Chorus Full Year Results and 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

26 August 2019

Chorus 2019 full year results & annual report

The following are attached in relation to Chorus’ FY19 full year results and annual report:
1. Media Release
2. Investor Presentation
3. Annual Report (including audited financial statements)
4. NZX Financial Results Announcement
5. NZX Distribution Notice
6. Corporate Governance Statement
7. Letter to investors

Chief Executive Officer Kate McKenzie, and Chief Financial Officer David Collins, will
discuss the FY19 full year results by webcast at 11.00am New Zealand time today. The
webcast will be available at www.chorus.co.nz/webcast.

ENDS


For further information:

Brett Jackson
Investor Relations Manager
Phone: +64 4 896 4039
Mobile: +64 (27) 488 7808
Email: brett.jackson@chorus.co.nz

Nathan Beaumont
Stakeholder Communications Manager
Phone: +64 4 896 4352
Mobile: +64 (21) 243 8412
Email: nathan.beaumont@chorus.co.nz

---

MEDIA RELEASE

26 August 2019


Chorus full year result for FY19
Fibre demand at record levels as rollout remains on track
 EBITDA $636m (FY18: $653m) in line with guidance of $625m to $645m
 Peak communal rollout year delivered successfully with capital expenditure of
$804m slightly below guidance
 Fibre uptake at record level with 186,000 fibre installations in FY19
 Household data usage on copper and fibre connections across Chorus’ network
increased by 55GB to 265GB
 Strong year for broadband connections, with an increase of 9,000 lines
 Total fixed line connections reduced by 76,000, consistent with FY18
 Final fully imputed dividend 13.5 cents per share
Chorus has today reported earnings before interest, tax, depreciation and amortisation
(EBITDA) of $636m for the year ended 30 June 2019, in line with guidance.

Operating revenue for the period was $970m (FY18: $990m) and operating expenses
were $334m (FY18: $337m). Depreciation and amortisation for the period was $393m
(FY18: $387m), delivering earnings before interest and tax (EBIT) of $243m (FY18:
$266m).

Net profit after tax (NPAT) was $53m, reflecting reduced revenue and the increased
interest costs of borrowing to fund the UFB rollout.

Chorus has also today announced that Kate McKenzie is to step down as CEO and
Managing Director at the end of 2019 (see separate press release).

Speaking about the results, Ms McKenzie said as the original UFB programme nears
completion, demand for fibre has reached record levels and more than half of Chorus’
broadband connections are on fibre.

“When Chorus signed up to the original UFB project with the Government in 2011 we had
a target of 20% for fibre uptake by 2020. We’ve well and truly smashed that target.

"This year demand for fibre was stronger than ever. We completed a record 186,000
fibre installations, and fibre uptake within our UFB areas grew from 45% to 53%. That is
all the more impressive when you consider we built the network past another 176,000
homes and businesses during FY19.”

Although the original UFB programme is nearing completion, Chorus is already making
good progress taking fibre to some of the more than 300 towns included as part of the
UFB2 extension. The completion of the original UFB programme also heralds the
beginning of reducing capital expenditure.

Insatiable appetite for data
Demand for data on Chorus’ network also continues to break records, reflecting the ever-
increasing range of online streaming content and the proliferation of connected devices in
the home. Monthly average household data usage on copper and fibre connections across

Chorus’ network increased by 55GB to 265GB in FY19. Fibre customers used an average
of 341GB.

“Pleasingly we’ve seen a growing proportion of customers opt for higher speed
connections, with uptake of 1 gigabit per second plans increasing from 7% to 10% of our
consumer connections in the period.”

Fibre delivers peak performance
As data demands grow significantly, Chorus’ ability to deliver consistent throughput at
dedicated speeds is a significant advantage, Ms McKenzie says.

Chorus has seen peak time traffic across its network grow from 1,500Gbps in June 2018
to 1,900Gbps in June 2019. This is the equivalent of 380,000 simultaneous high-
definition video streams.

“By the end of 2022, we will have made 1Gbps connections with no data cap constraints
available to more than 1.3 million potential customers. We’re already trialling next
generation 10Gbps services with retailers.”

Broadband line growth
Chorus had a strong year for broadband connections, with an increase of 9,000 lines.
This was a significant jump from a gain of just 1000 lines in FY18, reflecting Chorus’
ongoing initiatives to win broadband customers from cable and fixed wireless networks in
Chorus areas, together with premises growth nationwide.

Customer experience
Chorus has continued its strong focus on providing excellent customer service.
Chorus is on track to achieving an ambitious goal of connecting 75% of residential fibre
orders in a single appointment. This “fibre in a day” initiative underpins Chorus’ goal of
making it as easy as possible for customers to have fibre connected to their home or
business.

“While we had already made good progress in working with retailers and service
companies to streamline our processes, this new initiative has challenged us to
completely reconfigure our long-standing fibre installation process from two customer
appointments to just one.”

By the end of FY19, customer satisfaction had lifted from 7.5 out of ten to 7.7. However,
where customers were part of the fibre in a day process, Chorus achieved 8.0 out of ten.
Technicians also rated highly, with customer satisfaction scores of 8.5 out of ten.

Strategy focus
Chorus’ overarching strategy remains simple, Ms McKenzie says.
“We want to keep connecting as many customers to fibre as fast as we can, while
continuing to do everything we can to keep improving customer satisfaction.

“Despite some of the competitive challenges we face, particularly the decline in voice-
only connections, we remain focussed on returning to modest EBITDA growth in FY20.

“Declining copper connection volumes present an opportunity for us to realise
maintenance and capital expenditure savings in some areas. However, this doesn’t mean
we’ll stop looking after the copper network. Faults on the copper network remain
relatively infrequent, averaging about once every five years, and usually take less than
24 hours to repair.

“The Commission has indicated it will develop a copper withdrawal code for the industry
by mid-2020. Naturally, we’ll take a customer-centric approach and inform consumers
well in advance and in accordance with the new code.

“While we’re starting to plan for when we might start switching off parts of the copper
network in our fibre areas, it will be on a street-by-street basis, subject to factors such
as fibre uptake. In the interim, we believe retailers need to take care to avoid creating
consumer confusion about the timeframes for copper switch-off. Some consumers appear
to have been advised that they need to disconnect from the copper network when that
isn’t the case.”

Dividend
Chorus will pay a final dividend of 13.5 cents per share, fully imputed, on 08 October
2019 to all shareholders registered at 5pm on 24 September 2019. 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 25 September 2019.

FY20 guidance
 EBITDA: $625 - $645 million
 Gross capex: $660 - $700 million
 Dividend policy: The Board expects to update the dividend policy once the
Commerce Commission finalises the value of Chorus’ regulated asset base and
regulated revenue for fibre, currently due in June 2021. Until then, the Board expects
to be able to provide shareholders with modest dividend growth, subject to no
material adverse changes in circumstance or outlook.
 FY20 dividend: 24 cents per share, subject to no material adverse changes in
circumstance or outlook.

ENDS

Chorus Chief Executive, Kate McKenzie, and Chief Financial Officer David Collins will
discuss the full year results at a briefing in Wellington from 11.00am (NZ time). The
webcast will be available at www.chorus.co.nz/webcast

For further information:

Brett Jackson
Investor Relations Manager
Phone: +64 4 896 4039
Mobile: +64 (27) 488 7808
Email: brett.jackson@chorus.co.nz

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

---

FY19 FULL YEAR RESULT
26 August 2019

26 August 2019
FY19 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 2019 and NZX and ASX
market releases.
• Includes non-GAAP financial measures such as "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 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.
2

Agenda
>FY19 overview, fibre rollout and connections4-9
>Financial results10-14
>Capex: including FY20 guidance15-20
>FY20 EBITDA guidance and summary21-22
>Capital management, FY20 dividend, debt23-27
>Strategic focus: from build to operate29-30
>Active wholesaler31-35
>Data usage36-37
>FY20: Our priorities38
Appendices
A: Connection and market trends39-40
B: Key RAB implementation parameters41
C: UFB programme guidance and Crown securities42
26 August 2019
Kate McKenzie, CEO
David Collins, CFO
Kate McKenzie, CEO
FY19 FULL YEAR RESULT
3

26 August 2019
FY19 FULL YEAR RESULT
4

UFB rollout 80% complete: 842,000 premises passed
Uptake
26 August 20195
FY19 FULL YEAR RESULT
>Uptake increased from 45%
to 53%
584,000 connections in
UFB area (FY18: 415,000)
1,108,000customers able
to connect (FY18: 932,000)
fibre passed another
176,000 customers

26 August 2019
Lifting productivity and customer experience
FY19: 30k more fibre installations
FY19 FULL YEAR RESULT
installation crews reduced from 800 to 670
lifted customer satisfaction from 7.5 to 7.7
400,000 addresses categorised as requiring a
single visit: 90% accuracy to date
lead times down from 13 business days to 8
days
work in progress reduced from 30k to 23k
managed migration installations increased from
12k to 23k, customer experience score of 8.0
6
524
615
800
670
No. of crews:

FY19 connection movements by Zone (indicative)
* Includes planned UFB1, 2 and 2+ coverage
**Excludes 16k fibre premium and data services (copper) connections
26 August 2019
▪new premises growth and VDSL vectoring upgrade offsetting wireless
7
See Appendix A for FY19 connection movements by category
FY19 FULL YEAR RESULT
-58
-6
-19
42
-1
-32
-60-40-200204060
Broadband (copper + fibre)Copper (no broadband)
▪premises growth, increasing broadband penetration and winbackof offnet
customers (cable/wireless) as fibre footprint grows
▪retailers targeted their customers with wireless voice
▪ongoing wireless voice competition
▪LFCs growing broadband connections as retailers promote fibre
▪unbundled copper migrating to LFC fibre; voice only connections to
wireless
Chorus
UFB zone*
Rural
zone
(non-UFB)
Local Fibre
Company
(UFB zone)
Total connections at 30 June**1,092,000199,000143,000
Broadband connections946,000153,00097,000
Copper (no broadband) connections146,00046,00046,000
LFC
Rural
CNU UFB

Chorus UFB and rural zones
26 August 2019
FY19 FULL YEAR RESULT
8
Fibre61% of broadband in UFB zone
17k fibreconnections in rural zone
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Rural zone broadband mix
FTTPCopper broadband
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
Chorus UFB zone broadband mix
FTTPCopper broadband

>166,000mass market fibre connections added in FY19
(FY18: 141,000)
▪71% of mass market fibre connections on 100Mbps
>1Gbps connections grew by 28k to 58k, now 10% of mass
market fibre connections
▪~15% of total orders are for 1Gbps; ~10% of new
connections
▪95%+ of Dunedin Gigatownconnections retained on
1Gbps following end of sponsorship
0
10
20
30
40
50
60
70
80
90
100
Jun-18Sep-18Dec-18Mar-19Jun-19
Business + Education
% of
plans
Total mass market fibre uptake by plan type
50Mbps
100Mbps
1Gbps
26 August 2019
Active wholesaler campaigns driving ARPU growth
200Mbps
9
$60 p.m.
$46 p.m.
$42.50
p.m.
$55 p.m.
FY19 FULL YEAR RESULT

Financial performance
David Collins, Chief Financial Officer
26 August 2019
FY19 FULL YEAR RESULT

Income statement
26 August 2019
FY19
$m
FY18
$m
Operating revenue970990
Operating expenses(334)(337)
Earnings before interest, tax,
depreciation and amortisation (EBITDA)
636653
Depreciation and amortisation(393)(387)
Earnings before interest and income tax243266
Net interest expense(165)(144)
Net earnings before income tax78122
Income tax expense(25)(37)
Net earnings for the year5385
FY19 FULL YEAR RESULT
11
>Growing fibre asset & copper cable depreciation
accelerated in our UFB fibre areas
>NZ$500m bond issued in Dec 2018; average
interest rate on debt now 5.75%
>Reducing copper connections, mostly offset by
fibre broadband growth
>Tight cost control

26 August 2019
FY19
$m
FY18
$m
Fibre broadband (GPON)294198
Fibre premium (P2P)7478
Copper based voice106133
Copper based broadband344421
Data services copper1827
Field Services7470
Value added network
services
3033
Infrastructure2423
Other67
Total970990
FY19 FULL YEAR RESULT
Copper revenues declining as customers migrate to Chorus fibre or
competing fibre/wireless networks
>Increased subdivision demand
>Revenue growing as fibre uptake and ARPU increases
>Customers moving from legacy services to lower priced UFB services
Revenue
12
>Commercial co-lo growth offsetting reduced copper unbundling demand

