Investor presentation – UBS Australasia Investor Conference

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

Email: company.secretary@chorus.co.nz






STOCK EXCHANGE ANNOUNCEMENT

17 November 2020

Investor presentation - UBS Australasia Virtual Investor Conference

The attached Chorus presentation will be referenced at the UBS Australasia
Virtual Investor Conference.

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

---

Introducing Chorus
17 November 2020
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An Overview Of Chorus
17 November 2020
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AgencyRatingOutlook
S&PBBBStable
Moody’sBaa2Stable
New Zealand’s largest fixed line communications infrastructure business
▪Established in December 2011 following demerger from Telecom NZ
▪~870 employees, supported by service company contractors and subcontractors
▪Listed on NZX and ASX: CNU
▪~$3.7 billion market capitalisation (as at 31/10/20)
A nationwide copper and growing fibre network
▪Wholesale network operator with ~100 retailer customers
▪~1.4m connections, including ~1.2m broadband
▪90% of way through 11-year fibre to premises rollout
▪62% fibre uptake, well ahead of initial rollout target of 20% by 2020
▪Streaming video services and working from home driving significant data
consumption
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17 November 2020
Our Network Infrastructure
Fibre to pass ~1.36m end customers by end 2022
~40,000km duct network
~600
exchanges
~12,000 cabinets
~300,000 poles
Exchange co-location:
wireless co-location and
network edge computing
Offices and apartments
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
Bridging the digital divide:
providing free broadband
connections to 12,000 student
households
IoT: pole and
cabinet assets
provide coverage and
power infrastructure
UBS AUSTRALASIA VIRTUAL CONFERENCE
~54,000km fibre; ~130,000km copper cable
3

>Ultra-fast broadband (UFB): a Government objective
▪Originalobjective(UFB1):fibretopremisescovering75%
ofpopulationby2020
▪Subsequentagreements(UFB2andUFB2+)extended
coveragegoalto87%ofpopulationbytheendof2022
▪Choruswasawarded~75%ofthefibrerollout.The
remaining25%includesgovernmentpartnershipswith
threeotherfibrecompanies:Enable,Northpower,Ultrafast
Fibre
The Ultra-fast Broadband Initiative
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17 November 2020
UFB rollout rapidly nearing completion
0
10000
20000
30000
40000
50000
60000
70000
FY21FY22FY23
UFB2 rollout (premises)
ULTRAFAST FIBRE
4

UFB uptake reaches 62%
>UFB uptake increased from 60% to 62% within
completed footprint in Q1
▪uptake in UFB1 areas grew from 63% to 65%
▪uptake in UFB2 areas grew from 37% to 38%
(note: uptake includes some UFB2 areas that have been partially built, but not
yet submitted for Crown sign-off)
▪757,000 connections (Q4: 725,000) now within completed
footprint, including business premium connections
▪1,226,000customers able to connect (Q4: 1,209,000)
▪947,000premises passed* (Q4: 931,000) out of
1,054,000 target = UFB rollout 90% complete
>47,000 fibre installations completed in Q1 (Q4: 31k)
▪customer satisfaction increased from 8.1 to 8.2
*under the UFB contract, a multi-dwelling unit or single office block is one premises
Uptake
17 November 2020
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
Sep-19Dec-19Mar-20Jun-20Sep-20
ADSLVDSLFibre
Fibrenow 76% of Chorus broadband
connections in planned UFB zone
No. of
connections
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17 November 2020
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. Chorus is included in the Dow Jones Sustainability
Australia Index.
>Environment
▪Target of 80% reduction in scope 1 and 2 emissions, from our FY12 base year, by
2030. Achieved 37% reduction against target in FY20.
▪B-rating from CDP for FY19 reporting.
▪Extensive waste minimisation: 195 tonnes of waste ducting and 37 tonnes metal
network components recycled in FY20.
>Social
▪FTTH estimated (2012) to contribute $32 billion in economic benefits to NZ over 20
years. Social benefits estimated (2017) at $2 billion annually.
▪Winner of Broadband World Forum’s Broadband delivering social impact award2018
for rural broadband rollout.
▪Employee engagement 8.5 out of 10 in June 2020 (7.6 in FY19).
>Governance
▪Director gender ratio of 43% women, 57% men at 31 October 2020.
▪Target of 40:40:20 (male:female:any/either) gender ratio achieved for Chorus’
people leader community in FY20. Largest gender pay gap by career level is 4.1%.
Objective to achieve 0% gender career level pay gap.
▪Minimum Shareholding Policy for directors and executives introduced in 2019.
▪Total Recordable Injury Frequency Rate decreased from 2.67 to 2.43 in FY20 with an
overall reduction in injuries requiring medical treatment.
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Broadband: the 4
th
utility
17 November 2020
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17 November 2020
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A new world of data demand
0
0.5
1
1.5
2
2.5
3
Mar-16Sep-16Mar-17Sep-17Mar-18Sep-18Mar-19Sep-19Mar-20Sep-20
Peak Traffic (Tbps)
Fibre
Network
Copper
Network
FortniteSeason 5
Rugby World Cup
COVID-19 Lockdowns
8

