Chorus Limited · NZX:CNU
Chorus — Debt Investor Presentation (August 2022)
35 slides from Chorus's debt investor presentation, Aug 25, 2022
Slide 1: Stock exchange announcement: EMTN debt investor roadshow and Tender Offer
Chorus Limited Level 10, 1 Willis Street P O Box 632 Wellington New Zealand For personal use only Email: company.secretary@chorus.co.nz STOCK EXCHANGE ANNOUNCEMENT 25 August 2022 Chorus announces new EMTN debt investor roadshow and Tender Offer for existing €500 million 1.125% 2023 Senior Notes Chor
Slide 2: Chorus Limited - Debt Investor Presentation
For personal use only Chorus Limited- Debt Investor Presentation August 2022 RESTRICTED
Slide 3: Disclaimer
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
Slide 4: Presenters
Presenters For personal use only Andrew Hopkinson Brett Jackson Treasurer IR Manager Andrew joined Chorus after 17 years with Brett has run Chorus’ investor relations Telecom Corporation of New Zealand (TCNZ) programme since the demerger from Telecom where he held a number of roles in finance, Corpo
Slide 5: Introducing Chorus
Introducing Chorus For personal use only New Zealand's largest fixed line communications infrastructure business Table of Contents Business and market overview 5-9 Strategy and focus 10-21 Regulatory framework and financial 22-27 highlights 51 Transaction details 287 Appendices 29-33 4 Aug
Slide 6: Key Credit Highlights
Key Credit Highlights New Zealand’s largest fixed line communications infrastructure business For personal use only Regulated utility-like framework applied to Chorus from January 2022 Fibre partnership with NZ Government; pre-committed, low cost, long term funding Growing demand for fibre broadband
Slide 7: An Overview Of Chorus
An Overview Of Chorus > New Zealand’s largest fixed line communications infrastructure business For personal use only Listed on NZX and ASX: CNU, since 2011 ~$3.6 billion market capitalisation (as at 22/08/22) ~800 employees, supported by service company contractors and subcontractors Earnin
Slide 8: The Ultra-fast Broadband Initiative
The Ultra-fast Broadband Initiative > Ultra-fast broadband (UFB): a Government objective For personal use only ▪ 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 > C
Slide 9: Our network infrastructure
Our network infrastructure For personal use only 8 August 2022 DEBT INVESTOR PRESENTATION RESTRICTED
Slide 10: New Zealand fixed line market
New Zealand fixed line market For personal use only 9 August 2022 DEBT INVESTOR PRESENTATION RESTRICTED
Slide 11: Strategy and focus
For personal use only Strategy and focus 10 August 2022 DEBT INVESTOR PRESENTATION RESTRICTED
Slide 12: September
For personal use only 11 September 2022 DEBT INVESTOR PRESENTATION RESTRICTED
Slide 13: Global rush to future-proofed fibre
Global rush to future-proofed fibre ▪ Fibre has overtaken cable as the primary fixed broadband technology in the OECD For personal use only ▪ Passive fibre network is most economic and sustainable technology for future needs ▪ USA government prefers fibre for subsidised projects because it “…can eas
Slide 14: Consumer data needs don't stand still
Consumer data needs don’t stand still For personal use only ▪ Commerce Commission monitoring highlights low latency benefits of fibre ▪ 15% of fibre connections already consuming 1,000GB+ a month ▪ We forecast monthly average of 1,000GB in 2025 and 4,000GB by 2033 ▪ Proliferation of in-home devices
Slide 15: Enhancing our fibre product line-up
Enhancing our fibre product line-up For personal use only 25Gbps trial Chorus broadband connections – UFB2 areas Hyperfibre 2,000 2,4,8Gbps Arrowtown Bluff Whangamata $70-$110 1,800 1Gbps 1,600 No. of connections $58 1,400 1,200 300Mbps 1,000 $50.50 Consumer fibre plans Wholesale pricing effective 1
Slide 16: Retail market: non-telco bundlers growing
Retail market: non-telco bundlers growing New entrant… For personal use only Chorus fibre: RSP share 600,000 90 Largest 3 RSPs 500,000 80 400,000 70 60 300,000 50 200,000 % 40 Other RSPs 30 100,000 20 0 10 Sky TV Nova Energy Contact Mercury Energy (+Trustpower) 0 Electricity/TV box connections FY20
Slide 17: Strong pipeline of new property orders
Strong pipeline of new property orders For personal use only Chorus new property pipeline 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 FY20 FY21 FY22 New property orders Completed 16 August 2022 DEBT INVESTOR PRESENTATION RESTRICTED
Slide 18: Fibre underpins new sustainability target
Fibre underpins new sustainability target For personal use only > New commitment to Science Based Target initiative ▪ Targeting 62% reduction in Scope 1 and 2 emissions by 2030, from 2020 base year ▪ Goal of 25% electricity consumption reduction by 2030 as copper equipment is withdrawn and fibre ena
Slide 19: Identifying opportunities close to our core
