S&P affirms Chorus' BBB rating - outlook raised to positive

Chorus Limited Level
10, 1 Willis Street
P O Box 632
Wellington New
Zealand
Email: company.secretary@chorus.co.nz


STOCK EXCHANGE ANNOUNCEMENT

11 November 2025


S&P affirms Chorus' BBB rating - outlook raised to positive

S&P Global Ratings (S&P) has released the attached update on Chorus.

The update states that S&P has applied new digital infrastructure rating criteria to Chorus.
Under the new criteria, Chorus is now measured using a ‘Funds From Operations’ (FFO)-to-
debt ratio, a core leverage metric used by S&P to assess a company’s creditworthiness,
especially capital-intensive regulated entities in New Zealand. Previously S&P measured
Chorus on a debt-to-EBITDA basis.

S&P has noted that, at the current rating of 'BBB', the downside trigger has been set at FFO to
debt of below 9% (which is roughly equivalent to a debt-to-EBITDA metric maintained above
7x, compared with Chorus’ prior downside debt-to-EBITDA threshold of 5x).

As part of its review, S&P has changed Chorus’ long-term credit rating outlook to BBB ‘positive’
(from stable).

Authorised by:
Drew Davies
Chief Operating Officer

ENDS

For further information:

Aleida White
Head of Investor Relations
Mobile: 64 (21) 155 8837
Email: Aleida.White@chorus.co.nz

Shannon Goldstone
Head of Corporate Relations
Mobile: 64 (21) 712 679
Email: Shannon.Goldstone@chorus.co.nz

---

Research Update:
Chorus Ltd. Outlook Revised To Positive On Updated
Methodology; 'BBB' Rating Affirmed; Off UCO
November 10, 2025
(Editor's Note: In this article, published earlier today, we misstated the debt-to-EBITDA ratio in the Overview section. A corrected
version follows.)
Rating Action Overview
• We believe Chorus' underlying creditworthiness, which benefits from regulated cash flow,
allows it to tolerate higher leverage at the current rating level, so we have loosened our rating
triggers.
• This follows our review of the New Zealand-based fixed line wholesale-telecom company
following our implementation of the methodology for rating digital infrastructure companies,
including wholesale fiber businesses.
• On Nov. 11, 2025, S&P Global Ratings revised its outlook on Chorus to positive from stable. At
the same time, we affirmed our 'BBB' long-term issuer credit rating on Chorus. We also
affirmed our 'BBB' long-term issue credit ratings on the company's senior unsecured notes
and our 'BB+' rating on its subordinated capital notes. We removed the ratings from under
criteria observation (UCO).
• The positive outlook reflects our view that the group's strong regulated cash flow, prudent
capital management, and robust balance sheet could support us raising the long-term rating
to 'BBB+' over the next 12 months. This would entail Chorus' FFO-to-debt ratio staying above
13%, which would correspond to its debt-to-EBITDA ratio being below 6x.
Rating Action Rationale
Chorus' shift toward becoming a utility-like business, characterized by high predictability of
earnings and low volatility, underpins our view that the company can accommodate higher
leverage. Chorus' near monopoly over the fixed-line telecommunications wholesale access
network in New Zealand, high barriers to entry, and cash flow certainty from its regulated
business support its robust business risk profile.
We have loosened our credit metric thresholds for the rating on Chorus in recognition of its
business strengths relative to peers, following our implementation of the methodology for rating
Primary Contact
Ieva Erkule
Melbourne
61-3-9631-2085
ieva.erkule
@spglobal.com
Secondary Contact
Richard P Creed
Melbourne
61-3-9631-2045
richard.creed
@spglobal.com
www.spglobal.com/ratingsdirectNovember 10, 2025 1

