Chorus Limited · NZX:CNU
Chorus — Debt Investor Presentation (November 2019)
33 slides from Chorus's debt investor presentation, Nov 21, 2019
Slide 1: Stock exchange announcement: Chorus' investor roadshow
Chorus Limited Level 10, 1 Willis Street P O Box 632 Wellington 6140 New Zealand Email: company.secretary@chorus.co.nz For personal use only STOCK EXCHANGE ANNOUNCEMENT 21 November 2019 Chorus’ investor roadshow The attached presentation has been prepared by Chorus for an international roadshow sche
Slide 2: Chorus Limited - Debt Investor Presentation
For personal use only Chorus Limited- Debt Investor Presentation November 2019 DEBT INVESTOR PRESENTATION
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 David Collins Andrew Hopkinson Brett Jackson Chief Financial Officer Treasurer IR Manager David joined Chorus in December 2018 after Andrew joined Chorus after 17 years with Brett has run Chorus’ investor relations 9 years with Aurizon, Australia’s largest rail TCNZ
Slide 5: Table of Contents
Table of Contents For personal use only 1. Introducing Chorus 2. Business Overview 3. Financial Highlights 4. Appendices 4 November 2019 DEBT INVESTOR PRESENTATION
Slide 6: Introducing Chorus
For personal use only Introducing Chorus New Zealand’s largest fixed line communications infrastructure business 5 November 2019 DEBT INVESTOR PRESENTATION
Slide 7: Key Credit Highlights
Key Credit Highlights New Zealand’s largest fixed line communications infrastructure company For personal use only Building and operating 75% of NZ’s planned fibre to the premises footprint Fibre partnership with NZ Government: pre-committed, low cost, long-term funding Regulated utility framework t
Slide 8: An Overview Of Chorus
An Overview Of Chorus New Zealand’s largest fixed line communications infrastructure business For personal use only Established in Dec 2011 following demerger from Telecom NZ ~900 employees, supported by service company contractors and subcontractors Listed on NZX and ASX: CNU ~NZ$2.5 bill
Slide 9: 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 10: Our Network Infrastructure
Our Network Infrastructure Copper VDSL to ~80% of lines; Fibre to pass ~1.36m end customers by end 2022 For personal use only Offices: fibre access and ‘fibre to the desktop’ IoT: pole and cabinet assets Fibre backhaul: to provide coverage and mobile towers, power infrastructure School Wi-Fi trials:
Slide 11: Business Overview
For personal use only Business Overview Chorus’ role within the New Zealand fixed line market 10 November 2019 DEBT INVESTOR PRESENTATION
Slide 12: An Open Access Wholesale Network
An Open Access Wholesale Network For personal use only 11 November 2019 DEBT INVESTOR PRESENTATION
Slide 13: Fibre to reach 87% of NZ population by 2023
Fibre to reach 87% of NZ population by 2023 For personal use only Planned fibre footprint > Chorus Rollout progress > to pass ~1.36m end users rollout 82% complete Uptake > uptake ~624k = 55% of deployed footprint Local fibre companies ~450k end users Auckland: broadband connections by type
Slide 14: Premises growth supporting broadband uptake
Premises growth supporting broadband uptake 96,000 dwellings forecast to be consented in Auckland (2019-2024) For personal use only Auckland ▪ New peak of ~14k dwelling unit consents in 2019, forecast to keep growing New Zealand ▪ Average of 37,000 new dwellings forecast per annum for the next six y
Slide 15: Broadband: the 4th utility
For personal use only Broadband: the 4th utility 14 November 2019 DEBT INVESTOR PRESENTATION
Slide 16: Unlimited data and streaming are the norm
Unlimited data and streaming are the norm Monthly average data usage per connection on Growing catalogue and quality of streaming content is driving For personal use only our network broadband uptake and usage higher ▪ 2degrees bundle with Amazon Prime ▪ Stuff launched news and content portal: play
Slide 17: 1,000 Gigabytes per month by 2023
1,000 Gigabytes per month by 2023… Video content and 4K, 8K to drive usage growth For personal use only Speed requirements in Mbps Chorus Forecast: Average Monthly Broadband Usage GB Copper Fibre 1400 1200 1000 800 600 400 200 0 JUNE 2019 JUNE 2020 JUNE 2021 JUNE 2022 JUNE 2023 JUNE 2024 Source: Cis
Slide 18: Active wholesaler campaigns driving ARPU growth
