Speaker 1: Kiota.
Speaker 2: Welcome to Shared Lunch, brought to you by Shares's. My
Speaker 2: name is Susanna Batley and I'm the general manager of
Speaker 2: Shares's business. In today's episode, we'll be talking to Mark Owah,
Speaker 2: CEO of Chorus. We'll be talking about the huge potential
Speaker 2: that digital infrastructure can offer our tetoa, as well as
Speaker 2: what's next for the talco. Before we get started, though,
Speaker 2: here are some important information.
Speaker 3: Investing involves risk you might lose the money you start with.
Speaker 3: We recommend talking to a licensed financial advisor. We also
Speaker 3: recommend reading product disclosure documents before deciding to invest. Everything
Speaker 3: you're about to see and here is current at the
Speaker 3: time of recording.
Speaker 4: Hi.
Speaker 1: Mark, welcome to Shared Lunch.
Speaker 4: Thanks you, Sanna, thanks for having me.
Speaker 2: I'm really excited to get into this conversation about Chorus,
Speaker 2: but before we do that, I'd like to start with
Speaker 2: you back. You've had over two decades in the industry
Speaker 2: across the UK, Australia and are Tetoa, and you've also
Speaker 2: had previous roles as CEO of Two Degrees as well
Speaker 2: as CFO of voteraphone New Zealand which is now one
Speaker 2: New Zealand. So what first attracted you to the sector,
Speaker 2: and why have you stayed there so long?
Speaker 4: It's fast paced. I enjoy technology and I enjoy change,
Speaker 4: but I think what's really kept me in the industry,
Speaker 4: both overseas and coming back home to New Zealand is
Speaker 4: that ability of connectivity to truly shape and enable better futures.
Speaker 4: And it's helping to shape the way that we live
Speaker 4: from an intergenerational impact, and I love that generally for
Speaker 4: the better.
Speaker 2: You'd say quite a few people that have worked at
Speaker 2: two degrees talked about how much you took that purpose
Speaker 2: approach to the organization two degrees obviously in the B
Speaker 2: two C space in the retail space. How does that
Speaker 2: change being at Chorus and as a B to B player?
Speaker 4: Yeah, look, I mean purpose for cause is something I'm
Speaker 4: really personally passionate about. I have five children, so I've
Speaker 4: I want to leave this place in a better state
Speaker 4: than when I joined it. And two degrees was such
Speaker 4: an amazing place to be able to put that foundation
Speaker 4: of a core purpose in there, and that was around
Speaker 4: fighting for fear to make New Zealand a better place
Speaker 4: to live, and that was the key challenge that decisions
Speaker 4: that the business was taking If it wasn't making New
Speaker 4: Zealand a better place to live, then we should stop it.
Speaker 4: And that's the whole beauty of purpose when it actually
Speaker 4: builds some momentum and that you can truly drive positive
Speaker 4: societal outcomes. And so we're trying to do the same
Speaker 4: thing in Chorus now, but albeit coming from a slightly
Speaker 4: different perspective, and we talked about unleashing potential through creativity
Speaker 4: and enabling better futures for altiet Or and again I
Speaker 4: think that goes back to my view of what's kept
Speaker 4: me in the industry as well, and being able to
Speaker 4: improve lives and help shape them for future generations. And
Speaker 4: whether you're in a B two C or in you're
Speaker 4: a B to B space, that the ability of large
Speaker 4: enterprise to actually drive positive society or outcome is really material.
Speaker 2: And the origins of Chorus was that it was originally
Speaker 2: spun out of Telecom, which for those old enough like
Speaker 2: myself remember as the former Spark.
Speaker 1: Could you talk a bit.
Speaker 2: About why Corus started, why it was spun out of
Speaker 2: Spark or Telecom back then, and then also a bit
Speaker 2: about the business today.
Speaker 4: Sure, I mean you go back to two thousand and
Speaker 4: eight and that's where the first proposals were to bring
Speaker 4: high speed fiber connectivity to the majority of New Zealand.
Speaker 4: And back then you'd recognize there was a fair amount
Speaker 4: of pushback to doing this, but you actually had a
Speaker 4: small group of visionaries that really pushed for that change
Speaker 4: and had the courage and the persistence to keep doing
Speaker 4: it when actually very few markets or countries around the
Speaker 4: world were even doing that. And it was premised on
Speaker 4: creating an open access platform and network built off a
Speaker 4: public and private partnership, which I think we could all
Speaker 4: recognize now and looking back that this is probably one
Speaker 4: of the most successful examples of private and public working
Speaker 4: together in partnership to deliver now what is an amazing
Speaker 4: network by global standards, and we bat well above our weight,
Speaker 4: you would say from a New Zealand perspective, You're right.
