Chorus’ annual shareholders’ meeting

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

Email: company.secretary@chorus.co.nz

STOCK EXCHANGE ANNOUNCEMENT


1 November 2018


Chorus’ annual shareholders’ meeting

Please find attached the following prepared announcements which will be delivered at
Chorus’ annual shareholders’ meeting to be held in Wellington at 10.30am today:

 Chairman’s address;
 CEO’s address; and
 Presentation slides.

Copies of these announcements will be available on Chorus’ website later today.

The meeting will also be webcast live on the investor section of Chorus’ website 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

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CHORUS LIMITED ANNUAL MEETING 1 NOVEMBER 2018

CHAIR’S ADDRESS


Good morning and, welcome to Chorus’ 2018 Annual Shareholders
Meeting. My name is Patrick Strange and I am Chorus’ chair.

Our agenda this morning is a short address from me. We’ll then hear
from chief executive Kate McKenzie, followed by resolutions and voting.

My fellow directors are here today:

- Jon Hartley, Deputy Chair
- Prue Flacks
- Murray Jordan
- Mark Cross
- Anne Urlwin
- Jack Matthews
and, of course
- Kate McKenzie.

We also have our Chief Financial Officer, Andrew Carroll, General Counsel
& Company Secretary, Elaine Campbell and our auditors KPMG here with
us today.

During the financial year ended 30 June, Chorus achieved a net profit of
$85 million and EBITDA of $653 million, modestly above the top end of
our initial EBITDA guidance.

This performance enabled total dividends of 22 cents per share during the
financial year, up from 21 cents per share in the prior period.

Management has also responded well to some competitive challenges,
which I will outline shortly.

The enormous investment in building a new fibre network continues, and
more than 900,000 homes and businesses now have fibre available.
Take-up of fibre has also continued to grow rapidly, with more than 50%
of those homes and businesses having already chosen to upgrade.

When you include customers who have chosen to upgrade to our premium
copper service, close to 70% of New Zealanders now enjoy world class
broadband.

It is worth reflecting on the massive scale of national infrastructure
upgrade.

By 2022, more than 87% of all the homes and businesses in New Zealand
will have fibre available to them. That will place New Zealand around 6th
in the world.

The rapid take-up of fibre has also shot New Zealand up global broadband
league tables. Already the proportion of broadband connections that are
full fibre to the premise places the country in the top 10 globally, and we
will continue to climb.

As an infrastructure wholesaler, most of our pricing is set by regulation or
government contract. We are not allowed to sell directly to the end
customers. However, we have faced competition, with one of the largest
retailers of broadband promoting its mobile network, predominantly to its
long-term customers, as an alternative to the more reliable and faster

fixed line services we offer. Further, the local fibre network providers take
customers off our copper network.

Our response to this has been to focus on our ‘active wholesaler’ strategy,
where we invest to promote awareness of better broadband through
advertising, collaborative campaigns with retailers and our own door
knocking activities.

The result was that the loss of overall lines - copper and fibre - has slowed
to 76,000 during the financial year, down from 125,000 lines the year
before.

On the other side of the ledger, reduced revenues due to fewer overall
connections has also emphasised the need for careful control of costs.

Following a strategic review, Kate and her team implemented a new
business model that has reduced our internal workforce by 12% but also
supported overall increases in productivity. This is best illustrated by a
20% increase in the number of fibre connections completed during the
year.

The success in these two areas – slowing line loss and improving efficiency
while lowering costs - directly contributed to EBITDA exceeding guidance.

While productivity has improved, the Board remains focused on driving
further improvements in customer experience. There is still work to do on
this front. The complexity of some installations, right-of way issues, the
necessity to build seamless interfaces between the RSP call centre that
takes an order all the way to the field crew acting on it, the sheer,

un-forecast volume of fibre take-up, and the very tight labour supply
market have all led to challenges, which we are getting on top of.

The rapid expansion of Netflix and the potential for the Rugby World Cup
being streamed will act as an incentive for more customers to move to
fibre, so continuing to improve both productivity and customer experience
will be of paramount importance over the next two years.