Forecasting 1,000 Gigabytes per month by 2023...
17 November 2020
Monthly average data usage per connection on
our network
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0
200
400
600
800
1,000
1,200
1,400
J U N E 2 0 2 0J U N E 2 0 2 1J U N E 2 0 2 2J U N E 2 0 2 3J U N E 2 0 2 4
CopperFibre
Chorus Forecast: Average Monthly Broadband Usage
ActualForecast
<<>>
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17 November 2020
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The shift to remote working
Reliable broadband becomes a necessity
85
74
56
54
53
48
40
31
16
13
8
7
2
Laptop or desktop PC
High-speed connectivity to internet
Computer monitors
Smartphone
Video conferencing
Wi-Fi router
Headset
Virtual network access
Dedicated camera
Wi-Fi expander/extender
VOIP
Tablet
Other
Which of the following workplace technologies do you
consider as ‘must have’ when working from home or
remotely in general?
>Commerce Commission report (May 2020) noted
reliability of fixed line services through lockdown vs fixed
wireless (average download speeds decreased by around
25% and 96% of latency tests were above 30ms)
Source: Measuring Broadband New Zealand, Winter Report, August 2020
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17 November 2020
An Open Access Wholesale Network
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17 November 2020
Power and pay TV operators are new entrants
35
18
15
8
7
17
Source: IDC market data
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38
24
13
7
5
13
%
48
29
12
1
10
Broadband market share by retailer
(Q2 2020 vs Q1 2013)
Fibre market share by retailer
(Q2 2020)
Q1 2013
Q2 2020
Open access enables increased retail diversity
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17 November 2020
-
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
Q1 2013Q2 2013Q3 2013Q4 2013Q1 2014Q2 2014Q3 2014Q4 2014Q1 2015Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016Q4 2016Q1 2017Q2 2017Q3 2017Q4 2017Q1 2018Q2 2018Q3 2018Q4 2018Q1 2019Q2 2019Q3 2019Q4 2019Q1 2020Q2 2020
Broadband uptake by retailer (all technology)
SparkVodafoneOrconVocus2degreesTrustpowerROM
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
Q1 2013Q2 2013Q3 2013Q4 2013Q1 2014Q2 2014Q3 2014Q4 2014Q1 2015Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016Q4 2016Q1 2017Q2 2017Q3 2017Q4 2017Q1 2018Q2 2018Q3 2018Q4 2018Q1 2019Q2 2019Q3 2019Q4 2019Q1 2020Q2 2020
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
Connectionandmarkettrends
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33,000mass market fibre connections added in
Q1 2020
▪1Gbps connections grew from 115k to 128k
(i.e. 40% of 33k increase in total fibre
connections in Q1 2020)
▪1Gbps demand represents ~20% of new fibre
connection orders in recent weeks
▪Small business connections grew from 3k to 4k
▪UFB prices capped to 2022 with annual CPI
adjustment
▪New Hyperfibreproducts 2 & 4 Gbps services
launched early 2020
Total mass market fibre uptake by plan type
50Mbps
100Mbps
1Gbps
17 November 2020
Active wholesaler campaigns driving ARPU growth
200Mbps
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14