26 August 2019
FY19
$m
FY18
$m
Labour 7473
Provisioning66
Network maintenance7587
Other network costs3334
IT5054
Rent, rates and property
maintenance
3024
Regulatory levies1613
Electricity1715
Consultants75
Insurance33
Other2323
Total334337
FY19 FULL YEAR RESULT
>CPI impact & lower capitalisation levels, partially offset by lower staff
numbers & reduced one-off restructuring costs
Expenses
>New platforms enabling lower IT maintenance and support costs
>Increase in external advice related to new regulatory framework
13
>Reduction reflects technology reducing unnecessary technician visits, fibre
network performance, favourable weather, and fewer copperconnections
>Rateable values for network assets increasing with rollout
>Increased funding provided for new regulatory framework
>Higher electricity prices

▪copper (fixed and variable) fault volumes reduced due to
favourable weather in FY19 vs FY18, particularly in Auckland
region, and reduction in total copper connections.
▪copper (variable) fault volumes also reduced due to fewer
copper connections and a decline in unnecessary technician
visits.
▪long run annual savingfrom full copper to fibre migration in
Chorus UFB areas estimated at ~$10m p.a.
▪fibre maintenance increasing as share of connections grows,
but fault rate is lower on fibre (although costlier to fix).
26 August 2019
Reactive maintenance: Chorus network
Key drivers for $66m spend (FY18:$75m)
FY19 FULL YEAR RESULT
14
0
10
20
30
40
FibreCopper - fixedCopper -
variable
Reactive spend by type
FY18FY19
0
10
20
30
40
Chorus UFBRural (Non UFB)LFC UFB
Copper -reactive spend by area
Note:
reactive maintenance excludesspend on proactive maintenance and
customer networks (i.e. premises wiring, no fault found, cancellations)
‘fixed’ faults: occur in parts of the network that affect multiple customers
(e.g. cable between exchange and cabinet)
‘variable’ faults: only affect one customer (e.g. cable on customer property)
$m
$m

26 August 2019
We’ve passed our capex peak
>FY19:$804m gross capex
▪below $820m -$860m range due to
reduced copper spend and fibre
connections mix
>FY20 guidance: $660m -$700m gross
capex
FY17FY18FY19FY20 GUIDANCE
CommonCopperFibre - otherFibre - connectFibre - communal
$810m
FY19 FULL YEAR RESULT
$660 -$700m
550-580
50-70
50-65
95
132
58
15
$804m
111
81
59
294
231
245
308
258
125
57
183
66
$689m*
*FY17 capex adjusted for NZ IFRS
**FY20 subtotals are not additive
**

26 August 2019
Capex: Fibre
FY19: 124,000 brownfields premises passed; 186,000 installations
FibrecapexFY19
$m
FY18
$m
UFB communal245231
Fibre connections & layer 2308294
Fibre products & systems1717
Other fibre connections & growth6565
Customer retention costs2913
Subtotal664620
>includes $105m UFB2 rollout (FY18: $61m); $75m WIP (FY18: $77m)
FY19 FULL YEAR RESULT
Cost per UFB1 premises passed (CPPP): ~$1,573 vs $1,500 -$1,600 guidance (FY18: $1,568)
Crown funding now claimed for ~33k UFB1 greenfieldspremises (18k in FY19) representing capex to date of
~$37m recognised in prior years ‘Other fibre connections & growth’
>included $8m UFB2 backhaul (FY18: $3m) and $10m pole replacement
>reflects incentive offers linked to fibre connection volumes
16
>186,000 installations (FY18: 156,000), including 14,000 UFB2

26 August 2019
Capex: Fibre connections & layer 2
Fibre connections & layer 2 capexFY19 spendFY18 spend
Layer 2 (long run programmeaverage of $100 per connection)$25m$32m
Premium business fibre connections$8m: 1,200 connections$11m: 1,400 connections
Single dwelling units and apartments connections$198m: 186,000 connections
(FY19 estimate:175k -195k)
$163m: 156,000connections
Backbonebuild: multi-dwelling units and rightsof way$77m: 16,000completed
(FY19 estimate: 19,000)
$88m: 13,100completed
TOTAL SPEND$308m$294m
Note: we estimate ~60-65% of MDUs and RoWsrequiring backbone build have been completed
Cost per UFB1 premises connected (CPPC): $1,025* vs $1,000 -$1,150 guidance (FY18: $1,037)
* excludes layer 2 and includes standard installations, some non-standard single dwellings and service desk costs
record year for fibre installations and backbones completed
Connections capex of $308m vs FY19 guidance of $310-$340m
FY19 FULL YEAR RESULT
17

26 August 2019
Capex: Copper and Common
CommoncapexFY19
$m
FY18
$m
Informationtechnology3435
Building& engineering services2220
Other33
Subtotal5958
CoppercapexFY19
$m
FY18
$m
Network sustain4445
Copperconnections22
Copper layer21234
Product14
Customer retention costs2247
Subtotal81132
network sustainreflects replacement of legacy
rural network, poles, proactive maintenance and
roadworks projects
copper layer 2: vectoring rollout completed FY18
customer retention costs reducing as demand
and retailer focus shifts to fibre
FY19 FULL YEAR RESULT
continued to invest in own IT platforms/technology
including a new standalone billing platform
18

1. TYPES OF SPEND
26 August 2019
FY19 FULL YEAR RESULT
19
How we think about capex investment
2. NETWORK HORIZON
RURAL
CHORUS
UFB
LFC
3. CAPITAL PRIORITISATION
STRATEGY
PAYBACK
(REGULATORY vs
CHORUS WACC)
FREE CASH FLOW
DISCRETIONARY
(e.g. footprint growth and
resilience, technology upgrades)
CONTRACTUAL
(e.g. UFB)
SUSTAIN
(e.g. TSO, network
performance)

26 August 2019
FY20 gross capex guidance
>$660m -$700m gross capex reflects:
Fibre $550m-$580m
$260-$280m fibre connections & layer 2
$140-$160m spend for UFB2/2+ communal
~$30m remaining for UFB1 communal (end Dec)
greenfieldsdemand to grow; pole and transport
(UFB2) spend continues
Copper$50m-$70m
pole programme slows outside UFB areas
Common: $50m-$65m
ongoing investment in IT platforms/technology
FY19 FULL YEAR RESULT
20
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
FY19FY20FY21FY22FY23
UFB rollout (premises)
UFB1 BrownfieldsUFB2UFB1 Greenfields

26 August 2019
FY20 EBITDA guidance: $625m to $645m
Focus on return to modest EBITDA growth, subject to no material
changes in expected regulatory environment or competitive outlook
Costs: We expect our initiatives to result in a
continued reduction in FY20 total expenses
transformationas we move from build to
operate (e.g. combining Customer Care and Network
Field Management functions)
greater use of digital functionality to simplify
processes and remove legacy systems (e.g. new
billing and assure platforms)
optimising maintenance spend as customers
migrate from copper to fibre
maintaining tight control of general costs to
offset incremental spend on innovation activity,
regulatory processes, and other transformation-
related one-off costs
FY19 FULL YEAR RESULT
21
Revenue
ARPU growth as copper connections transition
to fibre and customers migrate to higher spec
plans (e.g. 1Gbps, enhanced business plans)
expectation of continued broadband growth
underpinned by increasing broadband
penetration and premises growth
commercialising new revenue opportunities

26 August 2019
FY20 guidance summary
FY20 guidance FY19 result
UFB1 Cost Per Premises
Passed (CPPP)
$1,500 -$1,600$1,573
UFB2* communal capex
$140m -$160m
(based on estimated starting premises of 65,000 to 70,000 and premises
handed over of 52,000 to 70,000)
$105m
52k premises started;
45k premises handed over
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)
$1,025
Fibre connections & layer 2
capex
$260m –$280m (based on mass market 160,000 –180,000 fibre
connections,and 11,000 backbone builds and including service desk costs)
$308m
FY20 Gross capex
$660 –$700m$804m
FY20 EBITDA
$625 –645m $636m
FY19 FULL YEAR RESULT
22
* combined UFB2 and 2+ rollout plans

The Board expects to update the dividend policy once the Commerce Commission finalisesthe value of
our regulated asset base and regulated revenue for fibre, currently due in June 2021, as part of the Final
Price Quality determination.
Until then, the Board expects to continue to be able to provide shareholders with modest dividend
growth, subject to no material adverse changes in circumstance or outlook.
The Board considers that a ‘BBB’ credit rating or equivalent credit rating is appropriate for a company
such as Chorus.
26 August 2019
FY19 FULL YEAR RESULT
23
FY20
FY21FY22FY23FY24
FY25
Transition period
Second regulatory period
First regulatory period
(3 years)
Final IM
decision
June 2020
Final PQ
decision
Q2 2021
Dividend policy: transition to regulated utility

26 August 2019
FY19 FULL YEAR RESULT
24
▪supplementary dividend of 2.4 cps payable to
non-resident shareholders
▪record date: 24September 2019
▪payment date: 8October 2019
▪Dividend Reinvestment Plan applies with
3% discount to prevailing market price; open
to New Zealand and Australian resident
shareholders
13.5 cps, fully imputed
FY19 final dividend FY20 dividend guidance
24 cps, subject to no material adverse
changes in circumstances or outlook

26 August 2019
Debt: ratings agencies
As at
30 June 2019
$m
Borrowings2,361
+ PV of CFH debt
securities (senior)
155
+ Net leases payable247
Sub total2,763
-Cash(273)
Total net debt2,490
Net debt/EBITDA3.92 times
Financial covenants require senior debt ratio to be
no greater than 4.75 times
>Moody’s announced they expect to revise Chorus’
current financial leverage tolerance threshold in
2021, following the Commission’s final determination
on the fibreprice path for Chorus.
>Moody’s expect declining UFB capital spending,
reducing cash outflows and execution risks, to place
Chorus’ risk profile more in line with other regulated
utilities.
>Moody’s consider Vector the most comparable rated
peer for Chorus, but note that Chorus’ greater
competition and technology risk suggest a tighter
leverage tolerance threshold.
FY19 FULL YEAR RESULT
25
S&P threshold 4x ND/EBITDA
on a sustained basis
Moody’s to review current 4.2x
ND/EBITDA threshold in 2021

26
Regulatory outcomes need to acknowledge risk
Emerging Views paper suggested WACC below investor expectations
21 May paper implied one of the lowest WACCs for a NZ regulated utility
key focus of legislation is a smooth transition for consumers andinvestors
Commerce Commission has acknowledged importance of real financial capital maintenance: the
ability to make a fair return on and of capital over the lifetime of the assets
Crown Fibre Holdings, credit ratings agencies and European regulators have acknowledged arisk
premium is appropriate for fibre network builders
investors clear that build and financing risks need to be recognised at the time they were
addressed, not in hindsight
treatment of Crown financing has implications for other public-private partnerships
26 August 2019
FY19 FULL YEAR RESULT

>At 30 June, debt of $2,361m comprised:
▪Long term bank facilities of $550m undrawn;
▪NZ bond: $400m and $500m
▪Euro Medium Term Notes $1,461m (NZ$ equivalent at hedged rates)
NZ
$M
26 August 2019
677
400
500
785
7979
118
151
7
26
49
58
0
100
200
300
400
500
600
700
800
CIP debt securities available
Face value of CIP debt securities issued
EUR EMTN
NZ Bond
GBP EMTN
27
FY19 FULL YEAR RESULT
Crown financing and debt profile
426426
60
38.538.5
242
105
U F B 1
E Q U I T Y
U F B 1 D E B TU F B 2 / 2 +
E Q U I T Y
U F B 2 / 2 +
D E B T
AS AT 30 JUNE
drawnundrawn
>up to $1.33 billion CIP financing
available by 2023 (57:43 equity/debt)
>$912m drawn at 30 June 2019
NZ
$M

Changing gear:
from build to operate
Kate McKenzie, Chief Executive Officer
26 August 2019
FY19 FULL YEAR RESULT

26 August 2019
FY19 FULL YEAR RESULT
29

26 August 2019
Streamlining and simplification
FY19 FULL YEAR RESULT
Accelerating our transformation programme
30
>Assure: new channel launched; identifying opportunities to
solve faults proactively and remotely
>Intact connections: make it easier and faster for
customers to get service switched on
>Fibreconnect: keep refining our process; emphasis on
reducing reschedules and cancellations
>Property developers: manage growing premises volumes
and lift developer experience
>Complex orders: new channels for non-premises
connections

26 August 2019
FY19 FULL YEAR RESULT
31
Active wholesaler
71% of Kiwis agree fibreis best
>Honing our incentives and marketing
▪improved data and analytics
▪promoting higher speed plans
▪testing copper-to-fibre messaging
▪prezzycard trial
>Chorus led installations = better
customer experience
▪40% connect within 6 months of installation;
60% connect after 12 months
▪strong UFB2 response (e.g. Ohau70%
uptake)

26 August 2019
FY19 FULL YEAR RESULT
32
Fibre is winning back Wellington market share
2,600
2,900
1,500
1,700
Connections

