Chorus Stock

Thank you for standing by, and welcome to the Chorus FY '26 Results. [Operator Instructions]

I'd now like to hand the conference over to Mr. Mark Aue, CEO. Please go ahead.

[Foreign Language] Good morning, and welcome to the Chorus results presentation for the 12 months ended 30 June 2026. I'm Mark Aue, Chief Executive; and joining me is Drew Davies, our Chief Operating Officer. I'll begin today with an overview of our results for the FY '26 year and cover the progress we're making on our strategy. Drew will cover the financials and FY '27 guidance before I close out with our outlook and the role we see Chorus playing as core infrastructure for New Zealand's rapidly evolving AI future.

We characterize FY '26 as strong financial and operational performance, reflecting the resilience of our business model, disciplined execution and focus on driving simplicity and efficiency as we transition to an all-fiber business. Fiber connections increased by 3% at over 1.1 million connections. Uptake continued to strengthen, reaching 75.9% with fiber revenue growth of 6% during the year. EBITDA increased 3% to $726 million, underpinned by continued revenue growth and disciplined cost management. We delivered further efficiencies across the business and maintained tight control of discretionary spend, helping offset persistent inflationary pressure, particularly in nontradeable costs.

Net profit improved significantly to $37 million. And strong cash generation reinforced the quality of earnings with operating cash flow up 4% to $740 million. Gross CapEx was $375 million. And while lower than FY '25, this primarily reflected the timing and phasing of projects rather than any change in our commitment to maintaining and enhancing network quality. Reflecting our confidence in the business and consistent with our previously signaled guidance, the total FY '26 dividend increased 4.3% to $0.60 per share.

We're now firmly in Horizon 2 of our multiphase strategy, a 4-year program through to the end of FY '29 focused on driving growth, simplicity and efficiency. Fiber uptake continued to progress during the year. Our opportunity still sits with around 400,000 addresses where fiber is available, but not yet connected. We've taken further steps to simplify the business, streamlining our plan suite and introducing new retailer incentives, whilst retaining a strong debt profile and our BBB or equivalent credit rating.

We're encouraged by the positive regulatory change, and we're accelerating copper retirement with fewer than 1,000 copper lines now remaining in fiber areas. In parallel, our copper recycling program is fully operational, and a multiyear property optimization program is underway. We're also building momentum across a number of infrastructure initiatives with the launch and expansion of new products like Express Connect and Unified Transport and the recent announcement of TimeSync, a precision timing service, all of which are creating future growth opportunities. Finally, while maintaining our disciplined investment approach, we're evaluating several medium-term infrastructure opportunities, including a potential inter-island subsea cable and a trial for the deployment of distributed battery energy storage systems.

While the financial results this year are important, they also reflect something deeper, how we're bringing our purpose to life and embedding it in the way we work. Our core purpose, unleashing potential through connectivity, enabling better futures for Aotearoa resonates widely. During the year, we clarified the purpose-led areas that matter most for Chorus. That work has shaped 3 interconnected pillars for connectivity: being future fit, resilient and equitable. Together, these bring focus where Chorus' strengths align with the needs of our wider ecosystem and where we can create the most meaningful shared value.

So we're continuing to deliver value beyond financial performance. One example is our focus on driving digital inclusion with the launch of our Equity Fibre product. Fundamentally, we believe everyone deserves to benefit from the potential that connectivity unlocks. By combining affordable fiber access alongside community partners, we can help remove barriers to digital participation and create lasting benefits for New Zealanders. Feedback to date has been positive, and we have over 3,000 connections on plan.

With climate, we've reduced Scope 1 and 2 emissions by 43% from our FY '20 baseline. Almost all waste has been diverted from landfill. And electricity consumption has reduced by 7% compared with prior year despite the growth in data traffic. Our people remain central to our success. Employee engagement remains strong with a score of 8.4 out of 10, well within top quartile, and we continue to compare favorably with industry on safety performance.