GPON
Hyperfibre
Fibre
Technology
Wi-Fi
Technology
Wi-Fi 5Wi-Fi 6
Wi-Fi 6 Speedtest
HyperFibre8000 Speedtest
Fibre capability keeps advancing
17 November 2020
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15

0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
30-Sep-1931-Dec-1931-Mar-2030-Jun-2030-Sep-20
17 November 2020
30 Sept
2019
31 Dec
2019
31 March
2020
30 June
2020
30 Sept
2020
Unbundled copper
(no broadband)
21,00018,00017,00015,00014,000
Baseband copper
(no broadband)
201,000192,000185,000179,000169,000
Copper ADSL
(includes naked)
304,000283,000261,000245,000218,000
VDSL
(includes naked)
257,000242,000228,000221,000202,000
Fibre broadband
(GPON)
645,000681,000713,000740,000773,000
Data services
(copper)
4,0004,0004,0004,0003,000
Fibre premium
(P2P)
12,00012,00011,00011,00011,000
Total connections
1,444,0001,432,0001,419,0001,415,0001,390,000
Fibre (GPON)
VDSL
Copper ADSL
Unbundled copper
Baseband copper
Fibre comprises 56% of Chorus connections
>1,193,000 broadband connections comprises:
▪773,000 fibre (GPON) connections
▪420,000 VDSL/ADSL (copper) connections
Business premium
Note: 11,000 free education connections are excluded from this data
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17 November 2020
Connection changes by Zone (indicative)
Chorus UFB
zone*
Non-UFB
zone
Local Fibre
Company
UFB zone
Total connections at
30 September**
1,087,000192,00097,000
Broadband connections978,000153,00062,000
Copper (no broadband)
connections
109,00039,00035,000
* Includes planned Chorus UFB1, 2 and 2+ coverage
**Excludes 14k fibre premium and data services (copper) connections
-2
8
3
7
-2
1
-9
-4
-8
-7
-8
-5
-5
-8
-1
-1
-1
-2
-2
-2
-2
-2
-15-5515
Q1 FY21
Q4 FY20
Q3 FY20
Q2 FY20
Q1 FY21
Q4 FY20
Q3 FY20
Q2 FY20
Q1 FY21
Q4 FY20
Q3 FY20
Q2 FY20
Broadband connections
Copper (no broadband) connections
LFC
Zone
Non-
UFB
Zone
Chorus
UFB Zone
N/C
Change in connections (‘000s) by zone**
>Chorus UFB zone: reduction in broadband reflecting RSP
copper broadband billing clean-up and catch-up of copper
migration delayed by Q4 lockdown period, as well as renewed
inertia selling campaigns by fixed wireless providers
>LFC zone: disconnections returned to pre-lockdown (Q4 FY20)
levels
>Non-UFB zone: fibre connections now 22k; some increased
rural wireless competition through mobile network expansion
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17 November 2020
Our strategic
focus in FY21
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17 November 2020
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1. Winning in our core fibre business
We’re lifting our connections intensity in FY21
~420,000
UFB1 + 2
addresses
already
passed, with
no ONT
installed
~80,000
UFB1 + 2
addresses
passed and
ONT already
installed
~80,000
UFB2
addresses
to pass in
FY21
25,000
greenfield
properties
under
contract
▪growth strongest in Auckland, good demand outside UFB zone
▪uptake continues to track at ~30% within 6 months of network build;
stronger in some UFB2 areas (e.g. Whatawhata80%)
▪~50% of fibre orders are now from intact addresses as our migration/incentive
programmes generate new uptake and consumers move premises
▪COVID-19 driving awareness of fibre reliability and capacity
▪new marketing and incentive campaigns launching
▪uplift in managed migration volumes
19

