Q3 FY17 Connections Update 12 April 2017

Q3 FY17 Connections Update 12 April 2017

Q3 FY17 OVERVIEW > Total fixed line connections declined by 39k to 1,639,000 and total broadband connections declined by 15k to 1,199,000 local fibre companies continued to grow their fibre connections and vertically integrated retailers are promoting wireless networks to their customers in rural and urban areas > Migration to copper VDSL and fibre continues at pace March was Chorus busiest ever month for fibre connection activity (new build and intact) fibre uptake across all Chorus UFB areas is now 34%, with Blenheim leading at 40% uptake 40% of broadband connections now on VDSL or fibre 2/3 fibre connections are on 100Mbps plans or better new VDSL and fibre RSP campaign commenced in April > Online video consumption driving significant increase in data traffic at peak times 973Gbps average network throughput at 9pm in March 2017, up 49% from March 2016 135GB average monthly household data usage in March (113GB average on copper; 215GB on fibre) 2

CONNECTIONS Fixed line connections 39,000 Broadband connections 15,000 Fixed line connections 31 March 2017 31 Dec 2016 30 Sept 2016 30 June 2016 Baseband copper 1,044,000 1,109,000 1,167,000 1,221,000 Naked copper (UBA/VDSL) 211,000 207,000 204,000 197,000 UCLL 89,000 98,000 103,000 108,000 SLU/SLES 1,000 1,000 2,000 2,000 Baseband IP 13,000 10,000 9,000 9,000 Data services over copper 9,000 9,000 10,000 10,000 Fibre (mass market + premium business) 272,000 244,000 216,000 180,000 Total fixed line connections 1,639,000 1,678,000 1,711,000 1,727,000 Broadband connections 31 March 2017 31 Dec 2016 30 Sept 2016 30 June 2016 Copper UBA (includes naked UBA) 716,000 784,000 847,000 900,000 VDSL (includes naked VDSL) 224,000 199,000 179,000 159,000 Fibre (mass market) 259,000 231,000 203,000 167,000 Total broadband connections 1,199,000 1,214,000 1,229,000 1,226,000 3

KEY CONNECTION TRENDS Q3 FY17 > Key connection trends Q3 FY17: total broadband connections reduced by 15k in Q3 (Q2-15k) as local fibre companies continued to grow their fibre connections and vertically integrated retailers promote wireless networks to their customers in rural and urban areas. 40% of broadband connections are now on VDSL or fibre, up from 35% at 31 December. fibre connections grew by 28k in Q3 (Q2 +28k) despite the summer holiday period. VDSL connections grew by 25k in Q3 (Q2 +20k) as retailers promoted it more widely. copper voice only lines continued to reduce, driven primarily by the reduction in UCLL connections (-9k in Q3) as UCLL customers migrate to fibre or other broadband products. Indicative change by area Non-UFB1 areas Local Fibre Company UFB1 areas Chorus UFB1 areas TOTAL CHANGE Q3 FY17 Broadband Copper voice only (incl UCLL) TOTAL -7,000-5,000-12,000-11,000-5,000-16,000 +3,000-14,000-11,000-15,000-24,000-39,000 4

BETTER BROADBAND CAMPAIGN > New nationwide campaign to upgrade customers to fibre, or VDSL as a stepping stone to fibre, commenced in April from 3 April to 30 September, Chorus is supporting RSPs with contributions to modem costs for qualifying connections upgraded to fibre or VDSL: $150 per connection for ADSL to fibre (100Mbps+) upgrades or $100 per connection for ADSL to VDSL upgrades above the line campaign due shortly 240,000 address checks in Q3 on www.chorus.co.nz/broadband-checker. Further enhancements to indicate likely VDSL speed at time of address check. > rollout of new Dynamic Line Management technology underway to automatically optimise ethernet-based ADSL and VDSL line settings for speed and stability. initial testing in Wairarapa area resulted in a 12% increase in download speeds on average, while VDSL upload speeds increased 40%

FIBRE UPTAKE & USAGE > 34% uptake with 243,000 connections within UFB deployed footprint (32% uptake and 216,000 connections at 31 Dec 2016) 93% of Q3 net adds were on 100Mbps plans or higher 66% of mass market fibre plans now >100Mbps % of plans 100 90 80 70 60 50 40 30 20 10 0 Total mass market fibre uptake by plan type Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 <100Mbps 100Mbps 200Mbps Gigabit Education Business 100Mbps+ > 135GB average monthly household data usage in March 2017 (89GB in March 2016) 113GB average on copper 215GB on fibre 250 200 150 100 50 GB - Average Monthly Data Usage (GB) per Broadband Connection 89 102 117 123 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Copper Fibre Average 135 6