Kate will speak to you shortly in a bit more detail about the range of
initiatives underway.

There has also been pleasing, if sometimes slow, progress in the
development of the regulatory framework that will underpin the
telecommunications sector from 2020 onwards.

Legislation outlining the framework has passed through the various
legislative stages, and may have its third reading today. We anticipate
royal assent by the end of 2018.

While we may not have got absolutely everything we may have wanted
from the new framework, it is our view that it is a significant positive
improvement from the current regime, and will provide greater stability,
predictability and certainty for everyone in the sector.

It is also pleasing to note that the regulatory framework enjoys support
from both sides of the house, which should prevent major shifts in
regulatory environment whenever there is a change in Government.

As we have seen from our neighbours over the ditch, lack of policy and
regulatory certainty makes life extremely difficult when rolling out long
run infrastructure projects with payback horizons measured in decades.

Once the legislation finally passes into law, it then becomes the job of the
Commerce Commission to implement the new regime.

We will continue to work constructively with the Commission, providing
high quality information and open engagement to allow them to do their
job in as timely and thorough manner as possible.

I would like to take a moment now to address an issue that garnered
some negative publicity recently, regarding concerns about the
employment conditions of some of our field force.

Like virtually all utilities and telecommunications companies around the
world, Chorus outsources its manual field work to partners with
international expertise in construction and maintenance of infrastructure.
This has been the case in New Zealand since the late 1980s.

The work undertaken currently falls into three broad buckets.

First, the ongoing maintenance of existing infrastructure, second, building
the new fibre network backbone, and third, connecting homes and
businesses to fibre – essentially taking fibre from the street into the
home.

We contract this work to large primary contractors. Chorus does not
specify which employment model they use. All of our primary contractors

use a mix of directly employed staff, sub-contractors and small business
owner-operators, depending on the type of work they are doing.

The enormous success of fibre has meant some staffing challenges for
some of our primary contractors.

To give you an example of this, the total number of people working in the
field on Chorus’ behalf has more than doubled to about 4000 as we work
through the peak of building the fibre network and connecting customers
to it.

The recently publicity has been centred on the fibre provisioning work -
connecting customers premises to the backbone network - basically,
apartment, house or business to the street kerb. At a time of full
employment, securing thousands of new, trained workers for what is
essentially a repetitive field task with varying demand which will peak over
the next year or two has been a huge challenge.

Indeed, as you know, sectors like horticulture and construction are
currently simply unable to fill the jobs they have available.

In part, our primary contracting partners have had success in encouraging
skilled technicians from other countries to come and work in New Zealand
to meet the demand at a time of labour shortage.

The concerns raised by the Labour Inspectorate relate only to the
employment conditions of those working in this area - connecting fibre
from the street into the home or business.

Breaches of employment conditions are regrettably more common
amongst migrant labour generally, not just those doing work on Chorus’
behalf. Problems range from simple documentation to more serious
issues around pay and visas.

Let me assure you, Chorus is absolutely committed to stamping this out
where it involves work for us. When issues have been raised before, we
have acted immediately.

We were disappointed with the recent findings of the Labour Inspectorate,
which we believe is focused in the Auckland area. Once we became aware
of them when they were made public, we have engaged thoroughly,
sought information to enable us to act, and commissioned our own
independent review to ensure we are doing everything we can do
ourselves to address these issues.

We will work with our primary contractors to stamp these issues out, and
we will happily share what we have learned with other companies that
may be facing similar issues.

We all need a sustainable, fairly paid and committed workforce and
Chorus will absolutely play its part in ensuring this situation is dealt with.

But some parties have used the issue to pursue other agendas.

I absolutely refute comments of a few that quality has been sacrificed.
Quality has actually improved, and is of a high standard internationally.
Chorus spot checks thousands of installations and only around 1% require
a return visit. This compares very favourably to the typical 4-5% industry
benchmark.

And, as I mentioned before, we have seen a 20% increase in productivity,
customer satisfaction with the installation component of getting fibre has
increased, and the overall field force is much more engaged.

I applaud the bulk of this largely younger, motivated workforce, many of
whom have brought their skills to New Zealand and committed themselves
to the specialist training we and our contractors give them, and are
making a strong and enthusiastic contribution to New Zealand.

