Chorus’ investor roadshow

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

Email: company.secretary@chorus.co.nz






STOCK EXCHANGE ANNOUNCEMENT

21 November 2019


Chorus’ investor roadshow


The attached presentation has been prepared by Chorus for an international
roadshow scheduled to take place next week.

ENDS


For further information:


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


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

---

Chorus Limited- Debt Investor Presentation
November 2019
DEBT INVESTOR PRESENTATION

November 2019
DEBT INVESTOR PRESENTATION
Disclaimer
This presentation:
Includes forward-looking statements. These statements are not guarantees or predictions of future performance. They involve known and unknown risks,
uncertainties and other factors, many of which are beyond Chorus’ control, and which may cause actual results to differ materially from those contained in
this presentation.
Includes statements relating to past performance which should not be regarded as reliable indicators of future performance.
Is current at the date of this presentation, unless otherwise stated. Except as required by law or the NZX 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 including "EBITDA”. These measures do not have a standardised meaning prescribed by GAAP and therefore may
not be comparable to similar financial information presented by other entities. They should not be used in substitution for, or isolation of, Chorus' audited
consolidated financial statements. Chorus monitors EBITDA as a key performance indicator and believes it assists investors in assessing the performance
of the core operations of Chorus’ business. Refer to Chorus’ FY19 results investor presentation for further detail relating to EBITDA measures.
Has been prepared with due care and attention. However, Chorus and its directors and employees accept no liability for any errors or omissions.
Contains information from third parties Chorus believes reliable. However, no representations or warranties (express or implied) are made as to the
accuracy or completeness of such information.
This presentation does not constitute investment advice or a securities recommendation and has not taken into account any particular investor’s
investment objectives or other circumstances. Investors are encouraged to make an independent assessment of Chorus.
Note that references made to $ within this presentation refer to New Zealand dollars (NZD).
To the extent permitted by law, the Joint Lead Managers and their respective related bodies corporate, officers, employees, agents, advisers, contractors
and members: (a) disclaim any and all liability relating to this information, including, without limitation, any express or implied representation for
statements and conclusions contained in and omissions from this presentation; and (b) accept no liability (whether in negligence or otherwise) for any
loss, damage, costs or expenses of any nature which may be suffered or incurred by any person relying on any information or statement contained herein
or otherwise arising in connection with any such information or statement. The recipient should not rely upon the contents of this presentation but should
make its own assessment and evaluation, undertake an investigation and enquire and seek advice to enable it to make any decision concerning its own
risks
2

November 2019
DEBT INVESTOR PRESENTATION
Presenters
David joined Chorus in December 2018 after
9 years with Aurizon, Australia’s largest rail
freight operator
David is responsible for ensuring Chorus’
strong financial performance, and creating a
stable and sustainable business. This includes
building relationships with shareholders, debt
holders, and the wider investment community

Andrew joined Chorus after 17 years with
TCNZ where he held a number of roles in
finance, before being appointed Treasurer in
2005
Andrew worked on the debt management
aspects of the TCNZ / Chorus demerger
Prior to joining TCNZ, Andrew worked at the
Reserve Bank of New Zealand in the financial
markets group

Brett has run Chorus’ investor relations
programme since the demerger from TCNZ in
late 2011
Brett joined Chorus when it was first
established as an operationally separate
business unit within TCNZ in 2008 and was
involved in marketing communications,
industry consultation and network bid
projects
David Collins
Chief Financial Officer
Andrew Hopkinson
Treasurer
Brett Jackson
IR Manager
3

Table of Contents

1.Introducing Chorus
2.Business Overview
3.Financial Highlights
4.Appendices






November 2019
DEBT INVESTOR PRESENTATION
4

Introducing Chorus

New Zealand’s largest fixed line
communications infrastructure business




5 November 2019
DEBT INVESTOR PRESENTATION

New Zealand’s largest fixed line communications infrastructure company
Building and operating 75% of NZ’s planned fibre to the premises footprint
Fibre partnership with NZ Government: pre-committed, low cost, long-term funding
Regulated utility framework to underpin financial profile from 2022
Strong demand for fibre broadband, and population/premises growth
Strong operating cash flows and financial performance
Financial flexibility via $550m bank facility, multi-currency EMTN and NZ dollar retail bond programmes
Proven commitment to maintaining a BBB credit rating (S&P or equivalent)
November 2019
DEBT INVESTOR PRESENTATION
Key Credit Highlights
6