Active wholesaler campaigns driving ARPU growth Total mass market fibre uptake by plan type For personal use only Business/Education 46,000 mass market fibre connections added in Q1 (vs plans 43k in Q4 FY19) 100 ▪ 1Gbps connections grew to 69k (Q4 FY19: 58k) and 1Gbps 90 $60 p.m. are now ~11% of m
Slide 19: Streamlining and simplification
Streamlining and simplification Accelerating our transformation programme For personal use only Assure: new channel launched; identifying opportunities to solve faults proactively and remotely Intact connections: make it easier and faster for customers to get service switched on Fibre connect:
Slide 20: Growing our portfolio
Growing our portfolio Moving from innovation to product phase For personal use only Edge Centre Colocation: 3 sites open for data centre space; ~30% of space filled Smart locations: growing demand for non-building connections (e.g. CCTV) Fibre to desktop: market identified; exploring channels
Slide 21: Regulatory Framework
For personal use only Regulatory Framework 20 November 2019 DEBT INVESTOR PRESENTATION
Slide 22: Legislation passed in November 2018
Legislation passed in November 2018 For personal use only 87% of population where fibre will be available by end of 2022 Remaining 13% of population Fibre access network Copper – where fibre is available: Copper – where fibre is not available: Regulated asset base (RAB) with revenue cap to be
Slide 23: Overview of current RAB implementation
Overview of current RAB implementation The Commerce Commission is implementing the new framework For personal use only On 19 November, the Commerce Commission released its Indicative fibre regulation timeline draft Input Methodologies decision, following extensive submissions from Chorus and investo
Slide 24: Regulated Asset Base implementation
Regulated Asset Base implementation Commerce Commission will determine the starting value of the RAB, regulatory WACC, cost allocations, expenditure allowances and maximum allowable revenue For personal use only Illustrative Only Building block cost stack 23 November 2019 DEBT INVESTOR PRESENTATIO
Slide 25: Financial Highlights
For personal use only FINANCIAL HIGHLIGHTS Financial overview and capital management 24 November 2019 DEBT INVESTOR PRESENTATION
Slide 26: Financial snapshot
Financial snapshot Revenue ($m) 1,200 1,040 Revenue has reduced due to: For personal use only 1,000 990 970 copper line loss in areas where Chorus is not building the fibre network 800 fixed wireless competition 600 Revenue loss partially offset by: 400 strong fibre uptake 200 customers
Slide 27: We've passed our capex peak
We’ve passed our capex peak For personal use only UFB rollout schedule (premises) Capex 160,000 $810m $804m 140,000 $689m* $660 - $700m 231 245 120,000 183 100,000 80,000 258 294 308 550-580 60,000 40,000 95 66 111 20,000 125 132 81 50-70 57 58 59 50-65 - FY19 FY20 FY21 FY22 FY23 FY17 FY18 FY19 FY20
Slide 28: Leverage follows Capex
Leverage follows Capex For personal use only 3.92 4.06 Capex peaked in FY18 & FY19, leverage to 3.43 peak in FY20 3.1 3.1 2.98 2.9 2.7 UFB1 will be completed in December 2019 680 Leverage will reduce in line with lower 593 689 810 804 capex/growing free cash flow in future 681 679 597 years
Slide 29: Capital management
Capital management Chorus Limited is rated BBB (stable) by Standard & Poor’s and Baa2 (stable) by Moody’s. For personal use only The Chorus Board considers that a ‘BBB’ credit rating or equivalent is appropriate for a company such as Chorus. We maintain capital management and financial policies
Slide 30: Debt and Liquidity
Debt and Liquidity GBP EMTN As at 31 Oct 2019, borrowings of $2,426m 785 NZ Bond comprised of: 800 EUR EMTN $ 65m drawn from bank facilities For personal use only 677 700 Bank Facility $677m equivalent at hedged rates 600 Face value of CIP debt securities issued GBP259.82m due April 2020 500 CIP deb
Slide 31: Making New Zealand better
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 For personal use only economic betterment The broadband networks we build and maintain are aligned with the infrastructur
Slide 32: Appendix: Key Terms
Appendix: 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 home
Slide 33: Thank you
For personal use only Thank you 32 November 2019 DEBT INVESTOR PRESENTATION