The overall picture for fibre is almost entirely positive. The network is
built to an extremely high standard, demand for fibre is through the roof,
and together we are transforming our national infrastructure in a way that
will make New Zealand better.

I will now hand over to Kate to take you through some more detail about
the work she and the team are doing.

Thank you.

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Chorus Limited
CHORUS LIMITED ANNUAL MEETING 1 NOVEMBER 2018

CEO’s ADDRESS

Tena koutou katoa

Thank you Patrick and good morning everyone.

A special welcome in particular to those of you who have joined us here in
our offices today - I look forward to talking to you after the meeting.

I believe it’s important for organisations to keep looking back on the past
so that you remind yourself of how much things have changed and what
progress you have made.

It’s now almost seven years since Chorus was listed as a separate
company and embarked upon the challenge of building fibre past about a
million homes and businesses. It was a substantial commitment – not just
the formation of a totally independent wholesale network - but also the
sheer scale of the investment and effort required to build the network.

When we started, structurally separated networks were a new idea and
the demand for fibre was an even bigger unknown. Our original
contractual target was to achieve 20% uptake by the end of 2019 when
the original fibre rollout areas are to be completed.

We and our shareholders took on significant risk and backed a fibre
future. Now, with hindsight, we can say we made the right choice. Fibre
uptake is already 50%, with another year to go before that original
contractual deadline.

Chorus Limited
Having recently met with a range of international network operators at the
Broadband World Forum, I can tell you that New Zealand has well and
truly scored an international upset and is considered a leading light for
others to follow.

Network operators and countries around the world now recognise that
fibre networks provide the best future-proofed technology to deliver
gigabit capability and beyond.

Wholesale fibre networks are springing up around Europe because
traditional combined retail and network owners are finding the longer term
economics of fibre network investment too challenging for their business
models.

In Denmark, long term infrastructure funds were so convinced about the
need for fibre that they bought out the listed incumbent telco and plan to
operate it as two separate retail and network units. The network business
will include both the fixed line and mobile networks because the new
owners recognise the economics are better when you have as many
retailers as possible using your network.

At the same time, EU policy makers are now promoting wholesale only
networks as the solution to Europe’s fibre shortage and encouraging fibre
investment through pools of funding and recognition that fibre networks
require higher rates of return than legacy networks.

Here in New Zealand, we are already seeing impressive outcomes from
our decision to go with fibre. In the 12 months since our last shareholder
meeting:

Chorus Limited
 66% of our broadband customers are on high speed broadband –
fibre or VDSL – up from 53% last year
 average broadband speed has grown from almost 60 megabits to
just under 90 megabits
 average monthly data usage in the home has grown from 162
gigabytes to 221 gigabytes
 average usage for fibre customers has gone from 251 gigabytes a
month to more than 300
 it’s no surprise then that Statistics NZ says 71% of residential
connections are now on unlimited plans, compared to 62% a year
ago.

What are people doing with this data? The answer is, far more than we
could have imagined when we started the rollout seven years ago.

New Zealand on Air says 62% of Kiwis now stream content online,
compared to 12% four years ago. And we expect even more Kiwis to get
to grips with online streaming in the next ten months with Spark planning
to broadcast rugby world cup matches online. We’ve begun encouraging
people to get connected – be it to fibre or VDSL – sooner rather than
later.

Our “stream big” website is intended to help demystify streaming for
those who might not have tried it before.

Imagine what that peak time traffic could look like when the All Blacks
play. The volume of 9pm traffic on our network was up another 40% over
the last year. The prior year it increased just over 50%.

Chorus Limited
We’ve already had a taste of the kind of network traffic spikes the All
Blacks may generate online next year with the effect of the online gaming
phenomenon Fortnite. The triangle on the chart shows the 20% spike we
experienced in July when a Fortnite update was available for download.

There’s little doubt that the mountain of data on the chart will be
substantially higher again in the future when broadcasters make 4K
quality content more widely available.