digital infrastructure companies. We have also transitioned our primary credit metric to a funds
from operations (FFO)-to-debt measure to align with other capital-intensive regulated
businesses. At the current rating of 'BBB' the downside trigger has been set at FFO to debt of
below 9%. This is roughly equivalent to a debt-to-EBITDA metric maintained above 7x, which
compares with the prior downside threshold of above 5x.
Chorus' capital management and clarity on financial policies remain key for potential ratings
upside. The recent announcement by the New Zealand government (October 2025) regarding the
possible sale of National Infrastructure Funding and Financing (NIFF) debt and equity securities--
issued to support the ultra-fast broadband (UFB) network buildout--may weigh on Chorus' capital
structure.
While the likelihood and timing of any transaction are uncertain, a change in ownership to a less
credit supportive financial investor could affect our assessment of the subordinated NZ$683
million of NIFF equity securities, reclassifying them as debt rather than equity. This would
materially increase Chorus' leverage.
Accordingly, any transaction could materially affect Chorus' capital structure, credit metrics, and
consequently its financial policies. In addition, how Chorus manages growth capital expenditure
(capex), such as expanding the UFB network, will also be important in the evolution of the
company's capital structure.
Chorus has a record of maintaining a disciplined approach to shareholder returns and financial
policy decisions. Our base-case forecast is for Chorus to achieve FFO-to-debt above 15% over
the next two years absent any significant growth capex spending, assuming business as usual.
The company's capital management objectives include maintaining balance sheet headroom
against the company's leverage target of net debt to EBITDA of up to 5x (which calibrates to
about 15% FFO to debt). Given inherent additional debt capacity from the relaxation of rating
triggers we look to understand what effect, if any, this may have on Chorus' financial policies.
We expect Chorus to maintain its business position as regulated earnings contribute more to
revenue and earnings. The group continues to benefit from its near monopoly market position
through additional fiber uptake driven by demand for faster and more reliable connectivity.
Chorus' revenue from fiber that is subject to the regulatory regime contributed to about 83% of
total revenue as of fiscal 2025. We expect this to increase to about 84%-86% over next two years,
as the company aims to retire the remaining copper network by 2030.
The regulatory regime applicable to Chorus' fiber network determines an annual maximum
allowable revenue that Chorus can earn over each regulatory period. Chorus has regulatory
certainty until the end of 2028. The company entered the four-year regulatory period PQP2
(Price-Quality Path 2), and the New Zealand Commerce Commission has applied a revenue cap of
NZ$4.1 billion for Chorus over the regulatory period from Jan. 1, 2025, to Dec. 31, 2028. A wash-up
mechanism adjusts for any under or over recovery of revenue arising from differences between
projected and actual demand. This adds a layer of earnings certainty. How the regulatory
framework evolves through subsequent resets for PQP3 and the resultant cash flow certainty
and predictability is likely to drive future leverage tolerance parameters for the rating.
Chorus retains some longer-term exposure to competition from alternative technologies.
Presently, we do not see wireless broadband as a direct substitute for fixed broadband, the
rollout of 5G is yet to complete in New Zealand. Fixed-line fiber networks are generally faster,
less prone to congestion, more scalable, more reliable, and have longer life cycles. That said,
www.spglobal.com/ratingsdirectNovember 10, 2025 2
Chorus Ltd. Outlook Revised To Positive On Updated Methodology; 'BBB' Rating Affirmed; Off UCO

vertically integrated mobile network operators are incentivized to bypass fixed-line wholesalers
to capture the full value chain and achieve higher margins compared with fiber resellers.
Consequently, clarity regarding the relative market share of fixed wireless and fiber, and
ultimately the effect on Chorus' demand remains unclear for now, in our view. Key will also be the
impact of alternatives like satellite technologies and the ability of these to attract customers
from fiber networks.
Outlook
The positive outlook reflects our view that the group's strong regulated cash flow, prudent capital
management, and robust balance sheet could support us raising the long-term rating on the
group to 'BBB+' over the next 12 months. This would entail Chorus' FFO-to-debt ratio staying
above 13%.
We note that the New Zealand government is currently assessing its options for its stake in
Chorus, which it holds via the NIFF securities. If the government chooses to sell these securities,
we will likely reclassify them as debt. This, together with any material additional debt funded
growth capex or increase in shareholder returns, could moderate upside rating pressure.
Downside scenario
We could revise the outlook to stable if we believe Chorus' FFO-to-debt ratio will trend to 13% or
below. This could occur if:
• The sale of the NIFF securities occurs and there is a material adverse effect on Chorus' capital
structure; and
• Chorus pursues a more aggressive financial policy that is not supportive of a higher rating,
including significant debt-financed returns to shareholders, growth capex, or acquisitions.
Upside scenario
We may raise the rating to 'BBB+' over the next 12 months if we expect Chorus to sustain FFO to
debt above 13%, supported by robust financial policies. An upgrade would also be dependent on
the outcome of any sale of the NIFF securities being consistent with a higher rating.
Inherent to our view of potential rating upside is that the company does not materially expand
into unregulated businesses, or the regulatory regime evolves in a manner that materially
reduces the predictability and sustainability of the group's earnings and cash flow.
Company Description
Chorus is New Zealand's largest fixed-line wholesale communications company, including the
legacy copper network (which is on the decline). The company owns the majority of telephone
lines and exchange equipment in New Zealand and is responsible for building approximately 80%
of the new fiber optic network. UFB1 (the original phase of the rollout), UFB2, and UFB2+ are
subsequent phases announced in 2017. The government-backed UFB covers 87% of the
population and the fiber uptake has reached 72.2% in Chorus' UFB rollout areas.
In 2011, Chorus was structurally separated from Telecom New Zealand, later rebranded as Spark
New Zealand prior to the UFB rollout.
www.spglobal.com/ratingsdirectNovember 10, 2025 3
Chorus Ltd. Outlook Revised To Positive On Updated Methodology; 'BBB' Rating Affirmed; Off UCO