26 August 2019
FY19 FULL YEAR RESULT
33
New focus on business broadband segments

26 August 2019
FY19 FULL YEAR RESULT
34
Growing our portfolio
Moving from innovation to product phase
Edge Centre Colocation: 3 sites open for data centre
space; ~30% of space filled
Smart locations: growing demand for non-building
connections (e.g. CCTV)
10GPON: trial with retailers to identify use cases
Fibre to desktop: market identified; exploring channels
to market
Wi-Fi ONT: device being deployed as part of standard
installation; considering Wi-Fi service options

FY19 FULL YEAR RESULT
26 August 201935
Technology evolution: fibre and 5G
Fibre5G
DeploymentAvailable across all major urban centres and
connects many existing cellsites.
Initially from suitable ‘macro’ towers. Requires infill sites then
small cell deployment (~200m radius) for optimal service.
TechnologyLight transmits data via fibre cable (10-100km)
1Gbps consumer and10Gbps business plans
available; 2-10Gbps consumer plans in trial.
Fibre to cell tower/site, then radio waves to end user.
Speed and performance vary on each cell subject to: number
of users, data usage, distance and propagation path.
CapacityDedicated connection delivers consistent
speed, unlimiteddata capacity, uncongested
performance and very low latency.
Capacity shared amongst userson each cell.
Upload speeds lower than download due to power and high
frequency challenges transmitting from mobile devices.
SpectrumLight wavesprovidesubstantial potential
bandwidth.
Wi-Fi connects devices to fibre via free public
spectrum.New Wi-Fi6devicesuse5G
technology over short distances.
3.5 GHz spectrum for 5G usagecurrently very limited.
Auction ofnew 3.5 GHz spectrum expected in 2020 for
commercial allocation in 2022.
Auction of mmWavespectrum (26 GHz) to follow and will
require new cellsites.
CostFibre already deployed.
Lowopex: no powered roadside equipment to
maintain.
Existing sites likely to require strengthening. Many more sites
required, with fibre backhaul.
Much higheropexthan fibre: site leases and power to
roadside equipment.

Unlimited data and streaming are the norm
>Growing catalogue and quality of streaming content is
driving broadband uptake and usage higher
▪2degrees bundle with Amazon Prime
▪Stuff launched news and content portal: play stuff
▪Sky TV focused on streaming services: Sky Sport Now
▪new standalone Vodafone TV device to enable online content
▪Spark Sport showing English Premier League, Rugby World
Cup
•Rugby World Cup expected to promote uptake of smart
TV’s and introduce traditional TV viewers to streaming
•Chorus network capacity increased ~50% in FY19
26 August 2019
188
341
265
0
50
100
150
200
250
300
350
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
CopperFibreAverage
Data
usage
(GB)
Monthly average data usage
per connection on our network
36
FY19 FULL YEAR RESULT

26 August 201937
77% increase in network traffic at peak time since June 2017
Fixed line network delivering consistent performance at peak time
41.8
9.3
24.3
40.9
9.1
18
0
5
10
15
20
25
30
35
40
45
VDSLADSLFixed Wireless
Download speed:
Copper line vs fixed wireless
24-7Peak time
26% drop in
performance at
peak time
0.000
1.000
2.000
Average peak time throughput on
Chorus network
Peak time = busiest daily 15 minute period
TbpsMbps
Source: Commerce Commission, June 2019
FY19 FULL YEAR RESULT

26 August 2019
FY19 FULL YEAR RESULT
FY20: Our priorities
regulatory outcomes that support a solid fibre utility
focus on end-to-end streamlining and simplification
invest in future capability
optimise our non-fibre business
create supplier partnerships fit for the future
commercialise new revenue opportunities
tap into broader connectivity opportunities
38
NEW IMAGE

0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
30-Jun-1830-Sep-1831-Dec-1831-Mar-1930-Jun-19
26 August 2019
30 June
2018
30 Sept
2018
31 Dec
2018
31 March
2019
30 June
2019
Unbundled copper
(no broadband)
53,00045,00039,00031,00024,000
Baseband copper
(no broadband)
268,000255,000244,000233,000214,000
Copper ADSL
(includes naked)
433,000402,000374,000352,000327,000
VDSL
(includes naked)
321,000309,000295,000283,000270,000
Fibre broadband
(GPON)
433,000479,000517,000556,000599,000
Data services
(copper)
6,0005,0005,0005,0005,000
Fibre premium
(P2P)
12,00012,00012,00012,00011,000
Total connections
1,526,0001,507,0001,486,0001,472,0001,450,000
Fibre (GPON)
VDSL
Copper ADSL
Unbundled copper
Baseband copper
39
>1,196,000 broadband connections comprises:
▪599,000 fibre (GPON) connections
▪597,000 VDSL/ADSL (copper) connections
Appendix A: Connection and market trends
FY19 FULL YEAR RESULT

26 August 2019
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
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
2,000,000
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
40
FY19 FULL YEAR RESULT
AppendixA:Connectionandmarkettrends(continued)

26 August 2019
FY19 FULL YEAR RESULT
41
Appendix B: Key RAB implementation parameters
ParametersChorus view
Asset valuationRABto include all assets supporting fibreaccess services –but likely to exclude fibrein
LFC areas. Valuation method defined by Act as actual cost incurred for post 2011 assets;
book value for pre-existing. The Commission has acknowledged real financial capital
maintenance as key principle underpinning the building block model.
DepreciationAct requires straight line depreciation for initial RAB valuation.
Allocation of shared
costs between fibre
access and other
services
No method prescribed in Act. The Commission will need to determine principles for cost
allocation for initial RAB valuation and for future periods. Precedent is accounting based
cost allocation, but more complexity for telco networks given high degree of asset
sharing and rapidly growing fibreuptake.
Unrecovered lossesAct prescribes adding an asset to RAB to enable recovery of financial losses on
investment prior to implementation. The Commission has proposed using a building block
methodology.
Crown financingAct requires actual cost of Crown financing to be considered in valuing the financial
losses asset, but no method prescribed. Commission should recogniseCIP financing was
not costless given contractual terms and financing structure.
WACCWACCto be set for loss calculation period andfor post implementation period. Nature of
Chorus/fibrebusiness and international comparators support WACC uplift.

26 August 2019
Appendix C: UFB programme guidance
and Crown securities
FY19 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
42
▪CIP equity securities
•unique class of security with no right to vote at
shareholder meetings, but entitle the holder to a
right to repayment preference on liquidation
•an increasing portion of the securities will attract
dividend payments from 30 June 2025 onwards
•the dividend rate is based on 180 day NZ bank bill
rate, plus 6% p.a. margin
•may be redeemed at any time by cash payment of
total issue price or the issue of Chorus shares (at a
5% discount to the 20-day VWAP for Chorus
shares)
▪CIP debt securities
•unsecured, non-interest bearing and carry no voting
rights at shareholder meetings
•Chorus is required to redeem the securities in
tranches from 30 June 2025 to 2036 by repaying
the issue price to the holder

---

Annual Report 2019
01 Chorus Board and
management overview
19 Management commentary
29 Financial statements
67 Governance and disclosures
99 Glossary

FY19 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 A new engagement survey provider means FY18 data isn’t directly comparable.
3 Based on the mean response to “How likely are you to recommend your company as a place to work?”
4 Net Promoter Scores can range from -100 to 100 and are calculated by subtracting the percentage of detractors (0-6 engagement score)
from the percentage of promoters (9-10 engagement score).
EBITDA
1
Customer satisfaction
DividendEmployee engagement score
2
Fixed line connectionsBroadband connections
Fibre connectionsNet profit after tax
FY19
23cps
FY18
22cps
FY19
7.6 out of 10
3
FY19
28
Net Promoter
Score
4
FY19
610,000
FY18
445,000
FY19
$53m
FY18
$85m
FY19
1,196,000
FY18
1,187,000
FY19
1,450,000
FY18
1,526,000
FY19
7.7 out of 10
(target 7.9)
FY18
7. 5
FY19
$636m
FY18
$653m

This report is dated 26 August 2019 and is signed on behalf of the 
Board of Chorus Limited.
Annual Report 20191
Dear investors
We’re on the fast-track to our goal of
keeping New Zealand new, with the fibre
rollout now 80% complete and more than
half of our broadband connections on fibre.
When we signed up for the original ultra-fast broadband
(UFB) contract with the Government in 2011, we had a target
of 20% fibre uptake by 2020. This year, demand for fibre was
stronger than ever. We completed a record 186,000 fibre
installations, up from 156,000 last year, and fibre uptake
within our UFB areas grew from 45% to 53%. That’s all the
more impressive when you consider we built the network
past another 176,000 homes and businesses during FY19.
Demand for data also keeps growing, reflecting the ever
increasing range of online streaming content and the
proliferation of connected devices in the home. Monthly
average household data usage on copper and fibre
connections across our network increased by 55 gigabytes
(GB) to 265GB. Fibre customers use an average of 341GB.
Pleasingly, we’ve seen a growing proportion of customers
opt for higher speed connections, with uptake of 1 gigabit
per second (Gbps) plans increasing from 7% to 10% of our
consumer connections in the period.
We completed a number of significant initiatives during the
year as part of our ongoing transformation programme to
optimise our business for a fibre-centric future. Despite some
impact from individual retailer processes, we lifted overall
customer satisfaction from 7.5 to 7.7 out of ten. This reflected
our collaboration with our industry partners to redesign
our processes and reduce the effort required by most fibre
installations to just one customer appointment. Our people
have been critical to embracing this kind of customer design-
led change. We achieved a score of 7.6 out of 10 in our annual
engagement survey, consistent with the middle of our
international ‘technology’ company benchmark, and
a positive net promoter score of 28.
We were pleased to have legislation enacting a new
regulatory framework for fibre passed by Parliament
in November. We’ve begun assisting the Commerce
Commission with the information it requires as it goes
through the process of establishing the value of our
regulated asset base and our allowable fibre revenues.
The utility-style regime is expected to apply to our fibre
access services from January 2022.
We had a strong year for broadband connections, with an
increase of 9,000 lines. This was a significant jump from a
gain of just 1,000 broadband lines in FY18 and reflects our
ongoing initiatives to win broadband customers from cable
and fixed wireless networks in our own fibre areas, together
with premises growth nationwide. Although broadband
connections grew, it was outweighed by the ongoing
reduction in our copper lines and we ended FY19 with 76,000
less fixed line connections overall. This was consistent with
connection losses in the prior year and reflects other fibre
companies reducing our copper broadband connections in
areas where we’re not the Government’s UFB partner, as well
as large retailers migrating voice only customers onto their
own wireless networks.
We’re 80% of the way to our target of building our fibre
network past approximately 1.36 million homes and
businesses by the end of 2022. We’ve started taking fibre
to some of the more than 300 smaller towns for the
extension of the original UFB rollout (UFB2), where fibre
promises to deliver even greater socio-economic benefits.
The fibre rollout remains on time and on budget and, with
copper investment reducing and a positive performance on
connection costs, we were able to limit capital expenditure
to $804 million for the year. This was slightly below the lower
end of our guidance range, of $820 million to $860 million,
and heralds the beginning of reducing capital expenditure
as we pass the peak of the UFB rollout schedule.
Reduced connection revenues meant we achieved EBITDA of
$636 million, within our guidance range, but down from $653
million in FY18. This was partly offset by our transformation
initiatives and a tight rein on costs, with operating expenses
slightly lower than in FY18 despite increased regulatory and
network related expenses. We achieved this by adopting
new digital processes and tools to deliver benefits across our
business, as well as for our retailers and their customers.
New online tools, for example, helped reduce network
maintenance costs by avoiding unnecessary technician visits.
Net profit after tax reduced to $53 million, from $85 million
in FY18, largely because of increased interest costs and
depreciation and amortisation. A fully imputed final dividend
of 13.5 cents per share will be paid on 8 October 2019,
bringing total dividends for FY19 to 23 cents per share.
Kate McKenzie
Chief Executive
Patrick Strange
Chair

Annual Report 20192
1.0
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 provide. Our copper VDSL
and fibre to the premises network makes
~600 exchanges
~37,000km duct network
~12,000 cabinets~290,000 poles
high-speed unlimited broadband available to
~90% of broadband capable lines nationwide.
About 100 retailers use our infrastructure to
deliver fixed line and mobile network services
to their customers. By the end of 2022 we’ll
have fibre available to ~1.36 million customers.
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
~52,000km fibre
~130,000km copper

