Chorus Q3 FY20 Connections Update

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

Email: company.secretary@chorus.co.nz


STOCK EXCHANGE ANNOUNCEMENT

9 April 2020


Chorus Q3 FY20 Connections Update

The Q3 period saw the COVID-19 lockdown, from 25 March, confirm the utility role of
fixed line broadband.

Monthly average data usage for March grew to 346GB, up 18% from 293GB in
December;
• copper broadband usage grew to 225GB vs 429GB for fibre users, and
• the COVID-19 lockdown is reinforcing the value of unlimited datacaps, with
103GB average usage in just the last week of March, while two-way services
such as video conferencing drove 85% greater upload usage during daytime.
Broadband connections grew 4k in Chorus UFB and rural areas, while total broadband
connections reduced by 4k to 1,202,000 (Q2 FY20: no change; Q3 FY19: +5k);

• fibre demand remained strong with 32k connections added (Q2 FY20: +36k)
despite COVID-19 impacts (i.e. fewer returning students and reduced
installations during lockdown in late March),
• strong growth in 1Gbps connections to 105k (Q2: 87k), now 15% of mass
market fibre connections, and
• UFB uptake rose from 56% to 58% and fibre was extended past 13,000 more
customers.
Total fixed line connections declined by 13k to 1,419,000 (Q2 FY20: -12k; Q3 FY19: -
14k)
• copper voice line reductions continued to moderate in Q3 (Q3 -8k; Q2 -12k).

Authorised by
David Collins
Chief Financial Officer

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


Steve Pettigrew
Head of External Communications
Mobile +64 (27) 258 6257
Email: Steve.Pettigrew@chorus.co.nz

---

Q3 FY20 Connections Update
9April 2020

>Monthly average data usage for March grew to 346GB, up 18% from 293GB in December
▪copper broadband usage grew to 225GB vs 429GB for fibre users
▪the COVID-19 lockdown is reinforcing the value of unlimited datacaps, with 103GB average usage in just
the last week of March, while two-way services such as video conferencing drove 85% greater upload
usage during daytime
>Broadband connections grew 4k in Chorus UFB and rural areas, while total broadband
connections reduced by 4k to 1,202,000 (Q2 FY20: nochange; Q3 FY19: +5k)
▪fibre demand remained strong with 32k connections added (Q2 FY20: +36k) despite COVID-19 impacts
(i.e. fewer returning students and reduced installations during lockdown inlateMarch)
▪strong growth in 1Gbps connections to 105k (Q2: 87k), now 15% of mass market fibre connections
▪UFB uptake rose from 56% to 58% and fibre was extended past 13,000 more customers
>Total fixed line connections declined by 13k to 1,419,000 (Q2 FY20: -12k; Q3 FY19: -14k)
▪copper voice line reductions continued to moderate in Q3 (Q3 -8k; Q2 -12k)
9April 2020
Q3 FY20 overview
Q3 FY20 CONNECTIONS UPDATE
2
COVID-19 lockdown from 25 March confirms utility role of fixed line broadband

9April 20203
COVID-19: Keeping New Zealand connected
>Our network is supporting exponential growth in broadband traffic
▪record evening peak of 3Tbps on 27 March, up from Rugby World Cup record of 2.6Tbps
▪we’ve offered to enable existing connections in up to 50,000 non-broadband homes, free-of-charge
for six months, to support government initiatives for online schooling
>Field force activity reduced to essential work only; focus on maintaining workforce capability
▪UFB2 rollout, subdivision and proactive work paused, while network restoration continues
▪weareworkingcloselywithservicecompaniestoidentifysupportforthemandourtechnician
workforce, inthecontextoftheir significantly reduced workflow/revenue, so they can quickly return
to extending the fibre network and connecting a backlog of customers post-lockdown
>We’re working with RSPs to address industry-wide challenges
▪fast tracking handover and backhaul capacity upgrades that keep services congestion free
▪CPI increase on wholesale charges delayed until October, possibly longer
▪introducing a process for RSP business customers so they can temporarily disconnect lines to limit
network charges while they aren’t trading, and waiving our reconnection fee
Q3 FY20 CONNECTIONS UPDATE