We’re already thinking ahead to what part our network can play in helping
broadcasters deliver 4K TV. Earlier this year we demonstrated the delivery
of a live 4K broadcast over fibre.

Commentators at the Broadband World Forum are picking that a terabyte
– that’s more than three times average monthly household usage today –
will be the norm by 2025. They say that may be achieved even earlier
given the current rate of growth in household data usage.

Data usage isn’t just about TV and gaming.

The socio-economic benefits of broadband are substantial and our network
is empowering new ways for Kiwis to earn and learn. Technology exports
are now NZ’s third biggest export, with revenue growth significantly
outpacing growth in the overall economy. We want to do more to help
Kiwi businesses get a competitive edge and have launched some new
business services, including a 10 gigabit per second service to be made
available across our fibre network next year.

The 10 gigabit service will allow businesses to work more effectively
through video conferencing and have better connection to important

Chorus Limited
business tools in the cloud. We expect it to be used by a range of
bandwidth-intensive businesses, whether they are animation businesses
with large data needs, or organisations with large numbers of employees.

Last year we talked about becoming a more active wholesaler. That focus
saw the reduction in our connection numbers slow progressively and our
broadband connections have returned to growth.

That’s been achieved by working more closely with retailers to migrate
customers to better broadband and carrying out our own campaigns to
raise consumer awareness of their network options.

These initiatives, combined with the strong retail competition created by
New Zealand’s separated fixed line networks, have helped lift fibre
demand to record levels.

Meeting this demand has been our biggest challenge.

As the slide shows, we’ve had to grow our workforce rapidly to try and get
customers connected as soon as we can. Our service companies added
185 installation crews in the last year alone and helped us achieve a
record 156,000 installations.

In the three months to the end of September we completed 50,000
installations. That’s another record. And weighted average lead times
were tracking at about 8 days in September compared to 13 days back in
June.

As I said last year, we’re putting a lot of focus into refining industry
processes to boost productivity and minimise the amount of effort

Chorus Limited
involved for customers. Other international fibre network builders tell us
they have had to deal with exactly the same challenges we have.
Accessing and connecting fibre into someone’s home can be difficult no
matter what country you’re in. They, like us, have also had to work on
improving systems and operational practices.

We have a big programme of work underway to reduce the time taken to
connect customers to fibre to just a single visit by us. Initial trials have
produced great feedback from retailers and in a few days we’ll be
releasing about 30% of our address base to retailers as the first phase in
this initiative. Our goal is to lift the number of customers connecting with
a single visit from about 25% to about 50% by Christmas.

To borrow a word from one of my industry colleagues – we want to make
the provisioning process happen automagically. To that end, we’ve been
opening up our systems and launching interfaces – Application
Programming Interfaces or API’s in technical speak – so that retailers can
access more information and gain greater control over processes.

The latest API we’ve released, for example, enables retailers to avoid
going through about 8 separate systems and reports, just to determine if
broadband is available for a business.

We expect these initiatives to also help lift our customer experience
scores. Some people ask us why, as a wholesaler we measure customer
satisfaction. The fact is these scores help us to identify where we can
improve our processes, or where we can work with particular retailers to
improve processes. We want all new fibre customers to have a good
experience. A bad experience will only discourage others from connecting.

Chorus Limited
That’s why we were disappointed when we missed our customer
satisfaction target of 7.8 last year, with only a slight lift from 7.4 to 7.5
over the twelve months to the end of June. We’re not shy of setting
ourselves tough challenges and we’ve raised the bar further again, with a
target score of 7.9 by the end of this financial year. We need to work in
concert with retailers to make that happen.

We’re now entering a phase where we expect to have a clearer regulatory
regime than in the past – one which promises to better recognise the need
for ongoing investment. Once the legislation is passed, it may take the
Commerce Commission some time to nail down every detail required to
implement the new framework, but we’re looking forward to working with
them to satisfy the objective of a smooth transition.

The rapid uptake of fibre also means we’re clearer than ever on our
strategic direction. We’ve begun reshaping the way we operate to reflect
the network transformation that is occurring and to harness the full
potential of the technology we’ve been building.