Annual Report 20193
1.1 Designing a new customer experience
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.
In November 2017, we set ourselves an ambitious target
of connecting 75% of new residential fibre orders in a single
appointment. This ‘fibre in a day’ initiative underpinned
our overarching goal of making it as easy as possible for
customers to have fibre connected to their home, or
business, where consent and additional communal
network build wasn’t required.
While we’d already made good progress in working with
retailers and service companies to streamline our processes,
this new initiative challenged us to completely reconfigure
our long standing fibre installation process from two
customer appointments to just one. This meant working
even more collaboratively with our industry partners to
redesign the customer experience from end-to-end,
and breaking new ground in our use of digital tools.
In particular, we developed new capabilities involving smart
data categorisation and machine learning. Multiple network
databases and connection records were analysed so we
could ultimately categorise which remaining premises
would be complex or simple to connect. This predictive
analysis identified about 400,000 simple installations and
has achieved 90% accuracy to date, greatly improving our
productivity and customer satisfaction score.
Although we lifted our overall customer satisfaction score
1

for fibre installations from 7.5 out of ten in June 2018 to 7.9
in December, it had reduced back to 7.7 by the end of FY19.
This was below the target of 7.9 we’d set ourselves for the
year. However, where customers were part of our fibre in a
day process and required just one appointment, we achieved
8.0. This difference reflects the ongoing challenges of
communication and coordination between multiple parties,
and we continue to see significant variances in results
between retailers. Our technicians are rated highly,
with customer satisfaction scores of 8.5 out of ten.
The changes we made to our installation processes helped
reduce nationwide lead times for new fibre connections.
Customers wanting to install fibre in June 2019 could book
a technician visit within eight business days, down from
13 days a year ago. This was despite the number of field
crews reducing from about 800 to 670.
1
Based on a rolling three-month average of scores from
a survey of newly connected customers each month
across a range of retail service providers.
Figure 1:
Fibre installations and customer experience
InstallationsCustomer satisfaction (right axis)
0
20,000
FY16FY17FY18FY19
40,000
6.8
6.9
60,000
7
80,000
7. 3
7. 2
7. 1
100,000
7.4
7.6
7. 5
140,000
120,000
7.7
7. 8
180,000
160,000
200,000
Number of installations
Customer satisfaction
1.2 Building our digital capability
Installations weren’t the only influencer of customer experience
to benefit from our focus on simplifying systems and processes.
We’ve continued to embrace the use of digital channels to help
retailers, service companies and customers, gain much greater
visibility of our network status, availability and provisioning. The
ease with which information can now be accessed is evident
in the exponential growth in usage from about one million
requests a month in FY18 to 11 million a month this year.
We’re now using these richer sources of network information
to derive greater customer insights for product and planning
purposes, as well as monitoring critical aspects of network
performance during online events.
These digital channels can have far reaching benefits.
Our online line testing tool, for example, is being used by
retailers to review reports of faults from their customers
so they can better pinpoint whether a fault is in our network,
their network, or the customer’s equipment. This has led
to hundreds of unnecessary technician visits being avoided
each month. The result is a virtuous circle of improved
customer experience with faster resolution of faults,
retailers avoiding unnecessary cost, and our technician
workforce being more productive.
We hope to further improve the retailer and customer
experience with the recent launch of a new assure channel.
This will provide a simplified process and integrated tools
to help speed up the diagnosis and resolution of faults.
We’re also using digital tools to automate operational
processes, such as the previously manual transfer of fibre

Annual Report 20194
Wholesale-only fibre networks like ours have helped establish
a competitive broadband market, with smaller retailers gaining
market share in recent years. The bundling of electricity and
broadband is becoming more common with another electricity
retailer, Nova Energy, entering the market. The larger mobile
network operators have responded to these market pressures
by encouraging customers onto their own fixed wireless
networks, reducing their wholesale network costs.
The ongoing rollout of our fibre network, together with
the investment we’ve made in enhanced copper broadband
technology, are helping us win customers back from fixed
wireless and cable networks. However, the popularity of
fibre broadband means other fibre companies continue to
reduce our copper broadband connections in areas where
we aren’t the Government’s UFB partner. Our voice only
copper connections, for which we receive lower revenue
than a broadband connection, also continue to decline as
customers take up broadband or migrate to alternative fibre,
mobile or fixed wireless networks.
Note: Fibre to the premises will cover ~87% of NZ population by the end of 2022
Figure 2:
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 ~450k 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
Nova Energy
Contact Energy
MyRepublic
Stuff Fibre
NOW
Slingshot, Orcon, Flip
Vocus2degrees
Vodafone TV
Vodafone
HFC cable in
Wellington +
Christchurch
(~60k customers)
Lightbox
+Skinny
Spark
order information between different systems. This has
helped deliver more consistent customer outcomes and
reduced offshore processing costs. We’re exploring further
opportunities to expand these technology solutions to
other processing tasks.
The deployment of a standalone billing system was another
milestone in our continuing separation from shared legacy
IT systems. This will provide us with greater speed to market
for new products and enables the decommissioning of
other costly legacy systems.
1.3 An active wholesaler:
growing broadband connections
Demand for broadband is growing, 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.

Annual Report 20195
We adopted an active wholesaler strategy several years
ago to mitigate the risk of competing networks reducing
our connections. This means that although we’re a
wholesaler, we implement our own in-market initiatives to
raise consumer awareness of our copper and fibre network
footprint. During FY19 some of these initiatives included:
• advertising campaigns, such as ‘Stream big New Zealand’,
to promote the capability of our network for streaming
services
• providing incentives to retailers to upgrade
their customers to better broadband options on our
network, or win customers back from other networks
• undertaking door knocking campaigns to promote
free fibre installations in newly completed suburbs
or to off-net addresses
• enhancing our ‘front door’ channels for subdivision
developers and retirement villages
These initiatives have helped us to return our broadband
connections to growth and raise customer awareness of
the premium benefits of fibre broadband. In our UFB rollout
areas, broadband connections grew by 42,000 connections
in FY19. This reflects the degree to which premises growth
and increasing broadband penetration, as broadband
becomes the fourth utility, is helping offset ongoing line
loss to the other local fibre company networks. Our market
research shows that New Zealanders recognise fibre
broadband as the premium technology for a broadband
connection and this is evident in the continued strength
of fibre demand.
Our market driversWhat we’re focussed on
Large vertically integrated retailers are encouraging
customers to use their own fixed wireless, cable
and legacy fibre networks to reduce their wholesale
network costs.
We’re an active wholesaler, promoting our extensive fibre and VDSL
broadband footprint through advertising, retailer campaigns and
our own door knocking initiatives. Our network supports about
100 retailers.
Competing fibre companies have overbuilt our
existing copper network with fibre as part of the
Government’s UFB programme.
We’re optimising our business in these competing areas and
maximising our broadband share in other areas experiencing
premises growth, particularly Auckland.
Traditional voice only connections are declining with
changing demographics and wireless service options.
We’re commercialising new potential revenue streams identified
by our innovation programme, such as data centres and smart
city connectivity.
Technology keeps evolving, with 5G potentially
enhancing the capability of mobile/wireless
technologies as a fixed line alternative for
lower data users.
We're continuing to connect customers to fibre and promote uptake
of 1Gbps services. Fibre provides the best possible broadband
performance, particularly at peak times when consumers stream large
amounts of data. We see 5G as complementary technology, with many
more cellsites requiring fibre backhaul.
Figure 3:
Summary of key market trends

Annual Report 20196
1.4 Fibre delivers peak performance
As data demands continue to grow, our ability to deliver
consistent throughput at dedicated speeds is a significant
competitive advantage. By the end of 2022, we’ll have made
1Gbps connections with no datacap constraints available
to more than 1.3 million potential customers. We’re already
trialling next generation 10Gbps services with retailers.
Statistics New Zealand says 71% of New Zealand households
were on unlimited broadband plans in 2018, up from 62% in
2017. Average monthly bandwidth demand on our network
grew from 210GB per customer to 265GB through FY19.
Usage for fibre customers was higher again at an average
of 341GB per month. Most of this usage occurs around 9pm
each night as more and more New Zealanders consume
streaming video on demand services. Freeview’s new
streaming device, for example, removes the need for a
TV aerial or satellite dish by transferring their content
entirely onto broadband. Pay TV operator Sky TV is also
continuing to make more of its content available online.
We’ve seen peak time traffic across our network grow from
1,500Gbps in June 2018 to 1,900Gbps in June 2019. That’s
the equivalent of 380,000 simultaneous high-definition
video streams. Online games are also contributing to record
spikes in network traffic whenever there is a software update.
4K content, which requires more bandwidth than high
definition programming, is starting to become more widely
available with the proliferation of 4K television sets. Olympic
broadcasters are already promoting the next high definition
8K television broadcasts for 2020. Together, these kinds of
technology developments and the uptake of more bandwidth
hungry services support our own and independent forecasts
that suggest average data usage by 2024 is likely to exceed
1,000GB a month.
Currently, wireless broadband retailers typically offer monthly
datacaps of 120GB, with larger datacaps available in some
areas where cellsite capacity allows. There are customers
who do not currently use much data and for whom wireless
networks may provide a viable network alternative. However,
these networks rely on shared capacity and are more prone
to congestion at peak times. Independent monitoring has
indicated peak time fixed wireless speeds deteriorating by an
average of 26%. We’ve seen growing evidence of customers
returning to our network from wireless alternatives as their
data usage grows or fibre becomes available.
Figure 4:
Monthly average data usage per connection on our network
0
50
100
150
200
250
300
350
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
SEP 2018
DEC 2018
MAR 2019
JUN 2019
DEC 2017
CopperFibreAverage
Data usage (GB)
Figure 5:
Download speed: Copper line vs fixed wireless
0
5
10
15
20
25
30
35
40
45
Mbps
40.9
9.1
18
41.8
9.3
24.3
Peak time24-7
VDSLADSL
FIXED WIRELESS
Source: Commerce Commission, June 2019
26% drop in
performance
at peak time

Annual Report 20197
There is much speculation about the potential future
performance of 5G wireless technology and what it means
for demand for fixed line networks. There have been initial
5G deployments in some countries overseas, although
performance has reportedly been variable. Global 5G
standards and consumer equipment are still evolving. The
auction of 3.5 GHz spectrum is expected in New Zealand in
early 2020, subject to Government negotiations with Māori,
with national rights available for use from November 2022.
Vodafone has announced it will use its existing 3.5 GHz
spectrum rights to deploy 5G services from December 2019.
This will initially be in parts of Auckland, Wellington,
Christchurch and Queenstown.
Initial deployments by mobile network operators are likely to
be limited to existing cell towers, or sites, with the customer
footprint limited accordingly. The deployment of smaller
suburban cellsites is expected to be later in the future and
subject to the economics of deploying the many more
cellsites that would be required for widespread coverage.
We, therefore, see a complementary future with 5G, because
fixed line infrastructure will also be needed for backhaul
and power to base stations, creating new commercial
opportunities for our business.
1.5 Commercialising new services
Our innovation programme has identified a number of
ways we can use our network infrastructure to provide
new technology solutions for customers.
We’ve established three distributed data centres in exchange
buildings in Auckland, Wellington and Christchurch and we’re
seeing a diverse mix of wholesale aggregators and IT service
innovators take interest. The rise of the Internet of Things
is driving the placement of computing and data analytics
equipment as close as possible to where the data originates.
Data processing can be done faster and more cost effectively
by keeping the computing process local. Small cellsites,
for example, could share network processing capability by
locating one piece of equipment in a nearby exchange.
A related concept that is starting to emerge is fibre-to-the-
desktop. When you have a reliable, high capacity transmission
service like fibre, it means office electronics and servers no
longer need to be located on-site in communications rooms.
They could, for example, be located in a nearby exchange
building and a third-party wholesaler might share the cost
of that equipment across a range of users. We’ve trialled
this concept in several office environments and have begun
exploring its wider application.
Our fibre network has a significant role to play in bringing
smart cities to life, by extending connectivity to a range
of ‘smart locations’ outside of traditional premises. These
locations include things like traffic lights, bus stops, cameras,
ATMs, lifts, alarms and cell sites.
The proliferation of smart devices within homes means
we have an emerging role to play in helping customers get
the most out of their Wi-Fi. We’ve begun deploying a new
Optical Network Terminal in homes that includes the ability
to offer services using new Wi-Fi and residential gateway
capability included in the device. We’re consulting with
retailers on potential service options, such as using Wi-Fi
data from the device to identify, analyse and resolve
customer experience issues.