Speaker 4: It was spun out of Telecom, as it was for
Speaker 4: those old enough, and I certainly am, but that was
Speaker 4: essentially so that Telecom could actually compete as part of
Speaker 4: the UFB, the Ultra Fast Broadband Initiative, and so it
Speaker 4: spun off the retail arm which we know today is
Speaker 4: now Spark and the wholesale arm of actually building, running, managing,
Speaker 4: maintaining the fiber networks into what we see as chorus today,
Speaker 4: you know, and that's where we see ourselves today from
Speaker 4: a retail to a wholesale perspective. We are the wholesale
Speaker 4: partner of the fiber network and also copper, but we're
Speaker 4: getting out of copper. Fiber is the gold standard that
Speaker 4: you would look to. But our roles around that ongoing investment, maintenance,
Speaker 4: running the network, working with the retail service providers the
Speaker 4: RSPs as they're known, to provide the products, the plans
Speaker 4: and the network essentially that they then are selling into
Speaker 4: market from a retail perspective.
Speaker 2: And just going into those retail sellers or resellers that
Speaker 2: you work with, you've obviously worked for them before running
Speaker 2: running through degrees and at votafone New Zealan or one
Speaker 2: New Zealand, as we mentioned at the start, do you
Speaker 2: see them just as partners or are they starting to
Speaker 2: become competition as well?
Speaker 1: How does that dynamic dynamic work?
Speaker 4: Well, look, competition is definitely alive and well I think
Speaker 4: you know where today we have five G fixed wireless
Speaker 4: and five G is a very different product to four
Speaker 4: G from a wireless broadband perspective, and that's there's competition
Speaker 4: in market now for some of those fiber customers. And
Speaker 4: you know, to be clear, there is a market for
Speaker 4: multiple broadband technologies. You know, we're seeing that advent with
Speaker 4: Starlink and the Leo satellites as well and the exit
Speaker 4: progressively from data legacy copper technology. But yeah, they are
Speaker 4: our partners, We work with them, we work through them
Speaker 4: to actually grow our own fiber customer base. But equally, yes,
Speaker 4: recognizing they are also competitors.
Speaker 2: A Deloitte report earlier this year say to that the
Speaker 2: digital fiber network has the potential to bring in thirty
Speaker 2: three point two billion dollars to the New Zealand economy
Speaker 2: by twenty thirty three. What do you see the potential
Speaker 2: barriers to us being able to realize this sort of
Speaker 2: benefit on the scale.
Speaker 4: Yeah, and it was a great report from Deloitte. And
Speaker 4: actually that thirty three billion dollars by twenty thirty three
Speaker 4: is just the annual benefit. You know, when you're actually
Speaker 4: looking at the cumulative benefit between now out to twenty
Speaker 4: thirty three, is that over one hundred and sixty billion
Speaker 4: dollars of economic benefit. And I think again that's a
Speaker 4: testament to that vision back in two thousand and eight
Speaker 4: to actually bring this network to New Zealand. You know
Speaker 4: some of those barriers, So the first is probably around
Speaker 4: coverage an expansion of fiber. So today we sit it
Speaker 4: just over eighty seven percent of our population that are
Speaker 4: covered by fiber, so thirteen percent the country aren't. We'd
Speaker 4: see a definite use case to grow that fiber expansion
Speaker 4: out to ninety five percent. Because of New Zealand's topography
Speaker 4: and geographic dispersion of the population. Probably doesn't you know,
Speaker 4: the economics don't work beyond ninety five percent. But actually
Speaker 4: that's one of the leaders and drivers to getting to
Speaker 4: recognize that economic benefit is being able to expand it.