Turning now to performance across our 4 strategic lead pillars. First, in lead, fiber uptake increased to 75.9%. Original UFB1 areas increased to 77.3% and UFB2 areas at 67.5%, with major urban areas like Wellington and Denedan now close to our 80% fiber uptake target. Encouragingly, as the right-hand chart shows, without the copper withdrawal tailwind of past, we're still maintaining new fiber connection growth. As we noted previously, we have 2 clear fiber growth pools, around 200,000 premises where an ONT is already installed, and we can win the customer back to fiber, and another 200,000 brownfield and infill addresses where fiber has passed the premise, but the ONT still needs to be installed.

Turning to connection trends. With ongoing cost of living pressures, our home fiber starter plan continues to play an important role in keeping customers on fiber, while demand for higher speeds continue to grow. More than 4 out of 5 customers are now on a 500-megabit plan or faster. Hyperfibre continues to gain momentum as our premium growth platform, offering symmetrical plans from 2 to 8 gigabits with around 54% of total addresses already network ready. We expect ongoing growth in high-speed services, supported by increasing household data usage and emerging AI-driven requirements. Our medium-term ambition is to reach 80% address availability with 70,000 Hyperfibre connections by 2030. In parallel, we continue to be buoyed by research highlighting the relative differences in broadband technology with first choice preference for fiber at 66% compared to 12% for fixed wireless.

Data consumption continues to grow strongly, reinforcing the importance of high-capacity fiber infrastructure. Average monthly fiber usage reached 731 gigabytes per connection in June 2026, up 9% on prior year. Heavy usage is also increasing with 21% of fiber customers now consuming more than 1 terabyte of data per month and 5% of those customers using over 2 terabytes per month. Total network traffic grew nearly 10% on FY '25. And I often like to put this in context. That increase alone is the equivalent of over 30,000 years of continuous HD video streaming.

Speaking of streaming, our congratulations to TVNZ, successfully running the recent FIFA World Cup tournament predominantly online. This demonstrated delivery credibility and bodes well for the future with the retirement of legacy broadcast services. And this represents another growth opportunity for fiber uptake that we've highlighted as services increasingly move to IP-based delivery. During the tournament, we were pleased but unsurprised by the fiber network's performance, peaking at over 180,000 concurrent streams for the final with each game in high resolution accounting for about 5 gigabytes of data.

We continue to drive the expansion of fiber. Whilst new property development was subdued in FY '26, we still passed 22,000 new lots, strengthening relationships with developers and renewing key partnership agreements. Beyond our core fiber network, we're continuing to expand and diversify our infrastructure portfolio. As I noted, we've launched several new products with Express Connect, Unified Transport and more recently, TimeSync, the precision timing service. With the intent of expanding further through FY '27, all are designed to simplify our offering and speed to market for customers. In mobile infrastructure, demand for fiber backhaul remains strong as operators continue investing in network densification, and we see steady demand for rack space in our regional edge centers, where access diversity is becoming more prevalent. Together, these initiatives broaden our addressable market, increase utilization of existing network assets and support sustainable long-term growth beyond traditional fiber connections.

To our adapt pillar, we've continued to evolve our operating model and capabilities. In Q4, Matt Bolton was appointed as Executive GM for Infrastructure, further strengthening our leadership team. In regulation, we've made a material step forward. The final report from the telco sector review highlighted opportunities to simplify legacy regulatory settings with the prior shareholder caps to be removed. This is an outcome we've been advocating for over some time and removes an unnecessary layer of complexity. There are still formal steps to work through, including seeking shareholder approval at our Annual Shareholder Meeting later this year. We're also seeing progress in copper services when we continue to work with government and industry stakeholders to establish a clear and efficient pathway for retiring copper services in areas where fiber is not available. This obviously has a benefit to us but equally provides certainty to the market and to customers.