9 April 20204
COVID-19: post lockdown connection impact
>Fibre installations have slowed significantly to ~100 per day vs ~650 prior as a result of
alert Level 4 restrictions
▪broadband installations limited to premises with no existing fixed line broadband, or customers
with essential business or educational requirements not met by an existing broadband service
▪number of active connection crews has reduced from ~640 pre-lockdown to ~260
▪we have suspended our door-to-door fibre migration programme, but have a new RSP incentive
campaign focused on ~50k addresses where fibre is ready to activate remotely
▪non-essential installations are currentlybeingscheduledto resume in May, with WIP expected to
grow from current level of 18k orders
>Broadband serviceupgradesarecontinuingviaremoteprovisioning
▪1Gbps upgrade orders grew ~50% in the first two weeks of lockdown; 3k upgrades to 1Gbps
were completed in March (excluding RSP bulk migrations)
▪ADSL to VDSL upgrades have also increased since the lockdown began
>Expect to see an increase in network disconnections as economic slowdown affects
businesses and our temporary disconnection process is utilised
Q3 FY20 CONNECTIONS UPDATE

0
200000
400000
600000
800000
1000000
1200000
1400000
31-Mar-1930-Jun-1930-Sep-1931-Dec-1931-Mar-20
9April 2020
31 March
2019
30 June
2019
30 Sept
2019
31 Dec
2019
31 March
2020
Unbundled copper
(no broadband)
31,00024,00021,00018,00017,000
Baseband copper
(no broadband)
233,000214,000201,000192,000185,000
Copper ADSL
(includes naked)
352,000327,000304,000283,000261,000
VDSL
(includes naked)
283,000270,000257,000242,000228,000
Fibre broadband
(GPON)
556,000599,000645,000681,000713,000
Data services
(copper)
5,0005,0004,0004,0004,000
Fibre premium
(P2P)
12,00011,00012,00012,00011,000
Total connections
1,472,0001,450,0001,444,0001,432,0001,419,000
Fibre (GPON)
VDSL
Copper ADSL
Unbundled copper
Baseband copper
Fibre now makes up 51% of Chorus connections
Q3 FY20 CONNECTIONS UPDATE
>1,202,000 broadband connections comprises:
▪713,000 fibre (GPON) connections
▪489,000 VDSL/ADSL (copper) connections
Business premium
5

32,000mass market fibre connections added
▪1Gbps connections grew from 87k to 105k,
helped by RSP migration of 200Mbps
customers, and now represent 15% of mass
market fibre
▪100Mbps retained 70% share at 494k
▪50Mbps connections were flat at 88k or 12%
0
10
20
30
40
50
60
70
80
90
100
Dec-18Mar-19Jun-19Sep-19Dec-19Mar-20
% of
plans
Total mass market fibre uptake by plan type
50Mbps
100Mbps
1Gbps
9April 2020
1Gbps plans grew from 13% to 15%
200Mbps
Q3 FY20 CONNECTIONS UPDATE
$60 p.m.
$46 p.m.
$42.50 p.m.
$55 p.m.
Business/Education plans
6
-10
0
10
20
30
50Mbps100Mbps200Mbps1Gbps
Fibre plan movement by quarter
Q1Q2Q3
Change in
connections
(‘000s)