Annual Report 20198
We’re the 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. At the end of FY19
we were 80% of the way through the rollout.
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 (UCG). 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.
2.0
The UFB rollout
Figure 6:
UFB rollout and uptake
0
200
400
600
800
1,000
1,200
1,400
Number of homes and businesses able to connect
JUN
2015
JUN
2017
JUN
2018
DEC
2022
JUN
2019
40%
50%
60%
70%
80%
90%
100%
30%
20%
10%
0%
Uptake
JUN
2016
% 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 20199
2.1 Health and safety
The health, safety and wellbeing of our people is paramount.
This includes our direct employees and the thousands
of 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 work
with our contractors and suppliers to ensure their systems
and procedures meet our health and safety expectations.
The number of hours worked, including our service
companies, remained the same at 13 million for FY19.
There was a reduction in the number of lost time injuries
and injuries requiring medical treatment. The Lost Time
Injury Frequency Rate (LTIFR) reduced from 1.16 in FY18
to 0.53 in FY19, while the Total Recorded Injury Frequency
Rate (TRIFR) decreased from 3.10 to 2.67.
For FY20 we’re focusing our efforts on the capabilities of
our people, our critical risks, and continued collaboration
with our service company partners to enhance health and
safety practices.
2.2 Creating a fairer supply chain
We’re committed to doing the right thing by people
working on our behalf, including those workers who’ve
come to New Zealand to build a better life for themselves
and their families.
In April 2019, we released an independent review from
MartinJenkins. We commissioned the review in October
2018 after potential breaches of employment law were
identified amongst some small businesses subcontracted
by two of our service companies, Visionstream and UCG.
While there were no allegations that we, or our service
companies, were in breach of labour standards, the Labour
Inspectorate identified allegations ranging from poor labour
standard practice (e.g. poor record keeping, non-payment of
holiday pay) through to a small number of serious allegations
of exploitation. These allegations centred on the treatment
of migrant workers in our subcontractor workforce.
As soon as we were made aware of the Labour Inspectorate’s
concerns we worked closely with Visionstream and UCG to
undertake our own independent audits of our workforce.
The findings of these audits resulted in some subcontractors
being stood down from working on our network, and others
being given deadlines to improve their practices. Where
subcontractors were stood down, we’ve done what we can
to help transfer any affected workers to another subcontractor.
Some cases have been referred by the Labour Inspectorate
to the Employment Relations Authority and we'll suspend
companies from working on our network if they're found to
have breached material employment laws.
Independent review findings
We were deeply disappointed that any workers helping
build our fibre network could have been treated unfairly
and we gave MartinJenkins a clear mandate to make
recommendations on how to better protect workers
throughout our supply chain. We asked them to look into
how the issues emerged, how well we anticipated and
responded to labour force risks, and whether these actions
were adequate. We also asked for suggestions on how we
could improve our approach to workforce management.
While the report found the vast majority of employment law
breaches were low level, it identified that the way the supply
chain is set up means it could still be vulnerable. It said:
• the use of migrant workers by Visionstream and UCG
was expected and reasonable given the type of work
and significant demand for labour in New Zealand.
• as the proportion of migrant workers increased, the
model became more vulnerable to risk - this was not well
understood or managed by Chorus, Visionstream, or UCG
and a number of systemic improvements are required.
• when issues arose Chorus relied too heavily on the assurances
given by service companies, which are not appropriate checks
in a situation where there are large numbers of migrants.
Figure 7:
Injury frequency rates FY18 – FY19
0
1
2
3
4
5
6
Injury frequency rate
2.67
0.53
FY18FY17
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
3.10
2.62
1.16
1.23
FY19

Annual Report 201910
MartinJenkins proposed four design principles to ensure
a fair and appropriate supply chain:
• all workers engaged in the Chorus UFB supply chain should
be able to earn a decent wage for a fair day’s work
• suppliers must respect the labour rights of workers
and take steps to ensure their supply chain is free from
discrimination, harassment, corruption and bribery
• suppliers must handle all business dealings and
transactions with the highest standards of integrity,
transparency and honesty. Management systems
must support good practice and clear accountability
• productivity improvements in the supply chain should
strike the appropriate balance between the needs of
the customers and the end workers
We and our service companies have committed to an extensive
range of actions to implement these supply chain design
principles. Some of the steps we’ve already taken include:
• publishing a Supplier Code of Practice to clearly outline
our expectations of all suppliers and encouraging them
to embrace international standards relating to human rights
• appointing an employee relations specialist to oversee
service company audit programmes
• requiring service companies to appoint appropriate
people to provide assurance and reporting on sub-
contractor compliance with labour law obligations
• helping migrant workers transfer to new employers
who meet employment standards
• setting up an independent whistleblower hotline
• establishing a fund for eligible workers unable
to secure payments from their employer
We’re also sharing our experiences and insights with
government agencies and other businesses so they
can better identify migrant labour issues. The Labour
Inspectorate has acknowledged the leadership role we’re
taking and how our actions can be a model for other
companies with subcontracted supply chains.
Transition from build to maintain
As we approach the end of the UFB rollout we are
concentrating on the transition that will be required in
the way we operate and maintain our network assets.
Ten-year maintenance contracts for our predominantly
copper-based network were agreed in 2009. We’ve now
agreed shorter term contracts, from 1 July 2019 through
to 31 March 2022, encompassing maintenance of our
copper and fibre broadband networks, as well as any
new fibre build outside of our planned UFB areas.
The contracts include our new Supplier Code of Practice
and our tender process focused on identifying service
company partners that will deliver the right mix of speed,
quality and price. Given our ongoing programmes of
network investment have meant a steady decline in network
faults, we were conscious of the need to ensure service
companies have enough volume and scope of work to
provide sustainable services, as well as invest in people
and infrastructure. This ultimately meant a reduction
from three companies to two, with Visionstream now
responsible for areas from Auckland northwards and
Downer responsible for the rest of the country.
Contract
scope
Maintenance of
copper and fibre;
fibre build outside
UFB areas
Connecting
premises to
fibre
UFB1
network build
UFB2/2+
network build
ContractorDowner
Visionstream
Electronet
UCG
Visionstream
Broadspectrum
Downer
Electronet
Visionstream
Broadspectrum
Electronet
Visionstream
Contract
period
Until
March 2022
Until
September 2020
Until
December 2019
Until
December 2022

Annual Report 201911
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
basis. This regime will remain in place outside of
the revised utility model now being implemented
by the Commerce Commission.
Approximately 46% of our FY19 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 with most 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
In November 2018, the Telecommunications (New Regulatory
Framework) Amendment Act passed into law with bipartisan
political support. This marked the culmination of five years
of policy review of the regulatory framework that applies to
our business and the decision to transition to a utility-style
framework for fibre access services.
Under the new framework our fibre investment will be
regulated according to a utility style building block model
from 2022. 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.
Key features of the proposed regime are:
•
deregulation of the copper network from 1 January 2020
in areas where fibre is available and the right to withdraw
copper services, where this is appropriate, subject to a
code being developed by the Commission.
•continued regulation of the copper network in areas
where fibre is not available, with copper pricing adjusted
for inflation.
•
the regulated asset base (RAB) for fibre will include
unrecovered losses incurred before 2022, 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.
•
key fibre prices will be frozen at 2020 pricing levels,
adjusted for inflation, until 2022.
•unbundling of the fibre network in UFB1 areas
on a commercial basis from 2020.
Figure 8:
New regulatory framework to replace UFB contractual framework by January 2022
87% of population where fibre will be available by end of 2022Remaining 13% of population
Fibre access network
•Regulated asset base (RAB) with revenue cap
to be determined by Commerce Commission
• Price caps on contracted fibre products,
with annual inflation adjustment, until 2022.
Price caps then only apply to fibre voice service,
a fibre broadband service and direct fibre.
• Unbundled fibre (commercial price)
to be available in UFB1 areas from 2020
and UFB2 areas from 2026
• Three years after new regime commences,
the Commission can review the revenue
cap model and anchor products, subject to
specified conditions and statutory criteria
Copper - where fibre is available:
•
C
opper network to be deregulated and
Telecommunications Service Obligation
(TSO) removed
•
C
horus can withdraw copper service,
subject to minimum consumer protection
requirements being developed by the
Commission and due by mid-2020
Copper - 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

Annual Report 201812
The Commission is required to establish the key input
methodologies that set the framework for determining the
starting value of our regulated asset base, the regulatory
weighted average cost of capital, cost allocations, and
our maximum allowable revenue. It has been granted
a one-time deferral from 1 January 2020 until 1 January
2022 to complete its implementation work. An indicative
implementation timeline has been published for its
various workstreams.
Indicative fibre regulation timeline
November 2019Input methodologies
draft decision due
June 2020Input methodologies
final decision due
Q4 2020Draft price-quality path
Q2 2021Final price-quality path
In May 2019, the Commission released an Emerging
Views Paper setting out some of its initial thinking on
key principles and parameters under the new framework.
Some of the indications in the paper, particularly those
relating to the potential weighted average cost of capital,
were viewed negatively by investors. We and some of
our institutional shareholders made submissions in
response. The Commission expects to release its draft
decision on the input methodologies in November 2019.
3.2 Commercial services for fibre unbundling
We’ve built our fibre network to enable unbundled fibre
services by providing a second fibre to each premises.
This means retailers can choose to use our passive
infrastructure - fibre optic cables, ducts, and poles –
and their own broadband electronics, to deliver services to
customers. Unbundled services will be launched in our UFB1
areas from January 2020 and in UFB2 areas from 2026.
We’ve developed commercial terms for these services,
including a monthly access charge of $28.55 per month
to cover access to the fibre between the premises and the
splitter, as well as $200 per month to access the feeder fibre
from each splitter to a central network point. The pricing
reflects the fact that passive infrastructure costs, known
as layer 1, comprise most of our rollout investment, with
broadband electronics, known as layer 2, representing a
very small component.
The architecture of the fibre network, with most customers
connected to street-based splitters, means the economics
of fibre unbundling are different from copper unbundling,
where exchange-based equipment could potentially serve
much larger numbers of customers. This means fibre
unbundling will most likely appeal to larger retailers.
Our proposed pricing seeks to strike a fair balance between
enabling fibre unbundling and ensuring a competitive
playing field for all other retailers. The Commission has
said that it will develop guidance on fibre equivalence and
non-discrimination obligations following concerns from
some retailers about our proposed pricing.
3.3 Other reviews
The Commission is developing a copper withdrawal code
that it aims to have in place by mid-2020. This will detail
the consumer protections and process that will regulate
when we’ll be permitted to stop providing copper services,
in areas where an equivalent fibre service is available.
The Commission concluded its study of the backhaul market
in June 2019, finding that further regulatory intervention
wasn’t currently necessary with charges having only a minor
effect on nationwide retail broadband prices. We’re reviewing
our backhaul portfolio to address some anomalies and errors
identified by the Commission. The Commission is required
to undertake another review to consider the need for new
regulated backhaul services before 2025.

Annual Report 201913
4.0
Making New Zealand
better
We take a long term view of our network
infrastructure investments and our people take
pride in delivering an asset for New Zealand’s
ongoing social and economic betterment. The
broadband networks we build and maintain are
aligned with the infrastructure-focused elements
of the United Nations Sustainable Development
Goals. Our networks enable sustainable cities
and communities, decent work and economic
growth, quality education, good health and
well-being and climate action.
In 2012, Alcatel Lucent’s Bell Labs estimated the rollout of
fibre could contribute more than $32 billion in economic
benefits to New Zealand over 20 years. A 2017 Sapere
Research Group study estimated the wider social benefits
from fibre uptake at about $2 billion annually. This was on
top of a $3 billion annual contribution business uptake
could make to Gross Domestic Product.
The socio-economic benefits of gigabit access have grown
with the UFB rollout target extended beyond the initial target
of 75% of New Zealanders by 2020 to reach 87% of the
population by the end of 2022. Our role in the extended
fibre deployment will encompass more than 300 smaller
towns and communities, some with as few as 50 premises.
This will build on the substantial investment we’ve already
made in reducing the digital divide for rural communities,
first through the Government’s Rural Broadband Initiative
(2011-2016), then our own investment in VDSL vectoring
technology in FY18 to enable unlimited high-speed
broadband for tens of thousands of rural homes. Our work
on the Rural Broadband Initiative with Nokia was recognised
on the world stage in FY19 with the Broadband Delivering
Social Impact award at the Broadband World Forum.
Hospitals and medical centres were some of the priority
customers connected by our rural and urban fibre rollout.
Medical practitioners now use improved video conferencing
capability to provide telemedicine consultations to their
regional patients. This is reducing travel demands on
doctors and patients, as well as improving the quality of
patient monitoring.
The availability of fibre broadband has had a profound impact
on the delivery of education in rural communities. Rural
schools do not have access to as many resources as schools
in urban areas and cannot always provide teachers for every
subject. They rely on online classes to bridge that gap. We’re
now trialling how fibre cabling to individual classrooms can
deliver greater capability and capacity per student, while
reducing the cost of networking equipment for schools.
A divide also exists within urban and rural communities
between those students that have broadband at home and
those who don’t. We continued our work with Network

for Learning, a government education group, to solve the issue
of students who are unable to access high-quality broadband
at home. We activated Wi-Fi access points, connected to
fibre, in more than 100 homes so students without broadband
access in Lower Hutt could log in remotely to Rata Street
School’s online learning network. Feedback on the trial has
been very positive and we’re evaluating opportunities to
extend its application to more schools.
Other groups or initiatives we supported during
the year included:
• industry and government organisations such as
TUANZ, InternetNZ, and the Local Government
New Zealand conference.
• School Gateway Programmes, where we provide groups
of students with onsite courses to learn about our network.
• Digital Journey, a social enterprise that delivers digital
projects and initiatives to support the opportunity to
use, understand and benefit from digital services.
• NZ Tech Week, with training seminars for elderly
consumers to learn the benefits of broadband technology.
• Dunedin city residents with residential gigabit broadband
services at entry level wholesale prices, as part of our
Gigatown initiative.
• working with councils, business associations and
community beautification groups, such as Keep
New Zealand Beautiful, to have about 100 of our
street cabinets illustrated by local artists.
• a range of community support, learning and art
organisations that use subsidised space within
our exchange buildings.
We believe we have an ongoing role to play in addressing
the digital divide, whether it is between rural and urban areas,
or between socio-economic groups within communities.
We’ll keep working with government to identify where our
infrastructure and alternative technology solutions can help
deliver better outcomes for New Zealand.