▪Q1 installation volumes increased significantly on prior
quarters (Q4 FY20 affected by COVID-19) as migration
activity ramps up
▪migration activity drove 7k connections in Q1 and
continues to result in ~50% uptake within 6 months of
installation
▪COVID-19 restrictions on door-to-door activity in
Auckland affected Q1 connection initiatives
▪Fibre, it’s how we internet now advertisingcampaign
creating strong awareness among late adopters and
helping drive migration activity
17 November 2020
Managed migration activity lifts fibre connections
More than 15k installations completed in Q1
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Q3 FY20Q4 FY20Q1 FY21
Managed migration programme
InstallationsConnections
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17 November 2020
2. Grow new revenues
Smart locations (e.g. CCTV, traffic lights)
▪streamlined our processes to help realise market growth
opportunity
▪new 50Mbps symmetrical plan to support connectivity of urban
infrastructure (e.g. poles, traffic lights) $55 per month
Wi-Fi ONT service
▪co-developed service with retailers
▪launching with $1.30 monthly fee; providing upfront credits to
support retailers switching systems
▪will enhance customer experience with shorter connection time
for homes with fibre already installed
▪potential to broaden fibre market by lowering router costs to
connect customers on short term contracts
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17 November 2020
3. Optimise non-fibre assets
Detailed review underway of existing network infrastructure
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>Focus on reducing ongoing network costs
▪20 network sitesexitedin FY20 (e.g. New Plymouth site –LFC
zone; Whangarei Heads rural site)
▪reshaping proactive maintenance programme in UFB zone to
reflect shift to fibre
▪reviewing copper broadband network assets in UFB zone
o~20 copper broadband cabinets with no customers
o~30 cabinets with <10 customers
BEFORE
AFTER
22

17 November 2020
4. Develop long term future of the business
Reviewing our operating model, including flexible working
UBS AUSTRALASIA VIRTUAL CONFERENCE
0
5
10
15
20
25
100% at
home
80% at
home
60% at
home
50% at
home
40% at
home
20% at
home
100% at
office
Employee preference for % of working
week at home vs office
% of
responses
23

Regulatory framework
17 November 2020
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87%of population where fibre will be available by end of 2022 →Remaining 13% of population →
Fibre accessnetwork –in Chorus UFB
areas
▪Revenue cap determined by Commission based on
regulated asset base (RAB) and regulatory rate of
return (WACC)
▪Accumulated unrecovered returns on investment
between 2011 and 2022 capitalisedinto initial RAB
and recoverable in future prices
▪Contracted price caps on fibreproducts to continue
until 2022, with annual inflation adjustment. Price
caps then only apply to specified ‘anchor services’;
fibrevoice service, entry level fibrebroadband
service and direct fibreaccess services
▪Unbundled fibre(commercial price) 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 in December
2020
Copper –where fibre is notavailable:
▪Copper remains regulated and TSO applies
▪Copper pricing capped at 2019 levels with CPI
adjustments
▪Commission required to review pricing framework
no later than 31 December 2025
17 November 2020
Legislation passed in November 2018
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17 November 2020
Overview of current RAB implementation
On 13 October and 3 November 2020, the Commerce
Commission released its final Input Methodology
determinations, following extensive submissions from
Chorus and investors.
The determinations establish the rules that will apply to
how the Maximum Allowable Revenue (MAR) will be
derived.
Chorus will continue to work with the Commission through
the next stage of the process where the MAR for the 3
year period from 1 January 2022 will be set.
These decisions, referred to as ‘price-quality’ decisions are
expected in the 2nd half of 2021.
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17 November 2020
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Input methodologies: key parameters
Pre January 2022 period (financial loss
asset)
First regulatory period
Risk free rate5-year rate, 1 month average, calculated as at
middle of year, or mid each part year for 2012
and 2021
3-year rate, 3 months average,
calculated as at 1 June 2021
TAMRP7% until Oct 2020 then 7.5%7.5%
Debt risk premiumBBB, 7-year term, 1 month averageBBB, 5-year term, 5-year trailing
average
Leverage29%29%
Debt issuance cost0.14%0.33%
Asset beta0.50.5
WACC upliftnone –50
th
percentilenone –50
th
percentile
Asymmetric stranding riskno allowance10 basis points
Crown financingFinancing rate reflecting Chorus’ actual senior
debt/subordinated debt/equity mix
Financing rate reflecting Chorus’
actual senior debt/subordinated
debt/equity mix
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17 November 2020
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Cost allocation parameters
Pre-December 2011 assets▪included to the extent assets are employed to provide fibre fixed line access
services under the UFB initiative.
▪valued as per Chorus financial accounts.
UFB costs from 1 December
2011 to 2022 (financial loss
asset)
▪shared costs are allocated using accounting-based allocation approach.
▪list of default allocators, with the Commission having the final decision:
number of customers, end-users, or premises (intact, connected or passed);
number of ports;
▪revenue; central office space; peak traffic; average traffic; used length of
linear assets; power usage; and number of events.
▪cost allocation calculations to be updated annually.
▪cap limiting the allocation of re-used assets to that which cannot be avoided
in providing UFB.
▪cost allocations to be applied consistently across costs and between years.
Fibre costs post 2022▪cost allocators to remain consistent with initial RAB unless there is a
justifiable reason to change.
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17 November 2020
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
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Illustrative Only
29