An Overview Of Chorus
November 2019
DEBT INVESTOR PRESENTATION
Agency Rating Outlook
S&P BBB Stable
Moody’s Baa2 Stable
New Zealand’s largest fixed line communications infrastructure business
Established in Dec 2011 following demerger from Telecom NZ
~900 employees, supported by service company contractors and subcontractors
Listed on NZX and ASX: CNU
~NZ$2.5 billion market capitalisation (as at 20/11/19)

A nationwide copper and growing fibre (FTTH) network
Wholesale network operator with ~100 retailer customers
~1.45m connections, including ~1.2m broadband
82% of way through 11-year fibre to premises rollout
55% fibre uptake, well ahead of initial rollout target of 20% by 2020
Streaming video services driving significant data consumption



7

The Ultra-fast Broadband Initiative
Ultra-fast broadband (UFB): a Government objective
▪original objective (UFB1): fibre to premises covering 75%
of population by 2020
▪subsequent agreements (UFB2 and UFB2+) extended
coverage goal to 87% of population by the end of
2022
Chorus was awarded ~75% of the fibre rollout
▪requirement that Chorus split from Telecom NZ to
participate: demerger in December 2011
▪government partnerships with four fibre companies:
Chorus, Enable, Northpower, Ultrafast Fibre (WEL
Networks)
DEBT INVESTOR PRESENTATION
8 November 2019

November 2019
Our Network Infrastructure
Copper VDSL to ~80% of lines; Fibre to pass ~1.36m end customers by end 2022
~37,000km duct network
~600
exchanges
~12,000 cabinets
~290,000 poles
Exchange co-location:
wireless co-location and
network edge computing
Offices: fibre access and
‘fibre to the desktop’
Fibre to smart locations:
CCTV, traffic lights
Fibre backhaul: to
mobile towers,
small cells
FTTP: enabling unlimited
data, enhanced Wi-Fi and
TV broadcast capability
School Wi-Fi trials: extend
school network to local students
via Chorus network
IoT: pole and
cabinet assets
provide coverage and
power infrastructure
DEBT INVESTOR PRESENTATION
~52,000km fibre; ~130,000km copper cable
9

Business Overview

Chorus’ role within the New Zealand
fixed line market
10 November 2019
DEBT INVESTOR PRESENTATION

November 2019
An Open Access Wholesale Network

DEBT INVESTOR PRESENTATION
11

November 2019 12
Fibre to reach 87% of NZ population by 2023
72
15
13
Auckland: broadband
connections by type (%)
FibreVDSLADSL
Planned fibre footprint >
Rollout progress >
Uptake >
Local fibre companies
~450k end users
uptake ~255k


Chorus
to pass ~1.36m end users
rollout 82% complete
uptake ~624k = 55% of deployed footprint


DEBT INVESTOR PRESENTATION

Premises growth supporting broadband uptake
96,000 dwellings forecast to be consented in Auckland (2019-2024)
Auckland
▪New peak of ~14k dwelling unit consents in 2019,
forecast to keep growing

New Zealand
▪Average of 37,000 new dwellings forecast per
annum for the next six years
▪Multi-unit dwellings expected to grow from 36%
to 41% of new residential dwellings by 2024







November 2019
DEBT INVESTOR PRESENTATION
13

Broadband: the 4
th
utility
November 2019 14
DEBT INVESTOR PRESENTATION

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 promoted uptake of smart TV’s and
introduced traditional TV viewers to streaming
Chorus network capacity increased ~50% in FY19
November 2019
Monthly average data usage per connection on
our network
15
DEBT INVESTOR PRESENTATION

0
200
400
600
800
1000
1200
1400
J U N E 2 0 1 9 J U N E 2 0 2 0 J U N E 2 0 2 1 J U N E 2 0 2 2 J U N E 2 0 2 3 J U N E 2 0 2 4
CopperFibre
GB
1,000 Gigabytes per month by 2023...
Video content and 4K, 8K to drive usage growth
November 2019
Speed requirements in Mbps
Source: Cisco VNI, Forecast and Trends, 2017-2022
DEBT INVESTOR PRESENTATION
16
Chorus Forecast: Average Monthly Broadband Usage

46,000 mass market fibre connections added in Q1 (vs
43k in Q4 FY19)
▪1Gbps connections grew to 69k (Q4 FY19: 58k) and
are now ~11% of mass market fibre connections
▪Second tier retailers continue to grow market share
with some promoting 1Gbps at ~$85p.m.
▪100Mbps connections stable at 71%
▪UFB prices capped to 2022 with annual CPI
adjustment