And finally, to our pioneer pillar. Copper to fiber transition is now largely complete across New Zealand's fiber footprint with fewer than 1,000 copper connections remaining to migrate. A total of 48,000 copper lines disconnected in the year, leaving roughly 44,000 services, nearly all in areas where fiber is not available. Given the rate of decline, we announced earlier this year that we would bring forward the estimated date of the copper network retirement to the end of 2028. The right-hand chart continues to show the efficiency gains from retirement with a $7 million reduction in reactive fault spend this year.

And progress continues on a number of other initiatives. To highlight 2, copper recycling has transitioned from a successful trial to a scaled operational program, contributing $4 million in EBITDA for the year. With metals pricing at historic highs, our estimates for cumulative returns are now in the $50 million to $70 million range from where we started the program out to 2030. We're also progressing our property optimization program. As the copper network is retired, the focus is not only on value realization, but also on reducing future operating costs and avoiding unnecessary capital expenditure.

I'll now hand over to Drew to take us through the financials.

Thank you, Mark, and [indiscernible], everyone. Overall, we delivered a strong set of financial results. Looking firstly at our income statement, which aligns to IFRS 18 standard presentation, EBITDA was $726 million, in line with the upper end of guidance and ahead of FY '25 by $21 million. For operating expenses, which declined by $6 million from the prior year, we made cost savings from the changed operating model, incurred lower consulting costs and reduced copper costs. That helped us absorb inflation in a number of cost lines. Accelerated depreciation in our copper assets in Chorus UFB areas occurred in the prior period, resulting in lower depreciation and amortization in FY '26 of $439 million.

Net finance expense was $5 million higher year-on-year. While our weighted average interest rate on debt reduced to 4.95%, we repaid the majority of our EUR 300 million notes early with $9 million of settlement costs. Income tax expense was up $15 million from FY '25, primarily driven by higher profits. The FY '26 effective tax rate was 46% versus 81% in FY '25 and higher than the statutory rate of 28%, mainly due to permanent differences arising from the tax treatment of the grants received from the Crown project-related funding. As a result, we recorded $37 million of net profit after tax for the year compared to $4 million in FY '25.

Looking in more detail at our revenue categories, total fiber broadband revenues were up 6% or $47 million from FY '25, driven by fiber connections up 32,000 lines, along with an approximate 2% increase in ARPU to end at $59.51 for the year. With total copper connections down 48,000 or 52%, this resulted in combined copper broadband, voice and data revenues being down $34 million or 45% lower annually as we continue to execute our multiyear copper exit strategy. Field service revenues were up slightly with higher brownfields projects and roadworks and was partly offset by lower NPD revenue, given the lower volume of development activity across New Zealand in FY '26. Other revenues were stable annually and included approximately a $4 million net gain from copper cable recycling sales as activity started to ramp up in the second half. In the prior year, $3 million was from that trial undertaken.

Total operating expenses were $303 million for the year and were $6 million or 2% lower than the prior period. We continue to drive strong cost management disciplines to offset the persistent inflationary pressures, mainly from nontradeables, such as rent, rates and electricity lines costs. Labor costs were $81 million, down approximately 5% annually as a result of our new operating model. The lower capitalization rate of 42% was mainly from fewer fiber footprint expansion projects. Network maintenance costs were $11 million lower year-on-year. The key driver was lower copper fault volumes to premises as copper connections continue to decline, resulting in a 23% reduction in truck rolls. As we noted at the half year, second half network maintenance costs did not decline as much as prior periods as contractual CPI increases occurred, along with a seasonal increase in weather-related faults, which impact network-related fault volumes, especially in more rural areas.

Other network costs were up $9 million higher than FY '25. This is mainly due to the higher engineering activity as a result of weather events and higher payments to service companies and better service levels. We also saw timing differences on project spend annually, including the one-off copper cabinet shutdown costs we incurred to power down each cabinet. While our electricity consumption declined annually by approximately 7%, electricity expense was up $2 million due to higher lines charges. Consultants expense was $4 million lower with spend relating to specific investments to explore potential new revenue opportunities. Meanwhile, we focus on lowering discretionary spend, which helps reduce other expenses by $5 million.

