Ann: GENERAL: CNU: Chorus and CFH agree package o

• Release Date: 11/03/14 10:41
• Summary: GENERAL: CNU: Chorus and CFH agree package of UFB improvements
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					CNU
11/03/2014 08:41
GENERAL

REL: 0841 HRS Chorus Limited (NS)

GENERAL: CNU: Chorus and CFH agree package of UFB improvements

STOCK EXCHANGE ANNOUNCEMENT

11 March 2014

Chorus and Crown Fibre Holdings agree package of UFB improvements

Chorus today announced a package of improvements to the UFB initiative have
been agreed with Crown Fibre Holdings that ensure the roll-out is more cost
effective, provides better outcomes for end users and eliminates some
barriers to take-up.

The initiatives do not require any additional funding from CFH, change the
underlying contractual obligations to pass all premises in Chorus' coverage
area before December 2019, or change the network requirements.

The two organisations have been working together, as requested by
Communications and Information Technology Minister Amy Adams in December
2013, to take the lessons learned from the first two years of the UFB
initiative and make a series of improvements that will benefit all parties.

"This initial set of initiatives will help Chorus to deliver UFB faster,
smoother and more cost effectively," said Andrew Carroll, Chorus CFO.  "While
Chorus is firmly focused on managing its costs, both parties have worked on
the basis that we need to find innovative ways to deliver better outcomes,
and that would require a degree of give and take.

"We all want UFB to be an enormous success and these improvements are an
important step towards that.

"They give Chorus a greater degree of flexibility to manage its own costs
effectively while still achieving the same outcomes and also facilitating the
uptake of UFB. In particular, this flexibility will enable Chorus to better
manage its cash flow through the peak of the balance of the capital intensive
period of the build, as well as addressing some of the $1 billion funding
gap.

"There is no one silver bullet that will address this issue, but several
small incremental changes all help towards navigating a very challenging
period.  At this stage it is not possible to put a specific dollar value to
Chorus on the changes as it is dependent on a range of factors, but we thank
CFH for its flexibility in supporting Chorus.

"While some of these initiatives have been accelerated by the funding gap
Chorus faces, several of them were already under discussion as both parties
were looking to further streamline the build.

"We will continue to work closely with CFH to identify further improvements
that enable both parties to deliver great outcomes for New Zealand," he said.

The changes are effective from 11 March 2014.

Summary of initiatives

Deployment Flexibility

While the agreed completion date for each candidate area does not change,
Chorus now has greater flexibility in how it phases the rollout within those
timeframes.  Key deliverables of Minimum Annual Build and Priority Premises
by Dec 2015 (100% of schools and hospitals, and at least 90% of business
premises) will be met.

For example, Chorus now has greater flexibility to manage the build programme
in conjunction with local councils and other utilities to optimise cost and
minimise any disruption in the community.

Better matching time of CFH investment to Chorus cost of build

CFH has agreed to subscribe for a portion of the CFH securities on a monthly
basis as work is completed, better aligning receipt of Chorus' cash flows
with its outgoings, with the balance paid on completion of stages and User
Acceptance Testing. This will allow Chorus to manage its cash flow more
effectively.   So long as a number of conditions continue to be met regarding
Chorus' financial position this will apply for an initial period to June 2015
and will be reviewed further after that.

Pre-fibred premises

In meeting the Priority User target of December 2015, Chorus will have
greater flexibility in the deployment of UFB in areas where Chorus already
has an extensive fibre footprint.

This initiative defers UFB build in these areas to later in the programme and
relates to around 12,000 premises.  Chorus will continue to connect customers
to existing fibre on demand.

Fibre to the Building (FTTB)

Chorus may deliver UFB services in Multi-Dwelling Units (MDUs) with common
communications rooms using Fibre to the Premises (FTTP) and in-building
reticulation where Cat 5e cabling exists. Where existing cabling isn't
sufficient to deliver requested UFB services Chorus will continue to
reticulate using fibre.

This solution will reduce the cost of installations, including cost that may
be chargeable to the building owner, while still delivering UFB services, and
potentially eliminate some consent requirements that delay connection. The
increased flexibility should lift UFB uptake.

Greenfields Reticulation

Chorus will charge developers for reticulation of Greenfields developments as
it does in the non-UFB areas of the country to a maximum of $900 per
Premises.
Chorus already charges for Greenfields Reticulation in non UFB areas.

NSI Fund Contribution

Chorus has agreed to increase its Non-Standard Installation Fund by $8m.
This will provide the industry with greater certainty regarding installation
costs, giving them more confidence when marketing fibre services.

Marketing Fund

In line with the above increase in the Non Standard Installation fund
contribution, Chorus will reduce its own fibre marketing spend from $5m per
annum to $2.5m.

Chorus will focus its marketing efforts into direct tangible marketing for
the Network, such as Gigatown, which has proven extremely successful at
raising awareness of the potential of NZ's fibre future.

ENDS

For further information:

Ian Bonnar
Corporate Affairs Manager
Phone: +64 9 358 6061
Mobile: +64 (27) 215 7564
Email: [email protected]

Brett Jackson
Investor Relations Manager
Mobile: +64 (27) 488 7808
Email: [email protected]
End CA:00248043 For:CNU    Type:GENERAL    Time:2014-03-11 08:41:35