Annual Report 201914
4.1 Our people
We’re committed to building a culture that’s inspiring for
our employees and drives the desired brand experience for
our customers. To help achieve this we have a new online
platform that enables us to regularly monitor engagement.
Our first survey assessment revealed a score of 7.6 out of 10,
consistent with the middle of our international ‘technology’
company benchmark. This translates into an employee net
promotor score of 28, showing our company values, culture
and concern for wellbeing rate highly.
Employee benefits play a key part in shaping and embedding
the right culture. During the year we introduced two new
leave days for our people to use for their wellbeing and
a group insurance programme. We continue to offer a
volunteer day and in FY19 about 380 employees used this
to undertake community activities such as tree planting and
assisting hospices.
As our business and industry continues to evolve, we’ve been
helping equip our people with the tools and skills needed to
support the changes we’re making in the way we operate.
That’s included programmes to foster design thinking and
agile practices. These have helped increase collaboration
across the organisation and deliver better customer
outcomes. We’re increasingly recruiting people with data-
centred skills to support our focus on digital capabilities and
opportunities. For more information on our people, see the
Diversity & inclusion section on page 81.
4.2 Keeping communities connected
New Zealanders place great reliance upon the availability of
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 1.45 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 kept the average duration of network interruptions
to 18 hours across our fibre and copper network in FY19,
down from 21 hours in FY18. We met our fibre service
level targets as contracted with the Crown:
• Layer 1: actual downtime of 50 minutes vs limit of 120 minutes
• Layer 2: actual downtime of 1 minute vs limit of 30 minutes
Weather-related risks are considered by the Board as part
of our evaluation of principal risks relating to network
performance and availability. In line with the Task Force
on Climate-related Financial Disclosure framework, we
commissioned an external report in FY19 to consider the
potential effects of climate change on our physical network.
This high-level desktop risk screening considered the
location of our key network assets against several climate
change scenarios, using published research and local and
national datasets.
The report identified that exposure of existing assets is
most likely to occur along the New Zealand coastline due
to projected sea level rise. These areas are also expected to
experience increased precipitation and storm events. Further
analysis of the potential exposure to 0.5 metres in sea level
rise, corresponding to projections to the year 2060 under
representative concentration pathway 8.5H+, identified that
in the medium term:
• five exchanges of varying size are at potential risk
from coastal inundation. This includes South Dunedin
where protection work is already planned.
• only 0.3% or ~260 kilometres of the total length
of core fibre routes, are potentially at risk.
• less than 0.5% of all point assets (exchanges, sites,
terminal enclosures, underground utility boxes, and poles)
are potentially at risk. This increases to 5% of assets for
a 100-year projection of three metres sea level rise.
The report is being used to further inform our existing
network planning and management practices that
incorporate experience from past extreme weather events.
Future asset management plans will likely need to evolve as
we learn more about the evolving effects of climate change.
For now, the substantial investment we’ve made in deploying
the fibre network in recent years is already enhancing our
future network resiliency for climate-related events. Fibre is
less susceptible to water and lightning related faults than the
cables and street-based electronics in the copper network.
The fibre network has performed well in extreme weather
events, including tornadoes and flooding. Moreover, some of
the assets identified as being at risk are in areas where we are
not the local fibre network provider and are, therefore, likely
to have diminished network relevance for us in the future.
We therefore consider the potential near to medium term
financial impact of climate change effects to be low.
Earthquakes remain a primary focus for our network
resiliency planning given New Zealand’s recent experience of
several earthquakes above a 7 magnitude on the Richter scale.
Network damage from these quakes was largely restricted to
localised copper cables, with minimal damage to exchange
buildings. We have a comprehensive insurance programme
typical of large scale infrastructure utilities, covering all risks
of physical damage and business interruption for above
ground assets. Specific cover is provided for earthquake
damage to underground cables in Auckland, Hamilton,
Wellington and Dunedin. We undertake probability based loss
estimate modelling to ensure that the policy limit covering
material damage and business interruption is adequate.
4.3 Enabling climate action
New Zealanders’ growing awareness of climate change and
the proposed Government target of reducing greenhouse gas
emissions to net zero by 2050, suggests there will be additional
growth in the use of our broadband network as a means of
reducing individuals' and organisations' carbon footprints.

Annual Report 201915
Enhanced broadband connectivity opens up alternative
business models and communications options that reduce
the need for carbon emitting activity. We’ve realised these
benefits for our own business through our investment in
inter-office video conferencing to reduce regional travel and
enhance employee collaboration. Virtual desktop connectivity
also means we can provide our employees with flexible work
options. The widespread availability of fibre means businesses
and employees throughout most of New Zealand can adopt
these technology solutions, greatly magnifying the potential
environmental benefits.
As fibre uptake grows we expect our own business’ carbon
emissions to begin to reduce. Electricity is our largest source
of emissions and the fibre network requires less electricity
to operate than the existing copper network. For now, we’re
operating both networks in parallel, but our electricity usage
should decline over time as copper broadband electronic
equipment is removed from suburban cabinets and exchanges.
Vehicle related emissions should diminish further once the
volume of orders for new fibre installations begins to reduce.
The fibre network will also require less technician visits for
provisioning and maintenance than the current copper network.
During FY19 we completed our programme to replace air
conditioning units that relied on ozone depleting refrigerant.
We expect our investment in fibre to help us achieve an 80%
reduction in our scope 1 and 2 emissions, from our FY12 base
year, by 2030.
We’ve avoided a net cumulative 58 kilotonnes of carbon dioxide
equivalent emissions (CO
2
e) since FY12. Our FY19 emissions were
22 kilotonnes-CO
2
e, 37% lower than in FY12, with reductions
across all major sources. This included a reduction of 1 kilotonne
of Scope 1 direct emissions, due to lower generator diesel
consumption and fewer refrigerant losses.
Scope 2 electricity emissions reduced by 5 kilotonnes from our
FY12 base year. Network electricity consumption accounts for
87% of combined Scope 1 and 2 emissions. Emission reductions
were mainly due to a greening national electricity grid, together
with energy efficiency improvements. The national grid was
83% renewable this year, but more coal was used for power
generation instead of natural gas in FY19. This resulted in higher
carbon intensity, offsetting our electricity savings.
Scope 3 value chain emissions reduced by 7 kilotonnes from
our FY12 base year, with half the reductions from service
company fleet efficiencies. Our field service vehicle fleet
accounts for 61% of measured Scope 3 emissions. Growing
use of video conferencing systems helped limit our air travel
and related emissions. Reduced electricity consumption by
customers’ network in our exchanges also assisted.
Our FY18 reporting achieved a B rating from CDP,
a global organisation that collects self-reported
environmental information.
0
10
20
30
40
Kilotonnes CO
2
e
FY19FY18
Figure 10:
Scope 1, 2 and 3 Emissions
Electricity
Service company fleet
Travel
Refrigerant
Diesel generators
Other
FY12FY13FY14FY15FY16FY17
Note: This data excludes subcontractor vehicle emissions which were estimated to account
for 5 to 10 kilotonnes-CO2e.
0
10
5
15
Kilotonnes CO
2
e
FY12FY18FY13FY17FY14FY16FY15FY19
Figure 9:
Scope 1 and 2 Emissions
Note: FY19 electricity emissions have been estimated in advance of the release of
government electricity generation and emission data. Service company fleet emissions are
included in Scope 3 value chain emissions because the vehicles are owned and operated
by third parties.
Electricity
Diesel generators
Refrigerant
Company vehicles
Natural gas

Annual Report 201916
4.5 Cybersecurity and privacy
As a wholesale network operator our cybersecurity risks
are different from those of retail service providers. We
don’t hold direct personal information of the consumers
connecting to our network. For the limited information we
hold, we adhere to the requirements of the New Zealand
Privacy Act. The Telecommunications Information Privacy
Code (2003) also stipulates that we must not collect
telecommunications information except in limited

exceptional circumstances.
Our Board receives cybersecurity reports every six
months, with interim updates as required. We have detailed
policies, processes, and registers to ensure cybersecurity is
contemplated and addressed through technology selection,
network delivery practices, and ongoing operations and
protection of our IT systems. We undertake regular reviews,
including external audits and ad-hoc reviews, to provide
assurance and feedback on our assessments and controls.
This includes testing our security incident responses and
liaising with New Zealand’s National Cyber Security Centre
on advanced cyber threats.
There were no material cybersecurity incidents in FY19.
We have insurances for key cybersecurity risks.
4.4 Waste and recycling
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, while redundant metal network components are
recovered for recycling. E-waste is processed to extract
precious metals. In FY19 we worked with our suppliers
to reduce soft plastic packaging for two of our high use
provisioning products and this helped avoid 200,000 soft
plastic bags entering the waste stream. No significant
environmental incidents were recorded during FY19.
279
Tonnes
of ducting
recovered
for recycling
10
Tonnes
of e-waste
diverted
from landfill
279
Tonnes
of metal
recovered
for recycling

Annual Report 201917
5.0
Outlook
Within six months’ time we’ll have completed
the rollout of fibre across our original UFB
contract areas. This means the intensity of
our organisational focus on building the fibre
network is now reducing, with annual rollout
volumes slowing through to the end of 2022.
As we continue the work already underway to
reshape our business, our emphasis is shifting
to what’s required to maintain and operate
our network.
Our overarching strategy remains simple. We’ll keep
connecting as many customers to fibre as fast as we can,
while continuing to do everything we can to improve
customer satisfaction. Digital platforms are the key to this
and form a central part of our ongoing transformation
programme focussed on streamlining our business. The
pace of fibre uptake has encouraged us to accelerate
some aspects of this programme, so we can optimise our
operations earlier than previously expected.
For example, a new service company gateway will help us
keep retailers and customers better informed about progress
with their provisioning or fault-related activity. We’re also
consolidating and simplifying our management of customer
interactions into a single system. Ultimately, we believe most
premises already connected by fibre should be zero touch
for activating broadband service and any service issues
should largely be able to be resolved remotely.
Despite some of the competitive challenges we face,
particularly the decline in voice only connections, we remain
focussed on our aspiration of returning to modest EBITDA
growth in FY20. Our modernisation activities will help
remove legacy system constraints and merge some teams
within our business. Declining copper connection volumes
also present an opportunity for us to realise maintenance
and capital expenditure savings in some areas. However, this
doesn’t mean we’ll stop looking after the copper network.
Faults on the copper network remain relatively infrequent,
averaging about once every five years, and usually take less
than 24 hours to repair.
The Commission has indicated it will develop a copper
withdrawal code for the industry by mid-2020. Naturally,
we’ll take a customer-centric approach and inform
consumers well in advance and in accordance with the new
code. While we’re starting to plan for when we might start
switching off parts of the copper network in our fibre areas,
that’s still some time in the future and it will be on a street-
by-street basis, subject to factors such as fibre uptake. In
the interim, we believe retailers need to take care to avoid
creating consumer confusion about the timeframes for
copper switch-off. Some consumers appear to have been
advised that they need to disconnect from the copper
network when that isn’t the case.
Strong fibre demand is expected to continue, supported by
our migration programme and incentive campaigns, as well
as the upcoming Rugby World Cup. This should drive further
average revenue per user (ARPU) growth as customers
increasingly recognise the benefits of higher speed plans.
Commercialisation of our new data centre services and the
promotion of business products with enhanced restoration
times are other revenue priorities. We’re also continuing
to enhance our interaction with land developers given the
ongoing growth in new premises nationwide.
We’re positive about the future for fibre, but we also
acknowledge that technology can change quickly in our
industry. It’s important that these risks are recognised and
that investors have a fair opportunity to earn a return on, and
of, the substantial investment we’ve made to bring fibre to
New Zealand homes and business. This has occurred well
ahead of most other countries in the world and we continue
to invest ahead of demand to enable the network capacity
and resilience needed for reliable high-speed broadband.
In Europe, regulators have acknowledged the risk involved in
fibre investment by allowing a rate of return higher than that
allowed for legacy network investment. Our investors were,
therefore, surprised by the Commission’s initial views on
some of the parameters that will shape our allowable return
on the fibre network. These parameters potentially implied
one of the lowest cost of capital calculations for a regulated
utility in New Zealand. Our focus is on providing clear
evidence to the Commission through its ongoing processes
to ensure our investors’ concerns are fully and fairly reflected
in future decisions.
We believe New Zealand’s best interests are served by
the continued development of vibrant retail competition
for broadband and that open access wholesale networks
are critical to this. A combination of a lack of competitive
intensity, a lack of clarity for consumers, and cross-subsidies
between mobile and fixed wireless services, may create
structural advantages over other retailers. That’s why, with
the auction of the first blocks of 5G spectrum scheduled to
occur in 2020, we’ve encouraged regulatory and government
bodies to consider including allocation requirements that
help ensure competition continues to emerge.
We agree with the Commission’s preliminary mobile
market review finding that 5G deployment will likely involve
infrastructure sharing, given the use cases for 5G investment
remain unclear. We’ve already begun trialling small cell
deployments with mobile operators, building on the success of
earlier innovation trials to identify alternative uses for our assets.
Infrastructure sharing at a wholesale level makes good
economic sense for New Zealand, if it creates a more level
playing field and fosters a healthier retail market. The UFB
rollout is clear evidence of this. As our industry evolves, we’ll
keep exploring opportunities to leverage our infrastructure to
help make New Zealand better.