Moving now to CapEx. Gross CapEx for the year was $375 million, down $35 million from the prior year and in line with the bottom end of the guidance range. Within gross CapEx, $205 million was sustaining CapEx and $170 million was for growth. Gross CapEx was supported by $41 million of customer contributions for roadworks, new property development and rural broadband upgrades. As signaled previously and as noted in the chart, the half year phasing shows total second half CapEx was in line with the prior year second half. This included phasing of large national fiber build projects underway, major network property refurbishment projects and large IT project deliveries.

This slide shows CapEx using regulated categories for the fiber regulated asset base, RAB, with the tables noting FY '26 allocations, which are subject to audit at the end of the calendar year. CapEx attributable to investing in the RAB, which excludes capital contributions, is estimated to be about $297 million for the year. For the non-RAB CapEx, copper CapEx was $6 million, down annually and was mainly third-party funded. As reported in our information disclosure update in May, total RAB increased by $101 million over the '25 calendar year to $6 billion, with core RAB increasing to $5.1 billion, up $221 million, partly offset by the financial loss asset declining by $130 million to $862 million as the FLA depreciates further.

Our net debt as of June 30 was $3.2 billion, up $72 million from the prior year, primarily as a result of issuing $400 million in new notes in November. Proceeds were used to repay $243 million of the EMTN300 notes due in December '26, along with paying down entirely the revolving credit facility. Moody's rates Chorus as Baa2 stable with a threshold of 5.25x debt to EBITDA, which we are currently at approximately 4.75x. S&P rating is BBB positive outlook with a threshold of 9% funds from operations to debt ratio, which we are currently well above at 17.2%. The table on the slide provides our bank covenant calculation under the revolving credit facility, and we are currently at 4.37x. Moody's rating trigger of 5.25x debt-to-EBITDA is the focus of our capital management policy. The Board considers that a credit rating of at least BBB or equivalent credit rating is appropriate for a company such as Chorus. It intends to maintain capital management and financial policies consistent with these credit ratings. Lastly, about 65% of our interest rate exposure is fixed for the next 3 years.

On August 7, the New Zealand government announced that it agreed to the sale of the securities NIFF held in Chorus to a select group of domestic and international institutional investors with settlement occurring by the end of August 2026. For reference, the key terms of the securities are set out on the left-hand side of the slide, and the face value of the combined securities is $1.16 billion. Chorus' obligations remain the same as presale, but those obligations will now be owed to a number of parties and not just NIFF. From a ratings agency perspective, we expect S&P may treat the $683 million equity securities as debt rather than equity, which will increase our calculated leverage for S&P towards 5.5x debt to EBITDA. Meanwhile, we believe Moody's will maintain the status quo with their equity attribution of 50% to debt and 50% to equity. This year, we adopted the fair value approach for our network assets. We completed our first independent valuation of these assets. This resulted in a $983 million uplift in asset values and a $708 million increase in equity through the asset revaluation reserve net of deferred tax.

Turning now to the year ahead. FY '27 will be a transition year for the copper business. We expect copper connections revenue in this year to be in the high-teens of millions of dollars, reflecting the ongoing decline of copper customers in non-UFB areas. At the same time, net copper recycling gains are expected to be in the low-teens of millions of dollars, supported by the continuing retirement of legacy infrastructure. We are also seeing a continued reduction in copper maintenance costs as the network footprint shrinks. There will be a further step down in copper depreciation in FY '27, as illustrated in this chart, and we expect copper assets to be fully depreciated by 2028.

Finally, we're progressing plans to exit high-cost sites and exchanges that are no longer required in a fiber-first environment with a further update anticipated at the half year '27 result in February. Overall, the copper business is becoming smaller, simpler and less capital intensive, while the benefits of lower depreciation and reduced operating costs support the transition to a fully fiber-focused network over the next few years.