Our Base-Case Scenario
Assumptions
• New Zealand's GDP growth to be around 1.2% in calendar 2025 and then recover to 2.1% in
2026, compared with -0.4% in 2024.
• Revenue growth 1%-3% in fiscal 2026 and fiscal 2027, supported by increasing fiber-based
revenues (fiber broadband and fiber premium), while copper-based revenues will continue to
decline.
• Modest EBITDA growth over the next two years.
• EBITDA margins of about 70% in next three years.
• Capex of about NZ$410 million in fiscal 2026 and NZ$365 million in fiscal 2027.
• Dividends of 60 cents per share in fiscal 2026, subject to no material adverse changes in
circumstances or outlook.
Key metrics
Period endingJune-30-2024June-30-2025June-30-2026June-30-2027June-30-2028
(Mil. NZD)2024a2025a2026e2027f2028f
Revenue 1,010 1,014 1,025 1,055 1,085
EBITDA 700 705 720 740 770
Capital expenditure (capex) 442 397 410 365 380
Funds from operations (FFO)534551560560570
Debt 2,980 3,256 3,310 3,340 3,515
Adjusted ratios
Debt/EBITDA (x) 4.3 4.6 4.6 4.6 4.6
FFO/Debt (%)17.916.916.916.616.4
70%
76%
80%
84%
86%
87%
16%
11%
7%
4%
3%
2%
13%
13%13%
12%
11%
11%
2023a2024a2025a2026f2027f2028f
0
200
400
600
800
1000
1200
Other
Copper
Fiber
RevenuedistributionforfiscalyearendingJune30
ChorusLtd.'sRevenueContributionFromFiberToIncreaseWithCopper-To-FiberMigration
Copyright©2025byStandard&Poor’sFinancialServicesLLC.Allrightsreserved.
a--Actual.f--Forecast.Sources:S&PGlobalRatings.
www.spglobal.com/ratingsdirectNovember 10, 2025 4
Chorus Ltd. Outlook Revised To Positive On Updated Methodology; 'BBB' Rating Affirmed; Off UCO

FOCF/debt (%) 2.3 4.9 5.9 7.2 6.9
DCF/debt (%) (4.5) (2.0) (1.8) (0.6) (0.9)
EBITDA margin (%) 69.3 69.5 70.2 70.0 70.7
All figures are adjusted by S&P Global Ratings, unless stated as reported. a--Actual. e--Estimate. f--Forecast
Liquidity
We consider Chorus' liquidity to be adequate, reflecting our expectation that the group's sources
of liquidity will cover its uses by about 1.2x over the 12-month period ending June 30, 2026. We
also expect the company's net sources to remain positive even if EBITDA were to decline by 15%.
Also supporting the group's liquidity are its sound relationships with banks and its generally high
standing in credit markets. Chorus has accessed funding in the domestic New Zealand,
Australian, and euro medium-term note markets. Following are the sources and uses of liquidity
as of June 30, 2025.
Principal liquidity sourcesPrincipal liquidity uses
• Cash and cash equivalents of NZ$80 million as of June
30, 2025.
• Undrawn committed bank facilities of about NZ$230
million, expiring beyond 12 months.
• Cash FFO of about NZ$550 million-NZ$600 million.
• No debt of maturing within the 12 months to June 30,
2026.
• Capex of NZ$410 million over the same period.
• Dividends of 60 cents per share over the same period.
Environmental, Social, And Governance
We view Chorus' environmental risk as somewhat lower than the average telecom company, due
to the environmental benefits of fiber broadband, which uses materially less electricity than
copper and mobile technology.
Chorus' targets are science-aligned, following guidance from the Science Based Targets Initiative
for the information communications technology sector.
Chorus' focus remains on reducing electricity use and exploring opportunities to invest in
renewables. In fiscal 2025, the company achieved a 5% reduction in electricity against fiscal
2024, largely due to a copper withdrawal program and upgrading or removing legacy network
equipment.
Issue Ratings--Subordination Risk Analysis
Capital structure
As of June 30, 2025, Chorus' capital structure consisted of NZ$220 million bank facilities, €800
million medium-term notes, A$300 million medium-term notes, NZ$900 million New Zealand
domestic bonds, NZ$170 million in capital notes, and NIFF debt securities of about NZ$240
million, which we treat as debt.
www.spglobal.com/ratingsdirectNovember 10, 2025 5
Chorus Ltd. Outlook Revised To Positive On Updated Methodology; 'BBB' Rating Affirmed; Off UCO