FIBRE ROLLOUT AND UPTAKE > Rollout 63% complete with 526,000 premises passed (505,000 at 31 Dec 16) 708,000 customers able to connect 10 days weighted average lead time for fibre connection 23k work in progress connections (22k in January) 15.5% reschedules (19% in January) > 29,000 new fibre connections built in Q3 fibre orders at peak May 2016 levels March 2017 highest ever connections (new + intact) 20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 Chorus fibre connection activity - all NZ Connections built and activated Additional connections completed Orders (net of cancellations and rejections in the month) 7

UFB UPTAKE BY REGION 100% BUILD 100% COMPLETE % uptake relative to capable addresses 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 34% UPTAKE Jun-16 Sep-16 Dec-16 Mar-17 % of build complete 31 March 8

BANDWIDTH DEMAND: IT S ALL ABOUT THE PEAK HOUR > Online video consumption has driven a 49% increase in peak hour traffic (i.e. ~9pm) on Chorus network 973Gbps network throughput at peak hour in March 2017 vs 653Gbps in March 2016 (see next slide). Roy Morgan research suggests nearly 2 in 5 Kiwis had subscription video on demand (SVOD) in the home at the end of 2016, with half a million adding a SVOD service during the year. Sky TV reported a new record of 640,000 viewer hours of Sky Go content consumed online in January 2017 and Sky TV subscribers using internet enabled decoders download the equivalent of one night of television viewing each week. > Cisco is forecasting internet video to TV will be 26% of global fixed consumer internet video traffic in 2020. Cisco predicted global busy-hour internet traffic would grow at a compound annual growth rate of 36% between 2015-2020 9

49% INCREASE IN CHORUS PEAK HOUR TRAFFIC MARCH 2016 MARCH 2017 PEAK 973 Gbps 9PM PEAK 653 Gbps 9PM 6PM 6PM AVERAGE 491Gbps 3PM AVERAGE 341Gbps 3PM 6AM 6AM 10 Time of day Note: data represents average of traffic across all days in March, excluding corporate traffic. Time of day

FIXED LINE NETWORKS PROVIDE DEDICATED PEAK TIME CAPACITY > Chorus designs its network to support peak demand fluctuations in fixed line (ADSL, VDSL, fibre) performance typically reflect retailer network constraints. > Cisco forecasts monthly global data traffic carried via fixed networks (including Wi-Fi traffic from smartphones, ipads, laptops, games consoles and smart TV s) will double by 2020. Source: TrueNet IP Traffic by Access Technology Source: Cisco VNI: Global Mobile Data Traffic Forecast Update, 2016-2021 9PM 11

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 200 Number of Connections CONNECTION SPEED HISTOGRAM 31 March 2017 160,000 140,000 120,000 100,000 80,000 ~500,000+ customers could make the switch to VDSL or Chorus fibre today 60,000 40,000 20,000 0 Connection Speed (Mbps) ADSL ADSL2+ VDSL2 GPON 12

100 90 80 Rural Broadband Initiative (RBI) 2011-2017 wireless access to 275k homes + businesses. 110k able to access Chorus fixed broadband: 57% get 5Mbps+; 50% 10Mbps+; 34% 20Mbps+ Indicative NZ broadband coverage No fixed line broadband coverage Government target (2025) Last 1% to access 10Mbps 99% to access 50Mbps UFB2 Population within reach (%) 70 60 50 Fibre to the Node (FTTN) (ADSL2+/VDSL) Non-UFB population: 777,776 UFB2 population: 423,226 UFB1 population: 3,746,069 TOTAL 4,947,061 40 30 20 10 UFB1 Estimated pop covered by 2023 UFB1 75.7% of pop; 33 towns and cities Chorus 2,772,000 830,900 premises; ~1.1 m connections (~70% of UFB1) Ultra Fast Fibre (central North Island, lines co.) Enable (Christchurch, council owned) Northpower (Whangarei, lines co.) UFB2 - ~8.5% of pop 168k premises; 203k connections (~85% of UFB2) 460,000 195k premises 23k premises; 12 towns/areas 433,000 ~180k premises 500 premises 52,000 20k premises 9k premises; 12 towns/areas 0 2011 2017 2020 2024