FINANCIAL HIGHLIGHTS
Financial overview and
capital management
17 November 2020
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17 November 2020
FY21 guidance summary
>Fibre $530m-$560m
▪$275m-$295m fibre connections & layer 2
(based on mass market 145,000 –165,000 fibre
connections, 9,000 backbone builds and including
service desk costs)
▪$125m-$145m spend for UFB2 communal
▪includes ~$30m for West Coast fibre rollout in
FY21 (3-year project ~$50m, largely government
funded)
▪UFB1 CPPC $1,025 -$1,175*
▪UFB2 CPPC $1,200 -$1,350*
*excluding layer 2 and including standard installations and
some non-standard single dwellings and service desk costs
>Copper $35m-$55m
>Common $50m-$65m
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Gross capex: $630m to $670m
EBITDA: $640m to $660m
▪subject to no material changes in expected
regulatory and competitive outlook
▪includes ~$10m allowance for ongoing COVID-19
impact and broader economic uncertainty
Dividend: 25cps, subject to no
material adverse changes in
circumstances or outlook
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17 November 2020
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▪Capex peaked in FY18 & FY19, leverage
peaked in FY20
▪UFB1 completed in November 2019
▪UFB2 scheduled to complete in CY22
▪Leverage will reduce in line with lower
capex/growing free cash flow in future
years
▪FY21 gross capex guidance:
▪$630-670m
▪FY21 EBITDA guidance:
▪$640-660m
* Mid guidance
Key Financial ratios:
▪Bank covenant -Net Senior Debt/EBITDA 4.75x
▪Credit rating downdriver -Net Senior Debt/EBITDA on a sustained basis
▪> 4.25x (S&P)
▪> 4.20x (Moody’s)
681
679
597
593
689
810
804
663
650
2.9
2.7
3.13.1
2.98
3.43
3.92
4.14
4.11
FY13FY14FY15FY16FY17FY18FY19FY20FY21*
Capex & Leverage
CapexSenior ND/EBITDA
* FY21 valuescalculated at
mid guidance levels
We’ve passed our capex peak
Net senior debt/EBITDA
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17 November 2020
Transition to free cash flow based dividend policy
0
50
100
150
200
250
300
FY20FY21*FY22FY23
UFB capex demands reducing
Communal spend
Connection & layer 2 spend
$m
*based on midpoint of FY21 guidance
UFB2 rollout
ends Dec 2022
Illustrative only
>from FY22 we will transition to a dividend policy based on a
pay-out range of free cash flow
▪free cash flow will be defined as net cash flows from
operating activities minus sustaining capex
>dividend levels through the transition period will reflect the
following considerations:
•maintenance of a BBB credit rating
•UFB related capital expenditure remains elevated
initially, reducing as the UFB rollout winds down (ends
Dec 2022)
•fibreconnection spend tapers off gradually, subject to
ongoing demand and timing of copper migration in
selected areas
•copper capex is declining as connections reduce
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17 November 2020
Defining sustaining capex
$186m of FY20 capex was sustaining
Fibrecapex: sustaining$m
Layer 231
Fibre products & systems14
Other fibre connections 20
Customer retention costs*7
Subtotal72
Coppercapex: sustaining$m
Network sustain31
Copperconnections1
Copper layer27
Customer retention costs*15
Subtotal54
Commoncapex: sustaining$m
Informationtechnology43
Building& engineering services17
Subtotal60
▪UFB communal $170m
▪Fibre connections $251m
▪Greenfield growth $42m
▪Customer retention$14m
▪Sub total$477m
▪FY20 Sustaining Capex$186m
>Sustaining capex is defined as total capex excluding:
▪UFB communal & future footprint expansion
▪Fibre connections & greenfield growth
▪Customer retention spend (incentives related)
>Exclusions within FY20 Capex of $663m were:
>Fibre sustaining capex is expected to increase over time as the
asset ages
UBS AUSTRALASIA VIRTUAL CONFERENCE
*Relates to provisioning, systems and service desk costs
34