0
10
20
30
40
50
60
70
80
90
100
Jun-18Sep-18Dec-18Mar-19Jun-19Sep-19
% of
plans
Total mass market fibre uptake by plan type
50Mbps
100Mbps
1Gbps
November 2019
Active wholesaler campaigns driving ARPU growth
200Mbps
$60 p.m.
$46 p.m.
$42.50 p.m.
$55 p.m.
Business/Education
plans
DEBT INVESTOR PRESENTATION
10G PON in development, 25G PON on the roadmap
17
•New Hyperfibre products, initially as 2 & 4 Gbps
services were recently launched
•Hyperfibre will enable new technologies and
experiences, fundamentally changing the
possibilities for how we live, work and innovate

November 2019
Streamlining and simplification
DEBT INVESTOR PRESENTATION
Accelerating our transformation programme
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

Fibre connect: 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

18

November 2019
DEBT INVESTOR PRESENTATION
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)

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
19

Regulatory Framework
November 2019 20
DEBT INVESTOR PRESENTATION

87% of population where fibre will be available by end of 2022  Remaining 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:
Copper network to be deregulated and
Telecommunications Service Obligation (TSO)
removed
Chorus 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

November 2019 21
Legislation passed in November 2018
DEBT INVESTOR PRESENTATION

November 2019
Overview of current RAB implementation
On 19 November, the Commerce Commission released its
draft Input Methodologies decision, following extensive
submissions from Chorus and investors. Key changes
from the Commission’s ‘emerging views’ paper published
in May were:

Higher WACC following an upward revision of:
the asset beta from 0.46 to 0.49; and
Market Risk Premium from 7% to 7.5% (applicable
after 2020)
Tax losses to be carried forward to implementation
date
More favourable treatment of Crown financing

The Input Methodologies are expected to be finalised by
mid 2020, followed by Price-Quality decisions in mid
2021.

The Commerce Commission is implementing the new framework
DEBT INVESTOR PRESENTATION
22
Indicative fibre regulation timeline
June 2020 Input methodologies
final decision due
(the "rule book")
Q4 2020 Draft price-quality path
Q2 2021 Final price-quality path
(sets the revenue and RAB)

November 2019
Regulated Asset Base implementation
Building block
cost stack
Commerce Commission will determine the starting value of the RAB, regulatory WACC, cost allocations, expenditure
allowances and maximum allowable revenue
DEBT INVESTOR PRESENTATION
23
Illustrative Only

FINANCIAL HIGHLIGHTS

Financial overview and
capital management
24 November 2019
DEBT INVESTOR PRESENTATION

November 2019
DEBT INVESTOR PRESENTATION
25
Financial snapshot
652
653
636
500
520
540
560
580
600
620
640
660
680
FY17FY18*FY19FY20
EBITDA ($m)
Revenue has reduced due to:
copper line loss in areas where Chorus is not
building the fibre network
fixed wireless competition

Revenue loss partially offset by:
strong fibre uptake
customers moving to higher priced plans
(e.g. 1Gbps, enhanced business plans)



* New accounting standards IFRS 9, 15 and 16 were adopted from FY18
FY20 guidance
625m-645m
1,040
990
970
-
200
400
600
800
1,000
1,200
FY17FY18*FY19
Revenue ($m)

Expect to return to modest EBITDA growth in FY20
Expect continued broadband and ARPU growth
Ongoing programmes to reduce costs

FY17FY18FY19FY20 GUIDANCE
Capex
CommonCopperFibre - otherFibre - connectFibre - communal
November 2019
$810m
DEBT INVESTOR PRESENTATION
$660 - $700m
550-580
50-70
50-65
95
132
58
26
$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
**
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
FY19FY20FY21FY22FY23
UFB rollout schedule (premises)
UFB1 BrownfieldsUFB2UFB1 Greenfields
We’ve passed our capex peak

Leverage follows Capex
November 2019
DEBT INVESTOR PRESENTATION
Capex peaked in FY18 & FY19, leverage to
peak in FY20
UFB1 will be completed in December 2019
Leverage will reduce in line with lower
capex/growing free cash flow in future
years
FY20 gross capex guidance:
$660m-$700m
FY20 EBITDA guidance:
$625-645m
*4.06x calculated at mid guidance levels
681
679
597
593
689
810
804
680
2.9
2.7
3.1
3.1
2.98
3.43
3.92
4.06
FY13FY14FY15FY16FY17FY18FY19FY20
CapexSenior ND/EBITDA
Key Financial ratios:
Bank covenant - Net Senior Debt/EBITDA 4.75x
Credit rating down driver - Net Senior Debt/EBITDA on a sustained basis
> 4.25x (S&P)
> 4.20x (Moody’s)
27

Chorus Limited is rated BBB (stable) by Standard & Poor’s and Baa2 (stable) by Moody’s.