Speaker 4: Today New Zealand ranks seventeenth in the world for fiber uptake,
Speaker 4: which is quite an amazing stat for a country with
Speaker 4: five million people. And again the topography that we have
Speaker 4: to actually build this network, but we've got to stay
Speaker 4: at the fore of that. You know, those visionaries put
Speaker 4: us out there when other countries and markets really weren't
Speaker 4: looking at this. You know, that same ranking, if you
Speaker 4: compare that to Australia are at fifty fifth the UK
Speaker 4: at sixty six, so it's nice to be on the
Speaker 4: right side of those for a change. But expansion is one,
Speaker 4: digital equities another, so ensuring that no one's really left
Speaker 4: behind from this digital world today, the government statistics which
Speaker 4: would estimate one in five people across our sed or
Speaker 4: are actually digitally excluded, which is roughly about ten percent
Speaker 4: of households. That seems like a staggering statistic, particularly when
Speaker 4: you consider that that we're increasingly becoming more digitized, so
Speaker 4: services like core government or retail services or access to
Speaker 4: health services that are becoming increasingly digitized, So the risk
Speaker 4: to being digitally excluded is probably is growing, if anything.
Speaker 4: So I think those are the two key ones in
Speaker 4: the third odd call loud as having appropriate regulation, whether
Speaker 4: that's too new products like fiber or it's too legacy products,
Speaker 4: and being able to have a pathway to exit from
Speaker 4: those like copper. You know, a regulatory frameworks need to
Speaker 4: encourage investment and promote competition, not stifle it. So and
Speaker 4: I think we've got some work to do in that space.
Speaker 2: Yeah, great, and I'd like to circle back on those,
Speaker 2: you know, on that question whether the regulatory framework is
Speaker 2: appropriate right now. But on those first two points, on
Speaker 2: ensuring that the economics work to increase that coverage to
Speaker 2: whether it's ninety five percent or whatever that number is,
Speaker 2: and also that social equity point, how do you think
Speaker 2: about about those economics, because you know, with a new subdivision,
Speaker 2: for example, I imagine that the economics can look really
Speaker 2: good because, as I understand it, most of the cost
Speaker 2: of installation is in thinking those trenches and putting that
Speaker 2: PI in. And with a new development, you're already doing
Speaker 2: that with electricity and plumbing and all those other infrastructural
Speaker 2: requirements that that that new that new dwelling requires. And
Speaker 2: also you're probably getting high connectivity rates as well with
Speaker 2: a new development like that if you compare it to
Speaker 2: say to a small rural town where you might get
Speaker 2: lower connection rates, and also the cost is higher the
Speaker 2: marginal cost, because you're having to dig up and do that.
Speaker 2: But obviously, to your point, from a social equity point
Speaker 2: of view, it's really really important.
Speaker 1: That people are connected.
Speaker 2: And given those second order effects, as we're distributing healthcare
Speaker 2: and all these other services digitally, how do you think
Speaker 2: about that and how do you sort of balance those objectives.
Speaker 4: Yeah, so from a new subdivision development. So we think
Speaker 4: about that as MPD is our new property development and
Speaker 4: it's something that that that we work well in across News.
Speaker 4: The only all the fiber areas that Chorus is involved in,
Speaker 4: and you're you're absolutely right where the fiber is already existing.
Speaker 4: And that's the Beau beauty of fiber and why it's
Speaker 4: so scalable because you're not having to go out and
Speaker 4: dig up the trenches and change out all the infrastructure
Speaker 4: every five to ten years. It's actually changing out the
Speaker 4: equipment at either end. So thinking about the exchanges at
Speaker 4: one end and the exchange cards, things that become their
Speaker 4: neighbors or in our homes, our households now where we
Speaker 4: have the little white box on the wall wherever it
Speaker 4: might be, and that's called the ANTS, the optical network terminal.
Speaker 4: So it's really scalable and that's the beauty of fiber.
Speaker 4: But the costs of delivering fiber when you move outside
Speaker 4: those fiber areas and you're building new infrastructure, they become
Speaker 4: exponentially greater. And you know, you can think about an
Speaker 4: urban example and maybe take my street as an example
Speaker 4: and say there's fifty homes in the street and they
Speaker 4: all have a three meter set back from the road.
Speaker 4: We can have a high degree of confidence around the
Speaker 4: costs of those and think about the uptake as well.