Annual Report 201918

Annual Report 201919
Management
commentary
20 In summary
21 Revenue commentary
22 Expenditure commentary
26 Capital expenditure commentary
27 Long term capital management

Annual Report 201920
2019
$M
2018
$M
Operating revenue 970 990
Operating expenses (334) (337)
Earnings before interest, income tax, depreciation and amortisation 636 653
Depreciation and amortisation (393) (387)
Earnings before interest and income tax 243 266
Net interest expense (165) (144)
Net earnings before income tax 78 122
Income tax expense (25) (37)
Net earnings for the year 53 85
In summary
We report earnings before interest, income tax, depreciation
and amortisation (EBITDA) of $636 million for the year
ending 30 June 2019 (FY19), a decrease of $17 million on the
prior year (FY18). Net earnings decreased by $32 million year
on year.
Results for FY19 largely reflect the annualised revenue impact
of declining copper connections, partly offset by increased
fibre uptake and continued tight control of expenses.
Capital expenditure of $804 million was below the FY19
guidance range of $820 million to $860 million. The
decrease from FY18 capital expenditure of $810 million
reflected significant reductions in copper capital expenditure,
which more than offset increased spend on fibre
connections.
We will pay a final dividend of 13.5 cents per share on
8 October 2019 and the dividend reinvestment plan will
be available. For FY20, we expect to pay a dividend of
24 cents per share, subject to no material adverse changes
in circumstances or outlook.
Connections
30 Jun 2019
Connections
31 Dec 2018
Connections
30 Jun 2018
Fibre broadband (GPON)599,000517,000433,000
Fibre premium (P2P)11,00012,00012,000
Copper VDSL270,000295,000321,000
Copper ADSL327,000374,000433,000
Data services over copper5,0005,0006,000
Unbundled copper24,00039,00053,000
Baseband copper214,000244,000268,000
Total fixed line connections1,450,0001,486,0001,526,000
Management commentary

Annual Report 201921
Revenue commentary
2019
$M
2018
$M
Fibre broadband (GPON)294198
Fibre premium (P2P)7478
Copper based voice106133
Copper based broadband344421
Data services over copper1827
Value added network services3033
Infrastructure2423
Field services products7470
Other67
Total revenue970990
Revenue overview
Our product portfolio encompasses a broad range of
wholesale broadband, data and voice services across a
mix of regulated, contracted, and commercial products.
Revenues of $970 million were down compared to revenue
of $990 million for the prior period. This largely reflects the
continued reduction in total fixed line connections from
FY18, as customers migrated to alternative fibre and wireless
networks. Line losses in FY19 were predominantly voice only
copper connections, with broadband connection growth
higher than in FY18.
Fibre broadband (GPON)
Fibre broadband revenues continue to grow as customers
migrate to our growing fibre network and broadband
penetration increases. GPON Fibre connections grew by 38%
to 599,000, with about 71% of connections on 100/20 Mbps
plans compared to 69% in FY18.
Demand for 1 Gbps plans almost doubled during the
year, growing to 58,000 connections, driven by growing
consumer demand for high speed connections and our
incentive campaigns to encourage retailers to promote
higher speed plans.
Fibre premium (P2P)
Fibre premium (point to point) revenues reduced as
customers migrated from legacy High Speed Network
Service Premium and Bandwidth Fibre Access Service
connections to lower cost inputs, or alternative fibre
networks. Direct Fibre Access Service and other backhaul
connections grew to 5,300 and 1,700 connections respectively.
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. The pace of decline increased in FY19 as
retailers promoted their wireless voice services, leading to
a reduction of 54,000 baseband copper connections, up
from 45,000 lines in FY18. Unbundled copper connections
declined at the same rate as the prior year.
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 continued to reduce as
retailers upgraded customers to better VDSL or fibre services.
However, the number of VDSL connections declined because
our ongoing fibre rollout enabled more VDSL customers to
upgrade to fibre.

Annual Report 201922
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 remained flat year on year and relate
to services that provide access to our network assets, such
as renting exchange space for commercial co-location
purposes. While there was ongoing growth in demand
for commercial co-location, this was largely offset by a
reduction in demand for unbundled copper access space.
Field services
Field services revenue increased by $4 million relative to
FY18, largely reflecting growth in revenue from new property
developments work. Revenue in this category can vary
depending on cost recovery for damage to our network
and third party demand (e.g. provisioning, cable location
services, maintaining retailer networks and network
relocation requests).
Other
Other income largely consists of revenue generated from
the provision of billing and network management services
to Spark. This continued to decrease 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
2019
$M
2018
$M
Labour7473
Network maintenance7587
Other network costs3334
Information technology5054
Rent and rates139
Property maintenance1715
Electricity1715
Provisioning66
Insurance33
Consultants75
Regulatory levies1613
Other2323
Total operating expenses334337
Operating expenditure of $334 million is lower than FY18
by $3 million. Significant savings were made in network
maintenance ($12 million) and information technology
costs ($4 million) as a result of specific cost reduction
efforts. These were offset by small increases across a range
of other operational and regulatory related cost lines.
Labour
Labour of $74 million represents staff costs that are not
capitalised. At 30 June 2019 we had 918 permanent and fixed
term employees, a further 2% reduction from 30 June 2018
of 933 employees. This reflects our ongoing improvement
of process and system workflows through the adoption of
digital systems, together with reviews of our organisational
structure as we begin to move from a build to a more
operational focus. There were one-off restructuring costs of
$1.5 million in FY19.

Annual Report 201923
Network maintenance
Network maintenance costs reduced by $12 million (14%)
from FY18. This was due to fewer network faults and
technician visits as a result of a number of factors, including:
• fewer extreme weather events than in FY18 and notably
dry conditions in the upper North Island;
• retailers using our new Application Programme Interface
tools
to better identify which faults don’t require
technician visits;
• underlying fault volumes decreased as a greater proportion
of customers are connected to the newer fibre network
and our total connection numbers reduced.
While the volume of technician visits reduced, the average
cost per fault increased. This is because the mix of faults
shifted from lower cost chargeable work at customer
premises, to higher cost faults within our fibre and copper
street network.
Other network costs
Other network costs relate to costs associated with service
partner contract costs, 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, with
the value incurred in the year dependent on various project
related activities.
Information technology
Information technology costs continued to reduce and were
down a further $4 million (7%) in FY19 as we maintained
tight cost control to offset inflation. We continued to replace
legacy shared systems with our own in-house solutions,
including a new billing platform. These solutions are enabling
lower IT maintenance and support costs.
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. Rates continue to increase
because the UFB rollout results in higher rateable values for
our network assets.
Property maintenance
Property maintenance costs have continued to increase as
we complete previously deferred maintenance activity.
Electricity
Electricity costs were slightly higher in FY19 due to higher
electricity prices. About 50% of our electricity requirements
have been hedged, with a current end date of June 2020.
Consultants
Consultant costs increased by $2 million (40%) as we
received external advice related to the implementation of the
new regulatory regime. Costs directly attributable to the final
models used in submissions to the Commerce Commission
(the Commission) have been capitalised.
Regulatory levies
Regulatory levies reflects the amount paid for the
Telecommunications Development Levy and the
Telecommunications Regulation Levy. We have allowed
for $3 million in FY19 in anticipation of the Commission
establishing a levy regime to fund the implementation of the
new regulatory framework.
Other
Other costs include expenditure on general costs such as
advertising, telecommunications, travel, training and legal
fees. Our cost control programme held expenses flat in FY19.

Annual Report 201924
Depreciation and amortisation
2019
$M
2018
$M
Estimated
useful life (years)
Weighted average
useful life (years)
Fibre cables90782020
Ducts, manholes and poles484220-5049
Copper cables615110-3022
Cabinets41415-2015
Property15155-5025
Network electronics60652-259
Right of use assets131310-5028
Other––2-106
Less: Crown funding (25) (22)
Total depreciation303283
Software56612-105
Other intangibles––6-3522
Customer retention 34 43 0-42
Total amortisation90104
The weighted average useful life represents the total useful
life in each category weighted by the net book value of
the assets.
During FY19, $804 million of expenditure on network assets
and software was capitalised. 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 (42%) and ducts, poles 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.
We considered the useful life of copper cables in Chorus
UFB1 areas and, due to strong fibre uptake, depreciation of
these cables is being accelerated at a rate of approximately
$11 million per annum, so they will be fully depreciated by
30 June 2025.
Software and other intangibles largely consist of the software
components of billing, provisioning and operational systems,
including spend on Spark-owned shared systems.
We expect that incremental costs incurred in acquiring new
contracts with new and existing customers are recoverable.
These costs are capitalised as customer retention assets.
Capitalised customer retention assets are amortised against
expenses when related revenues are recognised either
upfront or over the life of the contract (currently estimated to
be within a maximum of four years). In FY19, the amount of
amortisation was $34 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 UFB assets being
built. The offset of Crown funding against depreciation is
expected to continue to increase over time as the amount
of funding received from the Crown accumulates,
with the associated amortisation credit to depreciation
increasing accordingly.

Annual Report 201925
Finance income and expense
(Income)/expense
2019
$M
2018
$M
Finance income (10) (7)
Interest on syndicated bank facility 5 4
Interest on EMTN – GBP 53 53
Interest on EMTN – EUR 39 39
Interest on fixed rate NZD bonds 31 18
Other interest expense 26 22
Capitalised interest (4) (4)
Interest costs 150 132
Fair value adjustment on interest rate swaps not in hedge relationship (3) (3)
Ineffective portion of changes in fair value of cash flow hedges 6 5
Total finance expenses excluding CIP securities (notional) interest 153 134
CIP securities (notional) interest 22 17
Total finance expense 175 151
Interest costs increased by $18 million year on year due to the
issuance of a new $500 million domestic bond in December
2018. The new bond helped reduce the weighted effective
interest rate on debt to 5.75% (FY18: 5.96%). A portion of this
bond has been held in term deposits to be utilised at a later
date. This has led to a higher cash balance in FY19, and resulted
in a $3 million increase in finance income.
Other interest expense includes lease interest of $20 million
(FY18: $18 million), $3 million amortisation (FY18: $3 million)
arising from the difference between fair value and proceeds
realised from the GBP Euro Medium Term Note (EMTN) interest
rate swap reset in 2013 and a $2 million one-off expense in
FY19 for restructuring two forward dated interest rate swaps.
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 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 2019 a further $2 million remains in the hedge
reserve to be amortised in relation to this reset. In FY19,
ineffectiveness of $6 million (FY18: $7 million) flowed through
interest expense relating to the amortisation of this reset.
Taxation
The 2019 effective tax rate of 32% (FY18: 30%) is higher than
the statutory rate of 28% due to permanent differences
arising between accounting and taxable income due to the
different treatment of Crown Infrastructure Partner (CIP)
securities and Rural Broadband Initiative (RBI) funding and
assets for tax. The accounting adjustments recognised in
relation to CIP securities are non taxable as confirmed via
binding rulings issued by Inland Revenue. RBI assets were
funded by a non taxable government grant and RBI assets
are not depreciated for tax. The accounting amortisation
of RBI government grants and RBI accounting depreciation
recognised in the profit and loss is added back as a
permanent difference for tax.