9April 2020
Connection changes by Zone (indicative)
Chorus UFB
zone*
Rural(non-
UFB) zone
Local Fibre
Company
UFB zone
Total connections at
31 March**
1,094,000196,000114,000
Broadband connections972,000155,00075,000
Copper (no broadband)
connections
122,00041,00039,000
* Includes planned UFB1, 2 and 2+ coverage
**Excludes 15k fibre premium and data services (copper) connections
Q3 FY20 CONNECTIONS UPDATE
7
3
7
16
1
1
-8
-7
-7
-5
-8
-11
-1
-2
-2
-2
-2
-3
-15-5515
Q3
Q2
Q1
Q3
Q2
Q1
Q3
Q2
Q1
Broadband connections
Copper (no broadband) connections
LFC
Zone
Rural
Zone
Chorus
UFB Zone
N/C
Change in connections (‘000s) by zone**
>Chorus UFB zone: 3kbroadband growth despite
signs of wireless migration of copper broadband
customers earlier in Q3 and lower fibre volumes in
March as a result of COVID-19, while copper voice line
loss continued to slow
>LFC zone: a clear reduction in VDSL disconnects in
March, with LFC and wireless competition in prior
months moderating
>Rural: positive broadband growth, with VDSL/fibre
adds exceeding ADSL reductions

Broadband mix in Chorus planned UFB zone
9April 20208
Fibrenow 71% of Chorus broadband
connections in planned UFB zone
80% of Chorus broadband
connections in Auckland on fibre
80
11
9
Chorus’ Auckland broadband
connections by type (%)
Fibre
Copper - VDSL
Copper - ADSL
Q3 FY20 CONNECTIONS UPDATE
No. of
connections
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
ADSLVDSLFibre

UFB rollout 87% complete
>UFB uptake increased from 56% to 58% within completed
footprint
▪uptake in UFB1 areas grew from 58% to 60%
▪uptake in UFB2 areas grew from 34% to 35%
(note: uptake includes some UFB2 areas that have been partially built, but not yet
submitted for Crown sign-off)
▪695,000 connections (Q2: 664,000) now within completed
footprint, including business premium
▪1,198,000customers able to connect (Q2: 1,185,000)
▪920,000 premises passed (Q2: 909,000) out of 1,054,000
target = UFB rollout 87% complete
>38,000fibre installations completed in Q3 (Q2: 45k)
▪customer satisfaction increased from 7.8 to 7.9
▪9kinstallationsthroughourmanagedmigrationsprogramme
Uptake
9April 2020
Q3 FY20 CONNECTIONS UPDATE
8,000
10,000
12,000
14,000
16,000
18,000
20,000
JulyAugSeptOctNovDecJanFebMarAprilMayJune
Fibre installations (NZ wide)
FY18FY19FY20
9

0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
Jun-19Sep-19Dec-19Mar-20
% uptake
relative to
capable
addresses
UFB1 uptake: 60%
Q3 FY20 CONNECTIONS UPDATE
109April 2020

Monthly average data usage grew 18% in Q3
>monthly average data usage per connection on our network
grew to 346GBin Q3, up from 293GB (Dec)
▪429GBon fibre (Dec:363GB)
▪225GBon copper (Dec:200GB)
>data usage in the last week of March averaged 103GBas New
Zealanders spent time at home for the COVID-19 lockdown
▪theincreaseindataneedsisdrivingincreasedconsumer
awareness of datacaplimitations, along with upload/latency
requirements
>continued growth in demand for EdgeCentrecolocation
capability in Auckland; extending footprint to Tauranga
9April 2020
200
225
363
429
293
346
0
50
100
150
200
250
300
350
400
450
Dec-14
Mar-15
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Sep-15
Dec-15
Mar-16
Jun-16
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Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
CopperFibreAverage
Data
usage
(GB)
Monthly average data usage
per connection on our network
Q3 FY20 CONNECTIONS UPDATE
11

>Download traffic set a new record of 3.03Tbps on 27 March, well within Chorus’ network capacity.
>Daytime upload traffic has grown ~85% as Kiwis use services such as video conferencing, requiring greater bandwidth
and low latency (latency above 30ms can result in poor experience of applications such as gaming and video calls –see
Measuring Broadband NZ,Spring Report, December 2019 -Figure 13).
9April 202012
COVID-19 effect on network traffic
Chorus download traffic
Q3 FY20 CONNECTIONS UPDATE
Chorus upload traffic