Speaker 4: In a rural context, though that same kind of area
Speaker 4: might have one premise and it's five hundred meters set
Speaker 4: back from the road, And as great as fiber is,
Speaker 4: it's these things still cost so that the exponential rate
Speaker 4: of cost versus the returns that we're getting, those economics
Speaker 4: actually become a lot less attractive to do that, which
Speaker 4: is why we then try to work with government around
Speaker 4: new frameworks that would either mirror or evolve from the
Speaker 4: original UFB program to actually take fiber further, maybe to
Speaker 4: that ninety five percent of the population, and interesting at
Speaker 4: the moment, the government's focus and vision around the Infrastructure
Speaker 4: Priorities Plan and having that twenty year vision, we'd certainly
Speaker 4: hope that that has a nod to fiber deployment and
Speaker 4: repeating the scale and benefits of what we saw out
Speaker 4: of the original fiber program and actually taking that to
Speaker 4: the next seven percent. And that same Deloitte report you
Speaker 4: referred to earlier that recognizes going from eighty seven percent
Speaker 4: to ninety five percent population coverage, that that's the equivalent
Speaker 4: of seventeen billion dollars of economic benefit to bringing fiber
Speaker 4: in high speed broadband connectivity to those regions. Part of
Speaker 4: whom are going to need to find a solution for
Speaker 4: digital equity or inclusion. They tend to be the groups
Speaker 4: like digital seniors, lower income households, or families Mary and PACIFICA,
Speaker 4: or people's with disabilities. They tend to be the groups
Speaker 4: that are disproportionately digitally excluded and yet ironically other groups
Speaker 4: that would benefit the most from actually being involved in
Speaker 4: this digital world. So it's not just expansion, as we say,
Speaker 4: it's that digital equity and ensuring that no one's really
Speaker 4: left behind.
Speaker 2: You've come to the end of a very large period
Speaker 2: of cap x or capital expenditure building the fiber network
Speaker 2: that effectively replaces the old copper network. What actually happens
Speaker 2: to the copper network.
Speaker 4: Our first challenge is actually having a pathway to exit
Speaker 4: from copper and this is something that we've pushed with
Speaker 4: the government and regularly discuss with both government and the
Speaker 4: Commerce Commission. We need a pathway to exit from legacy
Speaker 4: technologies that are no longer fit for purpose. You know,
Speaker 4: there are all better alternatives already available, and if if
Speaker 4: I talk to that for a second, the Comments Commission
Speaker 4: themselves recently published a report looking at the non fiber
Speaker 4: areas of New Zealand, so that thirteen percent of the
Speaker 4: population and ninety seven percent of those premises can already
Speaker 4: receive an alternative to copper technology, so either a mobile
Speaker 4: or an alternative wireless provider. That's before you overlay stalink and
Speaker 4: satellite services, and so there are already alternatives. So we
Speaker 4: need to be able to find a pathway to exit
Speaker 4: from copper. It can't be something that just goes on
Speaker 4: and definitely it's something that is coorus. Ourselves are saying
Speaker 4: that these networks are not for purpose. There are better
Speaker 4: alternatives available, so let's get out of it. And for
Speaker 4: a dollar spent on copper is not the most efficient
Speaker 4: or effective use of that dollar spend. You'd prefer to
Speaker 4: put that into other investment that's going to go to
Speaker 4: better the country. So that's our first challenge is to
Speaker 4: have an exit to copper, and then the second is
Speaker 4: thinking about, well, what's the ability for us to recover
Speaker 4: that copper or extract it. Not all copper is created equal.
Speaker 4: There's large gauge small gauge copper, and it's not as
Speaker 4: simple to actually get it out of the ground either,
Speaker 4: so but there are use cases actually and you see
Speaker 4: that around the world of companies actually moving beyond their
Speaker 4: legacy technology so copper, and actually removing it from the ground.
Speaker 1: We'll lease talk a bit more about the regulation.
Speaker 2: Obviously a big part of coorus being regulated by the
Speaker 2: commis Commission and them setting what you can earn.
Speaker 1: Can you just talk a.
Speaker 2: Bit more about how the regulator currently does that and
Speaker 2: some of the terminology that we hear such as.
Speaker 4: MAR, the MAR, the RAB. The talco industry is renowned
Speaker 4: for scronyms absolutely, so the RAB is our regulated asset
Speaker 4: base and which is essentially the capital that's been spent
Speaker 4: on the network and course today to spent around five
Speaker 4: and a half billion dollars on building this amazing network.
Speaker 4: So that's essentially the foundation of our RAB. Now there's
Speaker 4: a very complicated formula that then the Commerce Commission will
Speaker 4: work out what the MAR is the maximum allowable revenue.
