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Signalling a return to EBITDA growth

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Chorus full year result for FY18Strategic initiatives see EBITDA above guidance

  Net profit after tax $85m (FY17: $113m)  EBITDA $653m (FY17: $652m)  Operating revenue of $990m (FY17: $1,040m)  Final dividend 13 cents per share  156,000 fibre installs in FY18, a 20 percent increase on FY17  Fibre uptake increased from 35 percent to 45 percent  Total fixed line connections down 5 percent to 1,526,000  Broadband connections increased by 1,000 to 1,187,000Chorus has today reported a net profit after tax (NPAT) of $85m and earnings before interest, tax, depreciation and amortisation (EBITDA) of $653m for the year ended 30 June 2018, modestly above the top end of its FY18 guidance range of $625 million to $650 million.Operating revenue for the period was $990m (FY17: $1,040m) and operating expenses were $337m (FY17: $388m). Depreciation and amortisation for the period was $387m (FY17: $339m), delivering earnings before interest and tax (EBIT) of $266m (FY17: $313m).Chorus’ financial results for the year to 30 June 2018 show the company's shift to becoming an active wholesaler and concentration on tight cost management, delivered on financial and operational targets.Speaking about the results, Chorus' CEO Kate McKenzie said, "It's easy to overlook the scale and pace of the technological change that we're bringing to New Zealand communities."Demand for fibre was stronger than ever, and our ongoing fibre rollout means there are now more than 900,000 homes and businesses with our fibre available at their door. During the financial year, we completed a record 156,000 fibre installations and this helped grow our fibre uptake from 35 percent to 45 percent.During FY18 Chorus invested $20m in a project to upgrade copper broadband performance for about 270,000 addresses across rural and local fibre company areas. The deployment of vectoring and new VDSL broadband electronics saw a more than 40 percent average increase in download speed for customers already on VDSL and a further 85,000 rural addresses who could benefit from improved broadband performance."Investing to promote better broadband that’s already available to many New Zealanders – our role as an active wholesaler – has succeeded in slowing the pace of connection decline. Continuing competition from wireless and other fibre networks saw our total fixed line connections reduce, but the pace reduced considerably with 76,000 connections lost compared to 125,000 last year," said Kate.“By June 2018, 64 percent of our broadband connections were on high performing VDSL or fibre services, up nearly 20 percent on the previous year."In the same time, we've seen the average monthly bandwidth demand on our network grow from 155 gigabytes per customer to 210 gigabytes. For fibre customers this was greater still at 297 gigabytes per month.“Much of this demand is occurring in the evening as more and more New Zealanders shift to streaming video on demand services. We’ve seen the peak usage on our network grow by nearly 40 percent at peak viewing times.”Customer experienceChorus’ number one operational priority remains a high quality connection experience for customers connecting to fibre for the first time.“We know we need to make things better if we’re to continue to encourage customers to make the effort to upgrade to fibre,” said Kate. “While customer satisfaction measures improved over the financial year achieving 7.5 we fell short of hitting our target of 7.8 by the end of FY18.“We need to keep improving our fibre installation process with initiatives like ‘fibre in a day’ for simple installs so we can both increase our productivity and customers’ satisfaction with the experience.“Given our essential role in the broadband ecosystem, achieving this in advance of the online broadcast of sports events like the 2019 Rugby World Cup, will require us to work even more collaboratively with our service company partners and our retailers to get our processes and systems working in concert.”

The strategic changes Chorus started in FY18, which continue through FY19, are focused on achieving the company’s objective of a return to modest EBITDA growth in FY20.“Our return to broadband connection growth in FY18, together with strong forecasts for urban housing development and underlying broadband trends, such as fibre uptake and the demand for streamed video content, give us added confidence in our strategy,” said Kate.“By innovating for growth and optimising today's business, we believe our infrastructure will continue to help make New Zealand better well into the future.”Innovation focus

In FY18 Chorus began trialling new ways to use our network to provide compelling technology solutions for customers. A successful ‘future of TV’ trial demonstrated the ability to broadcast live 4K quality TV content, via the fibre network to customers’ TVs. With New Zealand’s fibre footprint coverage exceeding that of terrestrial broadcasting by the end of 2022, this proved to be of strong interest to local broadcasters. A proof of concept initiative took advantage of Chorus' existing network assets to build an Internet of Things (IoT) network. Powered using re-purposed copper cables with wireless access points on telephone poles, the network demonstrated that localised, deep network coverage for a sensor network was feasible. Progress towards the regulated utility model Regulatory clarity remains critical to Chorus' focus on long-term shareholder value. Chorus has worked throughout the year to assist the passage of the utility style regulatory framework through Parliament and is now awaiting a revised Bill for passage into legislation. "We're looking forward to working with the Commerce Commission on a smooth and timely transition to a framework that aligns the interests of customers and investors through recognition of a fair return on investment", said Kate. Dividend Chorus will pay a final dividend of 13 cents per share, fully imputed, on 09 October 2018 to all shareholders registered at 5pm on 25 September 2018. A supplementary dividend will be paid to non-resident shareholders. A dividend reinvestment plan will apply for the final dividend at a discount rate of 3%. Applications to participate must be received by 5pm (NZ time) on 26 September 2018. FY19 guidance EBITDA: $625 – $645 millionCapital expenditure: $820 – $860 millionDividend: 23 cents per share, subject to no material adverse changes in circumstances or outlook.