Identifying opportunities close to our core For personal use only > Hyperfibre: 1,000 connections despite limited retail channels; revised pricing from 1 October to accelerate growth > Business fibre: fibre connections grew 12%; ~75% of business market on fibre (excluding small/home offices) > EdgeC
Slide 20: Operating update
Operating update 69% uptake across UFB footprint (+4%) For personal use only > On track for 1 million connections by December, despite COVID challenges Chorus fibre uptake (% uptake vs available addresses) ▪ 959,000 total fibre connections (GPON + P2P); 88,000 added in FY22 80 ▪ 919,000 connections
Slide 21: >90% of mass market connections on 300Mbps+
>90% of mass market connections on 300Mbps+ Fibre boost in December 2021 has seen 68% of residential connections graduate to 300Mbps plans For personal use only 1Gbps uptake grew from 19% to 23% of residential connections, continues to make up ~30% of new adds Hyperfibre 2/4/8Gbps connections
Slide 22: Total network traffic grew 23% in FY22
Total network traffic grew 23% in FY22 ▪ Peak time average grew to 3.3Tbps; Fortnite drove record 4.2Tbps in March For personal use only ▪ Total traffic grew 1.3 billion gigabytes to 7,140 petabytes ▪ Fibre users averaged 567GB in June, up from 500GB in June 2021 21 August 2022 DEBT INVESTOR PRESENT
Slide 23: Regulatory framework and financial highlights
For personal use only Regulatory framework and financial highlights 22 August 2022 DEBT INVESTOR PRESENTATION RESTRICTED
Slide 24: New regulatory framework for fibre from January 2022
New regulatory framework for fibre from January 2022 For personal use only 23 August 2022 DEBT INVESTOR PRESENTATION RESTRICTED
Slide 25: Regulatory outlook
Regulatory outlook For personal use only > Awaiting confirmation of final RAB ▪ Chorus calculated starting RAB $5.346 billion vs $5.425 WACC parameter RP11 WACC ID2 WACC billion draft starting RAB (1 July 2021) (1 Feb 2022) ▪ This excludes submission of $67m in shared exchange Risk-free rate 0.51% 1
Slide 26: Financial snapshot
Financial snapshot Revenue 1000 > FY22 Revenue of $965m (FY21: $955m) For personal use only 800 ▪ Growing consumer fibre uptake and ARPU 600 ▪ Strong greenfield demand 400 200 0 FY19 FY20 FY21 FY22 Guidance EBITDA $655 - $675m 800 > Objective of modest EBITDA growth 700 600 500 400 300 200 100 0 FY1
Slide 27: Capex and leverage
Capex and leverage For personal use only Guidance > Chorus’ Board considers that a ‘BBB’ credit rating or 900 $410 - $450m 4.5 equivalent credit rating is appropriate for a company 800 4 such as Chorus. ▪ 4.08x ND/EBITDA at 30 June 700 3.5 Net Debt ▪ total net debt $2,713m at 30 June /EBITDA 600 3 $
Slide 28: Crown financing and debt profile
Crown financing and debt profile > Up to $1.33 billion CIP financing available > At 30 June, debt of $2,389m comprised: For personal use only by 2023 (57:43 equity/debt) ▪ Long term bank facilities of $350m ($190m drawn) > $1,254m drawn at 30 June 2022 ▪ NZ bonds: $400m and $500m ▪ Euro Medium Term
Slide 29: Tender Offer - Description
Tender Offer - Description Summary Terms - New Issue and Tender Offer Offeror: Chorus Limited New Issue Description of the Notes €500,000,000 1.125 per cent. guaranteed notes due 2023 Issuer: Chorus Limited Guarantor: Chorus New Zealand Limited ISIN/Common Code XS1505890530 / 150589053 Programme: Th
Slide 30: Appendix 1: Key Terms
Appendix 1: Key Terms Term Description ADSL Asymmetric digital subscriber line – a communication technology allowing high-speed data transfer over copper-based access networks in the local loop For personal use only ARPU Average revenue per user CIP Crown Infrastructure Partners FTTH Fibre to the ho
Slide 31: Appendix 2: Sustainability
Employee engagement Appendix 2: Sustainability See also https://company.chorus.co.nz/sustainability For personal use only 30 August 2022 DEBT INVESTOR PRESENTATION RESTRICTED
Slide 32: Appendix 3: Regulatory building block model for fibre
Appendix 3: Regulatory building block model for fibre For personal use only Source: Commerce Commission: Chorus’ price-quality path from 1 January 2022 – Final decision, Reasons paper, 16 December 2021 31 August 2022 DEBT INVESTOR PRESENTATION RESTRICTED
Slide 33: Appendix 4: Regulatory revenue: FY22 FFLAS (indicative)
Appendix 4: Regulatory revenue: FY22 FFLAS (indicative) Non- Regulated TOTAL regulated FFLAS FY22 For personal use only > Indicative* FFLAS revenue of $638m or 66% $m $m $m of FY22 revenue Fibre broadband 2 546 548 ▪ FFLAS total excludes estimated $44m allocation (GPON) of fibre-related capital cont
Slide 34: Appendix 5: Crown financing summary
Appendix 5: Crown financing summary For personal use only ▪ CIP equity securities • Unique class of security with no right to vote at Equity shareholder meetings, but entitle the holder to a securities right to repayment preference on liquidation subject to • An increasing portion of the securities
Slide 35: Thank you
For personal use only Thank you 34 August 2022 DEBT INVESTOR PRESENTATION RESTRICTED