Speaker 4: But essentially the regime, the regulated regime set up in
Speaker 4: order to provide a greater degree of certainty and that
Speaker 4: Chorus can earn a regulated return on that capital investment.
Speaker 4: But that complicated formula will take into our whole into
Speaker 4: account a whole bunch of drivers such as you know
Speaker 4: your capital spend, your depete depreciation profile, your whack, your
Speaker 4: asset beader, your leverage, your tax building blocks. So and
Speaker 4: what it will do at the end is essentially split
Speaker 4: out a number that would say, based on your regulated asset,
Speaker 4: based on what you've spent. This is in theory the
Speaker 4: maximum allowable revenue that Chorus could return could earn over
Speaker 4: a period, and that's probably where there's a secondary complication
Speaker 4: to it because Chorus is subject to defined regulatory periods.
Speaker 4: So our first period PQP one was only three years long,
Speaker 4: ran from its finishing at twenty twenty f twenty two
Speaker 4: to twenty five end of twenty twenty four, so that
Speaker 4: sets it for a three year period. And actually Coorus
Speaker 4: now for the last year and a half or so
Speaker 4: has been in this process of doing a submission for
Speaker 4: our second regulatory period PQP two. We've had earlier this year.
Speaker 4: Our allowances have been determined by the Commerce Commission, so
Speaker 4: that sets an envelope for our operating costs and our
Speaker 4: capital costs, and then we have our MAR determination which
Speaker 4: is due to come hopefully in early December, and that
Speaker 4: will again set the framework out for that MAR across
Speaker 4: what will be a four year period, so this will
Speaker 4: run to from twenty twenty five through to the end
Speaker 4: of twenty twenty eight.
Speaker 2: You've called for deregulation in the sector this year, and
Speaker 2: when I think about it, you know, when we look
Speaker 2: at the lakes of Spark and two degrees in One
Speaker 2: New Zealand, they all run their own mobile networks. So
Speaker 2: as you pointed out earlier, you are definitely subject to competition,
Speaker 2: at least at the margin. And if you're a household
Speaker 2: where you're not streaming lots and lots or downloading lots
Speaker 2: and lots then probably using the mobile network as as
Speaker 2: a viable option. Then you've also got starlink and the
Speaker 2: lacks of those other players coming in as well, which
Speaker 2: is a bit different to I guess other industries or
Speaker 2: other companies that are heavily regulated, like an airport or
Speaker 2: a Talco line.
Speaker 1: You know that you are.
Speaker 2: Facing competition and yet still the Commics Commission determines what
Speaker 2: you can earn. If the industry was to regulated, how
Speaker 2: would consumers ultimately benefit from that, do you.
Speaker 4: Think, well, I mean, i'd point to the Commission earlier
Speaker 4: this year having done a review for of fiber deregulation
Speaker 4: or five year regulation as it is, and not seeing
Speaker 4: enough of a change where you'd say, actually, they're going
Speaker 4: to step into an investigation. So you know, when I
Speaker 4: call out regulation and deregulation from a fiber perspective, I
Speaker 4: think Chorus is subject to a lot more stringent regulation
Speaker 4: even compared to the other local fiber companies. You know,
Speaker 4: there are three others through the country. Chorus has a
Speaker 4: majority of the fiber infrastructure, but we're already doing a
Speaker 4: lot more than they are having to provide under our
Speaker 4: regulatory regime. And then your rights c enter you call
Speaker 4: out from a mobile perspective, it's essentially not there that
Speaker 4: we don't have the same constraints or regulatory requirements in
Speaker 4: a wireless world. So it is quite different, and it's
Speaker 4: something that we'd like to see given competition that starts
Speaker 4: to actually even out. At the same time, there's a
Speaker 4: certain degree with fiber regulation that it does provide greater
Speaker 4: certainty about that framework, so that you know, we've just
Speaker 4: talked to a regulated framework as well. So I mean
Speaker 4: from a consumer perspective, it would be a fundamental change
Speaker 4: because at the moment, Chorus can't retail, so we have
Speaker 4: our entire frameworks based off being a wholesaler and working
Speaker 4: with the retail service providers. So changes to deregulation and
Speaker 4: fiber we'd probably push in the first instance that we're
Speaker 4: at least only subject to the same regulations that the
Speaker 4: local fiber companies are. Beyond that, there's regulatory obligations that
Speaker 4: we have around service availability and performance. And the fiber network,
Speaker 4: by the way, is the only broadband technology that is
Speaker 4: regulated to have more supply than there is demand, which
Speaker 4: is why there's almost this loop of capital investment required
Speaker 4: because our usage just continues to grow. But Corus is
Speaker 4: the only one that has that. You think about that
Speaker 4: from a customer experience perspective about you, But my kids
Speaker 4: at home pretty quick to tell me when they think
Speaker 4: the Wi Fi is not working and the broadband's not working,
Speaker 4: which they can't understand why when their dad does what
Speaker 4: he does. So anyway, that's a that's a different story.