That means optimising our business as it is today, across both fibre and
copper, and innovating for new revenue opportunities – some of which I
mentioned earlier. While we talk a lot about fibre, a big part of our
optimisation focus includes the copper network. Our investment in
vectoring technology during the year has improved average VDSL
broadband speeds by over 40 per cent for downloading. That’s a huge
boost for those who don’t yet have fibre connected, including many rural
residents.

And the copper network continues to perform well in terms of fault levels
– both as a result of our VDSL and ongoing proactive maintenance

Chorus Limited
programmes. Current residential fault restoration times are at about 16
hours, significantly better than our target of 24 hours.

You may have noticed that we’ve refreshed our brand for the first time in
a decade. At the same time we’ve adopted a new company purpose to
better reflect the long term view we’re taking as a utility network
operator.

That purpose is to keep New Zealand new. We want to make New Zealand
better, keeping it at the cutting edge through the connectivity our
infrastructure enables.

That’s why we were delighted to win the Broadband Delivering Social
Impact award at the Broadband World Forum last week with our supplier
partner Nokia. The award was fantastic recognition for a lot of people who
had worked hard over many years to improve broadband in rural New
Zealand as part of the Government rural broadband initiative.

And we haven’t stopped there. We’ve been doing a lot of work with
government agency Network for Learning to develop various ways in
which our network can be used to bridge the digital divide in urban
communities – by enabling students to access their school’s network at
home, even where their family may not be able to afford a broadband
service. Network for Learning has shown some great foresight in
undertaking this initiative and I believe it has great potential to make New
Zealand better.

On that note, here’s a news clip that gives you a better sense of just what
we’re talking about.

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1November 2018
ANNUAL MEETING

Agenda
>Chairman’s Introduction & Address
>CEO Address
>Resolutions
>Shareholder Discussion & Questions
>Morning tea
1 November 20182

1November 2018
ANNUAL MEETING
3
Your Board

1 November 2018
FY18 results overview
4
ANNUAL MEETING

CEO Address
1 November 2018
ANNUAL MEETING

1November 2018
ANNUAL MEETING
6
Looking back...
>In late 2011 when we
started the UFB rollout,
our contractual target was
20% fibre uptake by
the end of 2019
>In September 2018 we
achieved 50% uptakeand
fibre connections were 40% of
our broadband connections

Sept 2017Sept 2018
Chorus customerson high speed
broadband (fibre or VDSL)53%66%
Average broadband speed59Mbps87Mbps
Average monthly home data usage162GB221GB
Average monthly data usage -fibre 251 GB307GB
NZ residential connectionson unlimited
plans (Statistics NZ)
62%71%
1November 2018
ANNUAL MEETING
7
One year on...

8
INTRODUCING CHORUS
25 October 2018
www.chorus.co.nz/streambig

1 November 2018
40% growth in traffic peak: Sept 2017-2018
Network
throughput
(Tbps)
Time of day
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Average Peak Throughput -September
20182017
Fortniteeffect: record
peak traffic 1,792Gbps
on 12 July 2018
9
Daily peak time for
throughput is ~9pm
ANNUAL MEETING

1November 2018
ANNUAL MEETING
10
Surging fibre demand drove rapid growth in workforce
Total number
of UFB
connections
0
100
200
300
400
500
600
700
800
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
FY12FY13FY14FY15FY16FY17FY18
UFB connectionsConnection crews
Number of
connection
crews

27 August 2018
FY18 FULL YEAR RESULT
11

Resolutions
1 November 2018
ANNUAL MEETING

1 November 201813
Resolutions
ANNUAL MEETING
1.That Dr Patrick Strange be re-elected as a Chorus director
2. That Ms Anne Urlwin be re-elected as a Chorus director
3. That Mr Murray Jordan be re-elected as a Chorus director
4. That the Board be authorised to fix the fees and expenses of KPMG as auditor

ANNUAL MEETING
14
Any questions?
1 November 2018

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
results to 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, futureevents
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”. 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 should not 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.
• Has been prepared with due care and attention. However, Chorus and its directors and employees accept no liability for any
errors or 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.
ANNUAL MEETING
Disclaimer
15
1November 2018