An item of network assets and any significant part is
derecognised upon disposal or when no future economic
benefits are expected from its use or disposal. Where network
assets are disposed of, the profit or loss recognised in the
income statement is calculated as the difference between the
sale price and the carrying value of the asset.
Leased assets and corresponding liabilities are recognised as
‘right of use’ assets, and depreciated over the life of the lease.
Note 1 – Comparative information for transition to new NZ IFRS standards (cont.)

Annual Report 201840
Non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange
rates as at the dates of the initial transactions.
Land and work in progress are not depreciated.
30 June 2018
Fibre
cables
$M
Ducts,
manholes,
and poles
$M
Copper
cables
$M
Cabinets
$M
Property
$M
Network
electronics
$M
Right
of use
assets
$M
Other
$M
Work in
progress
$M
Total
$M
Cost
Balance at 30 June 2017
1,566 2,007 2,369 583 564 1,673 – 5 124 8,891
Transfers due to adoption of
NZ IFRS 16 at 1 July 2017
(6) – – – (173) – 179 – – –
Additions due to adoption of
NZ IFRS 16 at 1 July 2017
– – – – – – 49 – – 49
Additions – – – – – – – – 721 721
Disposals – (4) – (2) (6) (30) – – – (42)
Transfers from work in
progress
222 225 15 39 17 92 28 – (638) –
Other – – – – 2 – 5 – – 7
Balance at 30 June 2018 1,782 2,228 2,384 620 404 1,735 261 5 207 9,626
Accumulated depreciation
Balance at 30 June 2017
(460) (515) (1,883) (354) (261) (1,443) – (2) – (4,918)
Transfers due to adoption of
NZ IFRS 16 at 1 July 2017
– – – – 22 – (22) – – –
Depreciation (78) (42) (51) (41) (15) (65) (13) – – (305)
Disposals – – – – 5 33 – – – 38
Other – – – – (2) – – – – (2)
Balance at 30 June 2018 (538) (557) (1,934) (395) (251) (1,475) (35) (2) – (5,187)
Net carrying amount 1,244 1,671 450 225 153 260 226 3 207 4,439
30 June 2017
Fibre
cables
$M
Ducts,
manholes
and poles
$M
Copper
cables
$M
Cabinets
$M
Property
$M
Network
electronics
$M
Other
$M
Work in
progress
$M
Total
$M
Cost
Balance at 1 July 2016
1,336 1,835 2,353 537 540 1,638 4 99 8,342
Additions – – – – – – – 592 592
Other – – – – 7 – – 8 15
Disposals – – – (3) (2) (53) – – (58)
Transfers from work in
progress
230 172 16 49 19 88 1 (575) –
Balance at 30 June 2017 1,566 2,007 2,369 583 564 1,673 5 124 8,891
Accumulated depreciation
Balance at 1 July 2016
(388) (476) (1,830) (311) (250) (1,429) (2) – (4,686)
Depreciation (72) (39) (53) (45) (19) (67) – – (295)
Disposals – – – 2 1 53 – – 56
Other – – – – 7 – – – 7
Balance at 30 June 2017 (460) (515) (1,883) (354) (261) (1,443) (2) – (4,918)
Net carrying amount 1,106 1,492 486 229 303 230 3 124 3,973
There are no restrictions on Chorus’ network assets or any
network assets pledged as securities for liabilities. At 30 June 2018
the contractual commitment for acquisition and construction of
network assets was $448 million (30 June 2017: $507 million).
Note 2 – Network assets (cont.)