Speaker 4: But yeah, that you don't have that same kind of
Speaker 4: condition conditionality in a wireless world.
Speaker 2: Yeah, I was thinking a bit about you know, with boardband,
Speaker 2: we do we continually expect more for less every year.
Speaker 2: We expect faster times and more without actually paying a
Speaker 2: higher monthly bill. So with that in mind, how do
Speaker 2: you think about growth going forward? Outside of population growth,
Speaker 2: what are some of the other drivers that can help
Speaker 2: sort of grow grow the industry?
Speaker 4: Yeah, I mean, let me pick up first on the
Speaker 4: on the data point, because I always I find this
Speaker 4: quite fascinating, and it goes back to your opening question.
Speaker 4: You know why this industry because I love how dynamic
Speaker 4: it is and having access to high speed fiber connectivity
Speaker 4: has fundamentally changed the way that we all live, learn,
Speaker 4: work and play. And we saw that even more so
Speaker 4: during the pandemic for COVID and being at home heavily
Speaker 4: restricted but still actually being able to work and live
Speaker 4: and order takeaways and get them dropped at your door.
Speaker 4: But it's fundamentally changed the way that we live. So,
Speaker 4: you know, even though it might seem like we're providing
Speaker 4: the same sort of service as we were back when
Speaker 4: Chorus first started with the UFB initiative, it's fundamentally changed.
Speaker 4: To give you another statistic, ten years ago, even the
Speaker 4: average data usage in New Zealand per month was forty
Speaker 4: gigabits gigabytes. Sorry, it's now over six hundred gigabytes. We
Speaker 4: now do the annual usage from ten years ago in
Speaker 4: just over two weeks. And again I'd say that's a
Speaker 4: pump for the fiber network because that shows again how
Speaker 4: scalable it actually is, and it's built for that future. Again,
Speaker 4: so you know, it's it's something that when you look
Speaker 4: at the use cases of where that that might grow. Yes,
Speaker 4: the rate of growth might change and lost late, but
Speaker 4: I don't think it's ever coming down. So and you
Speaker 4: think about where some of that growth might be, because
Speaker 4: that speaks to the industry, you know, as terrestrial TV
Speaker 4: increasingly and most likely comes to an IP solution as
Speaker 4: we get to four K mass market. And and what
Speaker 4: I mean by that is, you know, even though four
Speaker 4: K has been around for a while, not every household
Speaker 4: has four K devices, and not every household is actually
Speaker 4: consuming four K content. Right at the moment, we have
Speaker 4: I think, on average about I think the average is
Speaker 4: now twenty six devices connected in our home, which seems crazy, right,
Speaker 4: but if you actually add them up and you think
Speaker 4: about the laptops the iPads, the wearables and watches, the TV,
Speaker 4: the smart fridge, disordering your milk for next week, the security,
Speaker 4: all your other appliance. It's really not hard to get
Speaker 4: to twenty six and that's only forecasts to grow even
Speaker 4: over the next five years to up to over forty devices.
Speaker 4: So there is growth and scalability in the fiber network
Speaker 4: itself in terms of where the growth for Chorus comes from.
Speaker 4: One of the things Chorus is doing now is we're
Speaker 4: in this transition from what I've termed as Corus is
Speaker 4: the great network builder to now transitioning to being Coorus
Speaker 4: is the great network operator, and the fundamentally different capabilities
Speaker 4: and mindsets. But largely the UFB program has completed a
Speaker 4: right where past the peak of installs, competition and technology
Speaker 4: is advancing. The government, regulatory and economic frameworks are evolving,
Speaker 4: as are the expectations of cooruses, yearholders and other stakeholders.