The Chorus Board considers that a ‘BBB’ credit rating or equivalent is appropriate for a company such as
Chorus. We maintain capital management and financial policies consistent with these ratings.

Chorus maintains ready access to ample liquidity across cash balances and availability under its bank facilities, as
well as remaining capacity under the arrangement with Crown Infrastructure Partners (CIP) with respect to UFB fibre
rollout capex
▪Chorus can issue debt securities to the Crown up to a total face value of $570 million. These securities are non –
interest bearing, repayable in tranches between 2025 and 2036, and rank equally with all other unsecured,
unsubordinated creditors of Chorus
▪Chorus can issue equity securities to the Crown up to a total face value of $766 million, which pay no dividends
until 2025 – at which point dividends are phased in between 2025 and 2036, and are deferrable (optional and
mandatory) on a non-cumulative basis
▪To date $982 million of securities have been issued to the Crown, leaving $354 million of crown funding available

Chorus’ financial bank facility covenants require its senior debt ratio to be no greater than 4.75 times








Capital management
November 2019
DEBT INVESTOR PRESENTATION
28

November 2019
Debt and Liquidity
As at 31 Oct 2019, borrowings of $2,426m
comprised of:
$ 65m drawn from bank facilities
$677m equivalent at hedged rates
GBP259.82m due April 2020
$400m NZD bond due May 2021
$784m equivalent at hedged rates
EUR500m due October 2023
$500m NZD bond due December 2028
$2,426m Total gross debt

Bank Facilities
$350m Evergreen, May 2022
$250m Evergreen, May 2024
$550m




DEBT INVESTOR PRESENTATION
Crown Financing ($m) at 31 October 19 Drawn Available Total
Face Value CIP Debt Securities 444
-
21
105
465
105
UFB1 $465m
UFB2/2+ $105m
Face Value CIP Equity Securities 444
94
21
207
465
301
UFB1 $465m
UFB2/2+ $301m
Total Crown Financing 982 354 1,336
677
400
500
785
350
200
82 82
123
157
4
23
44
52
0
100
200
300
400
500
600
700
800
GBP EMTN
NZ Bond
EUR EMTN
Bank Facility
Face value of CIP debt securities issued
CIP debt securities available
29

We have an extensive waste
minimisation process for network
activities
Our People
Keeping Communities
Connected
Enabling Climate
Action
Waste and Recycling
Cybersecurity and
Privacy
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
November 2019 30
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
DEBT INVESTOR PRESENTATION
We’re committed to building a
culture that’s inspiring for our
employees and drives the
desired brand experience for
our customers
Equip our people with the
tools and skills needed to
support the changes within
the business
Employee Benefits: Wellbeing
& Volunteer Days
Diversity and Inclusion
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
We work to ensure the 1.45
million connections on our
network receive stable and
reliable service
Average duration of network
interruptions in FY19 across
fibre and copper network was
18 hours, down from 21 hours
in FY18


Enhanced broadband
connectivity opens up
alternative business models
and communications options
that reduce the need for
carbon emitting activity
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

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

Term Description
ADSL Asymmetric digital subscriber line – a communication technology allowing high-speed data transfer over copper-based access networks in the local loop
ARPU Average revenue per user
CIP Crown Infrastructure Partners
FTTH Fibre to the home
GBs Gigabits per second. A measure of data consumption
HFC Hybrid fibre copper
IoT Internet of things – network of physical devices, vehicles, home appliances and other items embedded with electronics, software, sensors, actuators, and network
connectivity which enables these objects to be connected and exchange data.
LFC Local fibre company – the companies responsible for the roll out, provisioning and maintenance of the UFB network
Mbps Megabits per second. A measure of network speed
ONT Optical network terminal. General term for a specialised piece of network equipment that terminates a single dark fibre and is located at the End User premises
PON Passive optical network. A line consisting of optical fibres spliced end- to- end possibly via a splitter
RAB Regulated asset base
VDSL

Very high bit rate digital subscriber line - the highest speed variant of ADSL technology
WACC Weighted average cost of capital
November 2019
DEBT INVESTOR PRESENTATION
Appendix: Key Terms
31

Thank you
November 2019 32
DEBT INVESTOR PRESENTATION