Annual Report 201841
Depreciation
2018
$M
2017
$M
Depreciation charged on network assets 305 295
Less: Crown funding – Ultra-Fast Broadband (12) (11)
Crown funding – Rural Broadband Initiative (8) (8)
Crown funding – Other (2) (2)
Total depreciation 283 274
Chorus receives funding from the Crown to finance the capital
expenditure associated with the development of the UFB
network, rural broadband services and other services. Funding is
offset against depreciation over the life of the assets the funding
is used to construct.
Refer to note 7 for information on Crown funding.
Property Exchanges
Chorus has leased exchange space and commercial co-
location space owned by Spark which is subject to finance lease
arrangements (included within right of use assets). Chorus in
turn leases exchange space and commercial co-location space
owned by Chorus to Spark under a finance lease arrangement.
For sites that it does not own, Chorus recognises its share of
the assets based on occupancy percentage, as well as a liability
for the future payments due. For sites that it does own, Chorus
derecognises the share of the asset used by Spark, as well as
recognising a receivable for the future receipts due.
The ‘Other’ asset and accumulated depreciation movement in
the year to 30 June 2018 is $5 million (30 June 2017: $7 million)
mainly reflecting consumer price index adjustments on Spark’s
use of Chorus owned sites.
Impairment
The carrying amounts of non-financial assets including network
assets, software and other intangibles are reviewed at the end
of each reporting period for any indicators of impairment.
If any such indication exists, the recoverable amount of the
asset is estimated. An impairment loss is recognised in earnings
whenever the carrying amount of an asset exceeds its estimated
recoverable amount. Should the conditions that gave rise to the
impairment loss no longer exist, and the assets are no longer
considered to be impaired, a reversal of an impairment loss
would be recognised immediately in earnings.
The recoverable amount is the greater of an asset’s value in use
and fair value less costs to sell. Chorus’ assets do not generate
independent cash flows and are therefore assessed from a single
cash-generating unit perspective. In assessing the recoverable
amount, the estimates of future cash flows are discounted to
their net present value using a discount rate that reflects current
market assessments of the time value of money and the risks
specific to the business.
Capitalised interest
Finance costs are capitalised on qualifying items of network
assets and software assets at an annualised rate of 6.00%
(30 June 2017: 6.50%). Interest is capitalised over the period
required to complete the assets and prepare them for their
intended use. In the current year finance costs totalling
$4 million (30 June 2017: $4 million) have been capitalised
against network assets and software assets.
Right of use assets
Fibre cables
Ducts, manholes,
and polesPropertyTotal
Balance 1 July 2017 (net) 6 21 179 206
Additions 3 7 23 33
Depreciation charge – (2) (11) (13)
Balance at 30 June 2018 9 26 191 226
Right of use assets are the present value of leases held by Chorus
as a lessee, as defined in the accounting policies (previously
recognised as finance and operating leases). Leases are
capitalised at the present value of the minimum lease payments
at inception of the lease.
Chorus has used a single discount rate to a portfolio of leases
across the two main portfolios of leases (‘Property’ and ‘Ducts,
manholes, and poles’) due to the long term usage nature of
the underlying assets used to service the same network. This is
reflective of the longer term nature of infrastructure assets.
The nature of these assets are similar enough that borrowing
rates on commercial debt would not change asset to asset.
The incremental borrowing rate is reviewed annually.
Note 2 – Network assets (cont.)

Annual Report 201842
Note 3 – Software and other intangibles
Software and other intangible assets are initially measured
at cost. The direct costs associated with the development of
network and business software for internal use are capitalised
where project success is probable and the capitalisation
criteria is met. Following initial recognition, software and
other intangible assets are stated at cost less accumulated
amortisation and impairment losses. Software and other
intangible assets with a finite life are amortised from the
date the asset is ready for use on a straight-line basis over its
estimated useful life which is as follows:
Software2–8 years
Customer retention0–3 years
Other intangibles 6–21 years
Customer retention costs
Chorus expects that incremental costs incurred in acquiring
new contracts with new and existing customers are recoverable,
and capitalised these as customer retention assets. In the
comparative period, such costs were recognised as operating
expenses when incurred. Customer retention assets are
amortised when related revenues are recognised upfront or
over the life of the contract (currently estimated to be within
a maximum of three years). In the period to 30 June 2018,
the amount of amortisation was $43 million and there was
no impairment in relation to the costs capitalised.
Other intangibles mainly consist of land easements.
At each reporting date, Chorus reviews the carrying amounts of its
software and other intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss.
For impairment policy and process refer to note 2.
Where estimated useful lives or recoverable values have
diminished due to technological change or market conditions,
amortisation is accelerated.
There are no restrictions on software and other intangible assets,
or any intangible assets pledged as securities for liabilities.
30 June 2018
Software
$M
Customer
retention
$M
Other intangibles
$M
Work in progress
$M
Total
$M
Cost
Balance at 30 June 2017
639 – 6 36 681
Adjustments at 1 July 2017 (on adoption of NZ IFRS 15) – 38 – – 38
Additions – – – 117 117
Disposals (12) – – – (12)
Transfers from work in progress 67 58 – (125) –
Balance at 30 June 2018 694 96 6 28 824
Accumulated amortisation
Balance at 30 June 2017
(538) – (1) – (539)
Adjustments at 1 July 2017 (on adoption of NZ IFRS 15) – (11) – – (11)
Amortisation (61) (43) – – (104)
Disposals 12 – – – 12
Balance at 30 June 2018 (587) (54) (1) – (642)
Net carrying amount 107 42 5 28 182
30 June 2017
Software
$M
Other intangibles
$M
Work in progress
$M
Total
$M
Cost
Balance at 1 July 2016
597 6 31 634
Additions – – 47 47
Transfers from work in progress 42 – (42) –
Balance at 30 June 2017 639 6 36 681
Accumulated amortisation
Balance at 1 July 2016
(473) (1) – (474)
Amortisation (65) – – (65)
Balance at 30 June 2017 (538) (1) – (539)
Net carrying amount 101 5 36 142
At 30 June 2018 the contractual commitment for acquisition of software and other intangible assets was $11 million
(30 June 2017: $13 million).