Speaker 4: So we need to move as well. Now. Part of
Speaker 4: that shift to becoming a great network operator is restructuring
Speaker 4: our teams in the way that we work to more
Speaker 4: of a matrix model, so thinking more of our three
Speaker 4: we have three value streams now, which the principally access,
Speaker 4: So how do we keep growing into our base. We're
Speaker 4: currently at seventy two percent uptake on all of the
Speaker 4: premises that we've passed with fiber. We want to grow
Speaker 4: that to eighty percent, and we see the pathways to
Speaker 4: actually achieving that. In infrastructure, it's our second value stream.
Speaker 4: This is a new stream, so it was largely passive previously.
Speaker 4: So but thinking more backholl wireless, co location revenues, other
Speaker 4: infrastructure style revenues that have now got dedicated resources, prioritization
Speaker 4: and investment to actually drive growth and really leverage the
Speaker 4: core assets that Chorus has because they are amazing and
Speaker 4: you probably won't appreciate this, but Chorus is actually of
Speaker 4: New Zealand's largest property owners. We have over six hundred
Speaker 4: exchanges throughout the country, thousands of those cabinets that we're
Speaker 4: now busily putting all this beautiful artwork on with local artists.
Speaker 4: We have over two hundred thousand light poles or poles
Speaker 4: that have half of which have fiber and power running
Speaker 4: to them, an awful lot of copper in the ground,
Speaker 4: and about twelve hundred odd high sites. All of these
Speaker 4: things are property that reimagined in a different way, actually
Speaker 4: create an opportunity for Chorus to think about these assets
Speaker 4: in a different way, leverage them more effectively with our
Speaker 4: core to what we do, or divest from them as
Speaker 4: fast as we can. And then that third value stream
Speaker 4: is what we call frontier, and that's essentially about accelerating
Speaker 4: our exit from copper and we want to do that
Speaker 4: by twenty thirty. We need to put a date on
Speaker 4: that and work backwards on what it is we need
Speaker 4: to believe. And then equally, as we've talked a bit
Speaker 4: about expansion and how do we step in that into
Speaker 4: that in a way that has broader industry engagement. And
Speaker 4: again looking back to a public and private partnership government.
Speaker 2: You recently announced a dividend policy that dividends would grow
Speaker 2: with inflation. What are the leavers that you need to
Speaker 2: control in order to be able to achieve that.
Speaker 4: Yeah, So earlier this year we did a reassessment in
Speaker 4: a reset of our capital management policy, and yes, the
Speaker 4: core pillar of that was around having a growing sustainable
Speaker 4: dividend at least at the rate of inflation. Now we
Speaker 4: see that's achievable through the changes that we're making, a
Speaker 4: lot of which I've just spoken to those stepping into
Speaker 4: where those growth areas actually are. So eighty percent uptake,
Speaker 4: becoming an all fiber business focusing on property optimization and
Speaker 4: other efficiency. There's opportunities for us to grow into that,
Speaker 4: and that's where that dividend growth we see coming from.
Speaker 4: But we certainly see choruses an essential digital infrastructure provider,
Speaker 4: and we can talk about the credicality of it and
Speaker 4: how we all use our fiber connections today, But that
Speaker 4: dividend policy and a capital management framework was essentially about
Speaker 4: us having greater confidence in our cash flows, greater certainty,
Speaker 4: and our regulatory environments said, we're transitioning now to be
Speaker 4: that great network operator. So we passed the peak of
Speaker 4: installs subject to something else happening that would enable further expansion,
Speaker 4: So we have that greater degree of confidence when we
Speaker 4: look out to the future.
Speaker 2: Now, we can't talk about technology without mentioning AI. You know,
Speaker 2: you talked about the demand curve, and you know demand's
Speaker 2: only going to increase, maybe the rate will slow down,
Speaker 2: but definitely expecting that demand will continue to go up.
Speaker 2: What if any impact do you see sort of this
Speaker 2: AI wave that's happening play on that demand curve.