17 November 2020
FY22 capital allocation framework driven by shareholder value
Net cash flow from operating activities
Sustaining capital
expenditure
Dividend
distribution
Surplus
capital
>Transition from FY22 to dividend distribution based on pay-
out range of free cash flow to reflect:
•a focus on providing shareholders with dividend
predictability, stability and sustainable growth
•comparable Australasian infrastructure and utility-like
businesses that pay out the majority of FCF
•robust management of sustaining capital expenditure
•transition period based on completion of UFB2 communal by
December 2022 and ongoing tapering of connection capex
>Surplus capital after dividend to be allocated based on
maximising shareholder value, and guided by:
▪debt levels consistent with existing credit rating, noting potential
re-gearing from any relaxation of rating thresholds
▪discretionary capex will only be pursued where:
•greater shareholder value is created compared to share buy
backs and/or additional dividends; and
•regulatory incentives are appropriate (e.g. regulatory WACC
vs Chorus WACC)
Discretionary
capex *
Additional
dividends
Share buy
backs
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* Examples include fibre footprint expansion, greenfield connections & customer retention spend
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17 November 2020
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Financial snapshot
▪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
▪Expect continued Fibre ARPU growth
▪Ongoing focus on cost reduction
1,040
990
970
959
-
200
400
600
800
1,000
1,200
FY17FY18*FY19FY20
Revenue ($m)
652
653
636
648
500
520
540
560
580
600
620
640
660
680
FY17FY18*FY19FY20FY21
EBITDA ($m)
FY21guidance
$640m -$660m
36

Income statement
17 November 2020
FY20
$m
FY19
$m
Operating revenue959970
Operating expenses(311)(334)
Earnings before interest, tax,
depreciation and amortisation (EBITDA)
648636
Depreciation and amortisation(402)(393)
Earnings before interest and income tax246243
Net finance expense(173)(165)
Net earnings before income tax7378
Income tax expense(21)(25)
Net earnings for the year5253
>Increasing with fibre asset; Crown funding offset
increased from $25m to $27m
>EUR300m bond issued in Dec 2019; average
interest rate on debt was 5.16%
>~$3m COVID-19 impact from industry hardship
fund ($2m) and migrations/connections
>~$9m COVID-19 impact across labour, other
network (sercos$5m) and provisioning lines
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17 November 2020
FY20
$m
FY19
$m
Fibre broadband (GPON)393294
Fibre premium (P2P)7374
Copper based voice82106
Copper based broadband271344
Data services copper1618
Field Services6574
Value added network
services
2930
Infrastructure2424
Other66
Total959970
Copper revenues declining as customers migrate to Chorus fibre or
competing fibre/wireless networks
>Reduced demand largely due to COVID-19 restrictions on activity
>Growing fibre uptake and ARPU: June FY20 $48.42* vs June FY19:
$47.50
>Direct fibre and backhaul growth helping offset legacy churn
Revenue
>Commercial co-lo growth offsetting reduced copper unbundling demand
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*FY20 ARPU adjusted to exclude COVID-19 related industry credits
38

