Slide 1: Stock exchange announcement: Analysys Mason presentation
Chorus Limited Level 10, 1 Willis Street P O Box 632 Wellington 6140 For personal use only New Zealand Email: company.secretary@chorus.co.nz STOCK EXCHANGE ANNOUNCEMENT 4 December 2014 Analysys Mason presentation Attached is the presentation to accompany a briefing today by Chorus’ consultants, Anal
Slide 2: Chorus UCLL and UBA models briefing
For personal use only Chorus UCLL and UBA models briefing 4 December 2014 • James Allen 38598-494
Slide 3: Contents
2 Contents For personal use only UCLL model UBA model 38598-494
Slide 4: Contents: UCLL model
UCLL 3 Contents For personal use only UCLL model Operator parameters Technology Services Implementation Result 38598-494
Slide 5: UCLL model overall approach
UCLL 4 UCLL model For personal use only Overall approach: use techniques of bottom up LRIC modelling, but based on an adjusted version of the existing set of assets Adjustments applied are for: Increased use of aerial Optimisation of route length Use of network sharing Lower expected peak de
Slide 6: Operator parameters
UCLL 5 Operator parameters For personal use only Type of operator: hypothetical Network footprint: Current national network coverage offering NC-UCLL and SLU to existing premises covered Scale: demand similar to Chorus 38598-494
Slide 7: Technology
UCLL 6 Technology For personal use only Technology – copper to the home those existing customers served with wireless links are not relevant to NC-UCLL costs Cabinets are used where cabinets are currently used Scorched node: Chorus MDFs and cabinets are retained Geo-typing – national model
Slide 8: Services
UCLL 7 Services For personal use only Products modelled: services using the copper access network including SLU, NC-UCLL, UCLFS, HSNS, etc) – but not UFB The model uses “technical services": non-overlapping services that map to specific network assets This may include for example route, cabling
Slide 9: Implementation
UCLL 8 Implementation For personal use only Tool – Excel; one workbook; no macros Model is in real terms Key results are provided in nominal terms Time period Multi-year model Depreciation method chosen only requires a single year calculation; Determining a unit cost that is constant in no
Slide 10: Increment and common cost markups
9 Increment and common cost markups For personal use only Increment – all modelled services on access network Mark-ups for common costs are available, but not used (business overhead costs are included within the incremental cost, allocated via an EPMU) 38598-494
Slide 11: Total costs
UCLL 10 Total costs For personal use only Asset counts come from NetMap, a Chorus GIS As noted above we have adjusted these in a number of ways (e.g. more aerial) Unit costs – based on costs faced by Chorus for modern asset type Trenching costs based on costs recently incurred and planned for
Slide 12: Allocation approach
UCLL 11 Allocation approach For personal use only Services sharing trench/duct/cable/UUB are allocated costs based on the number of subscribers Opex is grouped into various categories, each treated distinctly some allocated based on drivers; some EPMU 38598-494
Slide 13: Annualisation
UCLL 12 Annualisation For personal use only Modified Tilted Annuity is used Flat demand makes this equivalent to tilted annuity Tilt for each asset from asset price trend WACC – 8.1% post-tax nominal Lifetimes from Chorus fixed asset register (FAR) Asset annual unit costs -> technical s
Slide 14: Versions
UCLL 13 Versions For personal use only Confidential version Restricted version certain information has been overwritten Public version much information has been overwritten All versions function in the same way – only the data differs Some outputs in the full model differ slightly as a r
Slide 15: Result
Result 14 Result For personal use only Service Unit cost (NZD/ month) NC-UCLL 74.10 SLU 81.43 UCLFS 84.87 The replacement cost of the modelled network (excluding costs reported in the UBA model) is NZD 14 B in 2013 real terms 38598-494
Slide 16: UBA contents
UBA 15 Contents For personal use only UBA model Operator parameters Technology Services Implementation Result 38598-494
Slide 17: UBA model overall approach
UBA 16 UBA model For personal use only Overall approach: use bottom up approach for electronics; use existing locations and existing passive assets for connections between: cabinet / exchange, and exchange / Ethernet Aggregation Switch sites Adjustments are made for optimisation of route lengt
Slide 18: Operator parameters
UBA 17 Operator parameters For personal use only Type of operator: hypothetical Network footprint: Current Chorus DSL network coverage offering UBA to existing premises covered Scale: demand similar to Chorus UBA 38598-494
Slide 19: Technology
18 Technology For personal use only Technology – DSL on copper Scorched node: Cabinet DSLAMs are deployed where they are currently located DSLAMs also deployed at customer sites and exchanges, as per current locations Chorus MDF and EAS locations also retained Geo-typing Divides DSLAM loca
Slide 20: Services
UBA 19 Services For personal use only Products modelled: all services using the Chorus network between the DSLAM and the switch including UBA, HSNS etc The model uses “technical services": non-overlapping services that map to specific network assets Future demand volume: forecast demand growth
Slide 21: Implementation
UBA 20 Implementation For personal use only Tool – Excel; one workbook; no macros Model is in real terms Key results are provided in nominal terms Time period Multi-year model depreciation method chosen only requires a single year calculation; determining a unit cost that is constant in no
Slide 22: Increment and common cost markups
UBA 21 Increment and common cost markups For personal use only Increment – all services offered on Chorus network between the DSLAM and first switch Mark-ups for common costs are available, but not used (business overhead costs are included within the incremental cost, allocated via an EPMU) 38
Slide 23: Total costs
UBA 22 Total costs For personal use only Asset counts come from Bottom up calculation for electronics Existing feeder routes to cabinets (from UCLL model) Existing inter-exchange links (from Chorus data) Unit costs – based on costs faced by Chorus for modern asset type Modern equivalent
Slide 24: Allocation approach
UBA 23 Allocation approach For personal use only Access network: services sharing trench/duct/cable/UUB are allocated costs based on the number of subscribers Core network: costs divided between UBA and other core network services (such as HSNS) on the basis of traffic Opex is grouped into var
Slide 25: Annualisation
UBA 24 Annualisation For personal use only Modified Tilted Annuity is used (UBA demand is forecast to change over time) Tilt for each asset from asset price trend and demand WACC – 8.1% post-tax nominal Lifetimes from Chorus fixed asset register (FAR) Asset annual unit costs -> technical s
Slide 26: Versions
25 Versions For personal use only Confidential version Restricted version – certain information has been overwritten Public version – much information has been overwritten All versions function in the same way – only the data differs 38598-494
Slide 27: Result
UBA 26 Result For personal use only Service Unit cost (NZD/ month) EUBA0 16.57 The replacement cost of the modelled network is NZD 2 B in 2013 real terms 38598-494