Speaker 4: I think it's the next wave that's going to fundamentally
Speaker 4: change the way we live, which is a little scary
Speaker 4: when you I mean you could spend the entire day
Speaker 4: literally just reading AI articles and I think I've got
Speaker 4: to be careful to because AI has been around for
Speaker 4: a long time, and even from a chorus perspective and
Speaker 4: running the network, there's a lot of AI in a
Speaker 4: network that actually is from an optimization and efficiency perspective
Speaker 4: and making sure the experience that you have a home
Speaker 4: with your fiber connection is amazing. It's generative AI that
Speaker 4: I think has the market all crazy and thinking about
Speaker 4: the applications for that and llms, you know, with the
Speaker 4: large language models and New Zealand I think represents a
Speaker 4: potential opportunity, particularly for data centers and data connectivity from
Speaker 4: a global perspective as well. I think we've got the
Speaker 4: last steps. We have over fifty data centers through out
Speaker 4: New Zealand as well, and there's been a couple of
Speaker 4: examples that have announced AI training centers and trying to
Speaker 4: establish those in New Zealand because of part cost of
Speaker 4: land and access and equally just thinking about the connectivity
Speaker 4: and connecting back up to the world. But in general,
Speaker 4: I think it's a watch and see. You know, I
Speaker 4: think the pace of change that we're seeing it's a
Speaker 4: little scary, but I think it will be that next
Speaker 4: wave that fundamentally changes the way we live.
Speaker 2: And in terms of just going back to earnings and
Speaker 2: the regulation by the Comments Commission, are there any parts
Speaker 2: of your revenue that are not regulated?
Speaker 4: Yeah, but twenty percent at the moment. So when I
Speaker 4: talk to that infrastructure stream, so back hall, co location,
Speaker 4: other infrast infrastructure style products. So I think Chorus roughly
Speaker 4: as a billion dollars of turnover, about two hundred million
Speaker 4: of that's actually in non regulated revenue to the non
Speaker 4: fiber So obviously that's copper as well at the moment,
Speaker 4: but that is increasingly on the decline.
Speaker 1: And do you see that twenty percent number increasing then
Speaker 1: over time it has to.
Speaker 4: Honestly, there's a part of establishing that value stream for
Speaker 4: infrastructure was around leveraging our core assets more effectively being
Speaker 4: one of New Zealand's largest property owners, recognizing those fifty
Speaker 4: odd data centers, even the connectivity that we get between
Speaker 4: those data centers and back out over the world, and
Speaker 4: what's the role that chorus actually plays in that even
Speaker 4: from a competition slash partner perspective with five G five
Speaker 4: G when it's truly working as standalone five G which
Speaker 4: is a different standard of it which we don't have
Speaker 4: in New Zealand yet, but when one of the mobile
Speaker 4: operators actually gets to that standlone, that's true five G
Speaker 4: running at network edge and network's liceing for dedicated enterprise networks,
Speaker 4: but the same token, you'd still need the back hall
Speaker 4: for the fiber network to actually make it be as
Speaker 4: amazing as it could be.
Speaker 1: It's where you come in.
Speaker 2: Absolutely well, I think we're almost at time, but before
Speaker 2: we wrap up, I'd love to ask one more question.
Speaker 1: We are living in a very connected world.
Speaker 2: Obviously, connectivity is really really important for all sorts of benefits,
Speaker 2: some of which we spoke about today, but also disconnecting
Speaker 2: is really important as well.
Speaker 1: So how do you like to disconnect?
Speaker 4: A great question. You know, I'm really big on family,
Speaker 4: so I'm spending time with my wife Kate and our
Speaker 4: five children is really important. And you know, we started
Speaker 4: our session talking about the last couple of decades that
Speaker 4: I've been involved in the telco industry and actually I've
Speaker 4: been doing this for probably almost those twenty odd years.
Speaker 4: But when I'm on leave, I disconnect as much as
Speaker 4: I can. I love being out in nature. We have
Speaker 4: so many amazing, great walks around New Zealand and it's
Speaker 4: amazing to just be out and disconnect and be a
Speaker 4: lot more mindful about who you're worth where you are.
Speaker 4: We have such a beautiful country, and I've been fortunate
Speaker 4: to live in a number of others, but you know,
Speaker 4: home is home and we should treasure that. And I
Speaker 4: as much as I'm in the telco industry and have
Speaker 4: been for a long time, I love disconnecting away from
Speaker 4: it as well.
Speaker 1: I agree.
Speaker 2: Well, thanks so much Mark for being on the show.
Speaker 2: We learned so much today and I really appreciate your time.
Speaker 4: Thank you, You're welcome, Thanks for having.
Speaker 1: Me, Thanks for tuning in.
Speaker 2: You can watch Shared Lunch on YouTube, or you can
Speaker 2: follow us on your favorite podcast app.
Speaker 1: Have a great week.