Annual Report 201926
Capital expenditure commentary
2019
$M
2018
$M
Fibre664620
Copper81132
Common5958
Gross capital expenditure804810
Gross capital expenditure for the year to 30 June 2019 was
$804 million. This was $16 million below the FY19 guidance
range of $820 million to $860 million and $6 million below FY18
gross capital expenditure spend. Increased fibre connection
capital expenditure was offset by reduced copper capital
expenditure due to lower customer retention costs in FY19 and
FY18 spend including about $20 million of work to deploy VDSL
vectoring technology.
Fibre capital expenditure
2019
$M
2018
$M
UFB communal245231
Fibre connections and fibre layer 2
1
308294
Fibre products and systems1717
Other fibre connections and growth6565
Customer retention2913
Total fibre capital expenditure664620
1 Layer 2 equipment, such as gigabit capable passive optical network ports, are installed ahead of demand as the UFB footprint expands.
Fibre capital expenditure includes spend specifically focused on
fibre assets and represented about 83% of our FY19 gross capital
expenditure spend, up from 76% in FY18.
The cost of the deployment of the UFB communal network for
FY19 was $245 million, including about $105 million for the UFB2
rollout (FY18: $60 million).
The average cost per UFB1 brownfields premises passed during
the year was $1,573. This was in the top half of FY19 guidance for
an average cost of $1,500 to $1,600.
Fibre connections and layer 2 spend was $308 million with fibre
connections installed for 186,000 customers nationwide. This
was an increase of 30,000 installations year on year and included
14,000 UFB2 connections.
About $77 million was upfront investment for ‘backbone’
network to enable the connection of multiple customers located
along rights of way and 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 $1,025, excluding the
long run average cost of layer 2 equipment. This was at the lower
end of the expected FY19 cost range of $1,000 to $1,150.
Investment in other fibre connections and growth was flat at

$65 million.
Fibre customer retention costs increased by $16 million,
reflecting an increased focus on fibre product incentives.
Copper capital expenditure
2019
$M
2018
$M
Network sustain4445
Copper connections22
Copper layer 21234
Product fixed14
Customer retention2247
Total copper capital expenditure81132

Annual Report 201927
Copper capital expenditure decreased by $51 million
from FY18.
Network sustain capital expenditure continued at FY18
levels because of an ongoing pole replacement programme
outside our fibre areas and replacement of legacy
rural network.
Copper layer 2 spend decreased following the conclusion
of the VDSL vectoring technology rollout in FY18.
Customer retention costs decreased by $25 million reflecting
an increased focus on fibre product incentive offers and
fewer technician visits for copper provisioning.
Common capital expenditure
2019
$M
2018
$M
Information technology3435
Building and engineering services2220
Other33
Total common capital expenditure5958
Common capital expenditure of $59 million was consistent with the prior year.
Contributions to capital expenditure
We received $9 million in contributions towards our gross
capital expenditure. These contributions are included as part
of Crown funding and represent instances where central or
local government authorities asked us to relocate or rebuild
existing network.
Long term capital management
We will pay a final dividend of 13.5 cents per share on
8 October 2019 to all holders registered at 5.00pm 24
September 2019. The shares will be quoted on an ex-dividend
basis from 23 September 2019. 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 2.4 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 25 September 2019.
The Board expects to update the dividend policy once the
Commission finalises the value of our regulated asset base

and regulated revenue for fibre, currently due in June 2021.
Until then, the Board expects to be able to provide
shareholders with modest dividend growth, subject to

no material adverse changes in circumstance or outlook.
For FY20, we expect to pay a dividend of 24 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 2019, we had
a long term credit rating of BBB/stable outlook by Standard &
Poor’s and Baa2/stable by Moody’s Investors Service.
The GBP EMTN of $491 million is due for repayment in April
2020, and is therefore a current liability. Refinancing of this
bond is planned for FY20. If refinancing was not achievable
for any reason, undrawn bank debt facilities of $550 million
and cash balances of $273 million are available as an
alternative option to use for repayment.

Annual Report 201928

Annual Report 201929
Financial
statements
30 Independent auditor’s report
33 Income statement
33 Statement of comprehensive income
34 Statement of financial position
35 Statement of changes in equity
36 Statement of cash flows
38 Notes to the financial statements

Annual Report 201930
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 and advisory 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 $5.9 million, determined with reference to a benchmark of
Group profit before tax. We chose the 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 1 to the Financial Statements.
During the year ended 30 June 2019 the Group has spent
$711 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 and the approval of the asset life annual review are
effective.
—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 33 to 65:
i. present fairly in all material respects the Group’s financial
position as at 30 June 2019, 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 2019;
— 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 201931
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 network
capability (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 our knowledge of the business and its operations and industry
benchmarks.
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.
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.
—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 by independently modelling the future
changes in the value of these instruments to assess whether the
underlying derivatives were effective.
—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.
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.
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.

Annual Report 201932
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);
— implementing necessary internal control to enable
the preparation of a consolidated set of financial
statements that is 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
26 August 2019

Annual Report 201933
Income statement
For the year ended 30 June 2019
(Dollars in millions)Notes
2019
$M
2018
$M
Operating revenue9 970 990
Operating expenses10 (334) (337)
Earnings before interest, income tax, depreciation and amortisation 636 653
Depreciation1 (303) (283)
Amortisation2 (90) (104)
Earnings before interest and income tax 243 266
Finance income 10 7
Finance expense4 (175) (151)
Net earnings before income tax 78 122
Income tax expense14 (25) (37)
Net earnings for the year 53 85
Earnings per share
Basic earnings per share (dollars)
170.120.20
Diluted earnings per share (dollars)170.100.16
Statement of comprehensive income
For the year ended 30 June 2019
(Dollars in millions)Note
2019
$M
2018
$M
Net earnings for the year 53 85
Other comprehensive income
Items that will be reclassified subsequently to the income statement when specific
conditions are met
Movements in effective cash flow hedges
19 (45) (3)
Amortisation of de-designated cash flow hedges transferred to Income statement19 (2) (1)
Movement in cost of hedging reserve19 – (3)
Other comprehensive income net of tax (47) (7)
Total comprehensive income for the year net of tax 6 78
The accompanying notes are an integral part of these financial statements.

Annual Report 201934
Statement of financial position
As at 30 June 2019
(Dollars in millions)Notes
2019
$M
2018
$M
Current assets
Cash and call deposits
15 273 50
Income tax receivable 11 15
Trade and other receivables11 140 154
Derivative financial instruments19 3 3
Finance lease receivable5 6 5
Total current assets 433 227
Non-current assets
Derivative financial instruments
19 56 74
Trade and other receivables11 7 7
Deferred tax receivable14 101 82
Customer retention assets3 61 42
Software and other intangibles2 137 140
Network assets1 4,823 4,439
Total non-current assets 5,185 4,784
Total assets 5,618 5,011
Current liabilities
Trade and other payables
12 360 370
Income tax payable 2 3
Lease payable5 8 6
Derivative financial instruments19 197 19
Debt4 491 –
Total current liabilities excluding Crown funding 1,058 398
Crown funding7 25 21
Total current liabilities 1,083 419
Non-current liabilities
Deferred tax payable
14 326 306
Derivative financial instruments19 91 210
Lease payable5 246 237
Debt4 1,741 1,807
Total non-current liabilities excluding CIP and Crown funding 2,404 2,560
Crown Infrastructure Partners (CIP) securities6 355 273
Crown funding7 797 737
Total non-current liabilities 3,556 3,570
Total liabilities 4,639 3,989
Equity
Share capital
16 638 590
Reserves19(83)(36)
Retained earnings 424 468
Tot al e quit y 979 1,022
Total liabilities and equity 5,618 5,011
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 26 August 2019
Kate McKenzie
Chief Executive Officer and Managing Director

Annual Report 201935
Statement of changes in equity
For the year ended 30 June 2019
(Dollars in millions)Notes
Share capital
$M
Retained
earnings
$M
Hedging-related
reserves
$M
Total
$M
Balance at 1 July 2017 520 473 (29) 964
Comprehensive income
Net earnings for the year
– 85 – 85
Other comprehensive income
Changes in cash flow hedge reserve
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
Comprehensive income
Net earnings for the year
– 53 – 53
Other comprehensive income
Changes in cash flow hedge reserve
19 – – (45) (45)
Amortisation of de-designated cash flow hedges transferred to
income statement
19 – – (2) (2)
Total comprehensive income – 53 (47) 6
Contributions by and (distributions to) owners:
Dividends
16 – (97) – (97)
Supplementary dividends – (12) – (12)
Tax credit on supplementary dividends – 12 – 12
Dividend reinvestment plan16 48 – – 48
Total transactions with owners 48 (97) – (49)
Balance at 30 June 2019 638 424 (83) 979
The accompanying notes are an integral part of these financial statements.

Annual Report 201936
Statement of cash flows
For the year ended 30 June 2019
(Dollars in millions)Notes
2019
$M
2018
$M
Cash flows from operating activities
Cash was provided from/(applied to):
Cash received from customers
966 1,002
Finance income 1 3
Payment to suppliers and employees (339) (350)
Taxation paid 14 (3) (30)
Interest paid (129) (117)
Net cash flows from operating activities 496 508
Cash flows applied to investing activities
Cash was from/(applied) to:
Purchase of network and intangible assets
(806) (766)
Capitalised interest paid (4) (4)
Net cash flows applied to investing activities (810) (770)
Cash flows from financing activities
Cash was provided from/(applied to):
Net outflow from leases
(21) (15)
Crown funding (including CIP securities) 167 117
Issuance of share capital – 23
Proceeds from debt 500 70
Repayment of debt (60) (10)
Dividends paid(49) (43)
Net cash flows from financing activities 537 142
Net cash flow 223 (120)
Cash at the beginning of the year 50 170
Cash at the end of the year15 273 50
Reconciliation of net earnings to net cash flows from operating activities
(Dollars in millions)
2019
$M
2018
$M
Net earnings for the year 53 85
Adjustment for:
Depreciation charged on network assets
328 305
Amortisation of Crown funding (25) (22)
Amortisation of software and other intangible assets 90 104
Deferred income tax 18 21
Ineffective portion of changes in fair value of cash flow hedges 6 5
Movement in cost of hedging reserve – 3
Other 19 9
489 510
Change in current assets and liabilities:
Decrease/(increase) in trade and other receivables
14 (15)
(Decrease)/increase in trade and other payables (10) 24
Decrease/(increase) in tax receivable 4 (11)
Decrease in tax liability (1) –
7 (2)
Net cash flows from operating activities 496 508
The accompanying notes are an integral part of these financial statements.

Annual Report 201937
Reconciliation of movements of liabilities to cash flows arising from financing activities
Debt
$M
Crown funding
$M
CIP securities
$M
Lease payable
(net)
$M
Share capital
$M
Retained earnings
$M
Balance at 1 July 20171,609 698 203 154 520 473
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 20181,807 758 273 238 590 468
Movements from cash flows
Payment of lease liabilities
– – – (21) – –
Proceeds from funding 500 95 72 – – –
Repayment of borrowings (60) – – – – –
Dividends paid – – – – – (49)
Total changes from financing cash flows 440 95 72 (21) – (49)
Non-cash movements
Movements in fair value
(including foreign exchange rates)
(10) – – – – –
Transaction costs and amortisation
related to financing
(5) (25) 22 – – –
Accruals – (6) (12) – – –
Dividend reinvestment plan – – – – 48 (48)
Lease additions – – – 31 – –
Net earnings for the year – – – – – 53
Balance at 30 June 2019 2,232 822 355 248 638 424
The accompanying notes are an integral part of these financial statements.

Annual Report 201938
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 business. It maintains and builds a network
predominantly made up of fibre and copper 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 Spark New Zealand Limited (Spark, previously
Telecom Corporation of New Zealand Limited. 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, ASX, and Luxembourg Stock
Exchange debt markets. 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.
The accounting policies adopted and methods of computation
have been applied consistently throughout the periods
presented in these financial statements.
Reclassification and re-statement of comparatives
Where management have reclassified items in the financial
statements, the related comparative disclosures have been
adjusted to provide a like-for-like comparison.
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 1)
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.
Customer retention assets (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 201939
Note 1 – 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 overhead.
Repairs and maintenance costs are recognised in the income
statement as incurred. If the useful life of the asset is
extended or the asset is enhanced then the associated costs
are capitalised.
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 (leases)10–50 years
Other2–10 years
Other network assets include motor vehicles, network
management and administration systems and radio
infrastructure.
Any future adverse impacts arising from 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.
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. Work in
progress is reviewed on a regular basis to ensure that costs
represent future assets.