>Included $5m COVID-19 sercosupport payments
17 November 2020
FY20
$m
FY19
$m
Labour 8074
Network maintenance6475
Other network costs2933
IT4750
Rent, rates and property
maintenance
2530
Regulatory levies716
Electricity1517
Provisioning56
Consultants97
Insurance33
Other2723
Total311334
>5% reduction in staff numbers, offset by COVID-19 impact on capitalisation
rates and annual leave costs, plus investment in regulatory capability
Expenses
>New platforms enabling lower IT maintenance and support costs
>Increase in external advice related to new regulatory framework
>Lower fault volumes due to favourable weather, fibre uptake and COVID-19
restrictions on activity
>Property maintenance activity reduced, partly COVID-19 related
>Reduction in annual Telecommunications Development Levy
>Lower electricity prices and consumption
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>Increased marketing to support copper to fibre migration
39

▪reactive maintenance spend in H2 FY20 was affected by COVID-
19 with lower reported fault volumes
▪copper (fixed and variable) fault volumes reduced due to drought
conditions in upper North Island and the ongoing reduction in
total copper connections
▪fibre maintenance increasing as share of connections grows, but
fault rate is lower on fibre (although costlier to fix)
▪long run annual saving from full copper to fibre migration in
Chorus UFB areas estimated at ~$10m p.afor fixed fault costs
17 November 2020
Reactive maintenance: Chorus network
Key drivers for $58m spend
0
5
10
15
20
FibreCopper - fixedCopper -
variable
Reactive spend by type
H1 FY19H2 FY19H1 FY20H2 FY20
0
5
10
15
Chorus UFB Rural (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
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17 November 2020
Net debt/EBITDA
As at
30 June 2020
$m
Borrowings2,234
+ PV of CIP debt
securities (senior)
183
+ Net leases payable263
Sub total2,680
-Cash0
Total net debt2,680
Net debt/EBITDA*4.14 times
>S&PND/EBITDA threshold 4.25xon a sustained basis
>Moody’sintend to review 4.2xthreshold once there is
further clarity on regulatory framework and portion of
revenue regulated
>Financial covenants require senior debt ratio to be no
greater than 4.75 times
>The Board considers that a ‘BBB’ credit rating or
equivalent credit rating is appropriate for a company
such as Chorus.
*Based on S&P and bank covenant methodologies
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>up to $1.33 billion CIP financing
available by 2023 (57:43 equity/debt)
>$1,067m drawn at 30 June 2020
>At 30 June, debt of $2,234m comprised:
▪Long term bank facilities of $550m ($30m drawn); $5m OD
▪NZ bond: $400m and $500m
▪Euro Medium Term Notes $1,299m (NZ$ equivalent at hedged rates)
NZ
$M
17 November 2020
400
500
785
514
85
86
128
163
20
39
46
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
Crown financing and debt profile
462462
143
161
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
drawnundrawn
NZ
$M
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17 November 2020
Crown financing
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▪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
Debt
securities
maturity
profile
30 June
2025
30 June
2030
30 June
2033
30 June
2036TOTAL
UFB1 & 2$85.3m$104.7m$166.7m$210.2m$566.9m
Equity
securities
subject to
paying
dividends
(cumulative)
30 June
2025
30 June
2030
30 June
2033
30 June
2036TOTAL
UFB1 & 2$85.3m$197.1m$377.7m$766.4m$766.4m
43