Analytical conclusions
We rate Chorus' senior unsecured bonds at 'BBB', the same as the long-term issuer credit rating.
This is given the debt is senior, and no significant elements of subordination risk are present.
In addition, we rate the subordinated debt two notches below at 'BB+', in line with our criteria on
hybrids. This is given the debt's subordinated nature and deferability characteristics.
The subordinated capital notes have a final maturity of 31 years, i.e., June 3, 2056, with a 25 basis
points (bps) step-up in year 11 (2036) and another 75 bps step-up in year 26 (2051). While our long-
term issuer credit rating on Chorus is in the 'BBB' rating category or higher, we will reclassify the
capital notes as having no equity content from intermediate when the period remaining to
effective maturity is less than 20 years (2031).
Rating Component Scores
Rating Component Scores
Component
Foreign currency issuer credit ratingBBB/Positive/--
Local currency issuer credit ratingBBB/Positive/--
Business riskExcellent
Country riskLow risk
Industry riskLow risk
Competitive positionExcellent
Financial riskSignificant
Cash flow/leverageSignificant
Anchora-
Modifiers
Diversification/portfolio effectNeutral/Undiversified
Capital structureNeutral
Financial policyNegative
LiquidityAdequate
Management and governanceNeutral
Comparable rating analysisNegative
Stand-alone credit profilebbb
Related Criteria
•Criteria | Corporates | General: Sector-Specific Corporate Methodology, July 7, 2025
•General Criteria: Hybrid Capital: Methodology And Assumptions, Feb. 10, 2025
•Criteria | Corporates | General: Methodology: Management And Governance Credit Factors For
Corporate Entities, Jan. 7, 2024
•Criteria | Corporates | General: Corporate Methodology, Jan. 7, 2024
•General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10,
2021
•General Criteria: Group Rating Methodology, July 1, 2019
www.spglobal.com/ratingsdirectNovember 10, 2025 6
Chorus Ltd. Outlook Revised To Positive On Updated Methodology; 'BBB' Rating Affirmed; Off UCO

•Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019
•Criteria | Corporates | General: Reflecting Subordination Risk In Corporate Issue Ratings, March
28, 2018
•Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global
Corporate Issuers, Dec. 16, 2014
•General Criteria: Methodology: Industry Risk, Nov. 19, 2013
•General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
•General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
Ratings List
Ratings List
Ratings Affirmed; Outlook Action
ToFrom
Chorus Ltd.
Issuer Credit RatingBBB/Positive/--BBB/Stable/--
Ratings Affirmed
Chorus Ltd.
Senior UnsecuredBBB
SubordinatedBB+
AUSTRALIA S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global
Ratings credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined
in Chapter 7 of the Corporations Act).
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in
our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at
https://disclosure.spglobal.com/ratings/en/regulatory/ratings-criteria for further information. A description of each of S&P Global Ratings' rating categories is
contained in "S&P Global Ratings Definitions" at https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/504352. Complete ratings
information is available to RatingsDirect subscribers at www.capitaliq.com. All ratings referenced herein can be found on S&P Global Ratings' public website at
www.spglobal.com/ratings.
www.spglobal.com/ratingsdirectNovember 10, 2025 7
Chorus Ltd. Outlook Revised To Positive On Updated Methodology; 'BBB' Rating Affirmed; Off UCO

www.spglobal.com/ratingsdirectNovember 10, 2025 8
Chorus Ltd. Outlook Revised To Positive On Updated Methodology; 'BBB' Rating Affirmed; Off UCO

STANDARD & POOR’S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor’s Financial Services LLC.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right
to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge),
and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors.
Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities.
As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures
to maintain the confidentiality of certain non-public information received in connection with each analytical process.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory
purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty
whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been
suffered on account thereof.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not
statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any
securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following
publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its
management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment
advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and
undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of
reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit
rating and related analyses.

Some of the Content may have been created with the assistance of an artificial intelligence (AI) tool. Published Content created or processed using AI is
composed, reviewed, edited, and approved by S&P personnel.

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof
(Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the
prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or
unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do
not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or
otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The
Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT
THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In
no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages,
costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in
connection with any use of the Content even if advised of the possibility of such damages.
Copyright © 2025 by Standard & Poor's Financial Services LLC. All rights reserved.