Finally, on dividend and guidance for the year ahead. The Board has approved a final dividend of $0.36 per share unimputed to be paid in October. This brings the total dividend for the fiscal year '26 to $0.60 per share. Noting our adoption of IFRS 18 means that our net cash flows from operating activities now exclude net interest. In the table, we show how we arrive at our free cash flows for capital allocation. For the fiscal year '27 year ahead, our EBITDA guidance range is $730 million to $760 million. For total CapEx, guidance is $375 million to $415 million and sustaining CapEx is between $195 million to $215 million, remaining the same for both as in the prior year. For dividends, we are guiding to a minimum of $0.62 per share, partially imputed. At $0.62 per share, this would be an increase of 3.3% over fiscal year '26 and maintains our policy of a growing dividend in real terms.

Overall, we continue to track well, and we're pleased with the progress we are making in the early phase of our strategic objectives for Horizon 2 through fiscal year '29. I'll now hand back to Mark to run through the outlook.

Thank you, Drew. Looking to our outlook, thematically, we see data centers and AI creating the next major wave of demand for network connectivity. These long-term demand drivers continue to support fiber growth opportunities. While AI isn't yet a significant contributor to traffic volumes in New Zealand, the direction of travel is clear. We're seeing growing investment in local data center capacity, increasing use of cloud-based AI applications, and we forecast a material shift in upload-intensive data traffic. Combined with ongoing growth in streaming quality and the number of connected devices, these trends support a sustained increase in bandwidth demand over time. Importantly, fiber is the only access technology with a proven road map to multi-gigabit plans, defined by low latency and symmetrical speeds, positioning Chorus well for the next generation of digital demand.

The scaling of AI requires 4 key infrastructure components: land, power, cooling and fiber. While the first 3 are often spoken about, fiber is the connecting enabler as a digital highway. The announcements for major data center developments for Makarewa and Stratford are a clear signal that this is no longer a hypothetical scenario. Large-scale computing infrastructure is being planned and built here, bringing significant new requirements for power, connectivity and network capacity, with estimates forecasting the quadrupling of capacity over the next decade.

The Chorus fiber network gives us the ability to move enormous amounts of data at scale with the resilience, speed, latency and capacity to grow as demand grows. And unlike compute capacity, which can be added relatively quickly, building new fiber routes takes time, capital and access to infrastructure corridors. Thematically, as this evolves, there is a clear opportunity and advantage for Chorus. A strong fiber footprint, one with over 200,000 kilometers of existing fiber, is a strategic asset that is very difficult to replicate.

Our expectations of network speed keep changing, and it's worth remembering just how quickly that occurs. There was a time when 56 kilobits per second was standard, and we had to accept that down or uploading a file could take hours because that's simply what the technology allowed. Fiber changed the equation. Now we're moving into the next phase where we see multi-gigabit fiber becoming mainstream. As users, when we have more capacity, we find new things to do with it, higher-quality video, cloud applications, connected devices, massive file transfers and now AI. What seemed like more capacity yesterday becomes the baseline for tomorrow.

As the table shows, a 1 gigabyte file that could take over 40 hours to upload over a dial-up connection can now happen in around 4 seconds over a 2 gigabit fiber connection. Even with alternate technologies today, that might take 2.5 minutes or more on a fixed wireless or LEO sat link. On fiber, that's not just a faster connection. It truly changes what is practical and repeatable. Again, noting where Chorus has an advantage through coverage and availability of high-capacity fiber, not just giving people more speed, but creating the headroom for the next generation of applications, businesses and experiences that we haven't even imagined yet. The key point is that New Zealand's fiber network is already built for the AI era with the scale and performance required to support next-generation digital services without significant network redesign.

As we look ahead, we see multiple pathways to growth and becoming an all-fiber business. In lead, underpenetrated segment growth in win-backs, brownfields and infill remain live shorter-term opportunities, and we expect to benefit from the structural demand growth driven by AI. In expand, we're building a pipeline of adjacent growth opportunities. We enter FY '27 with a strong order book among previous product launches. TimeSync has also moved into build phase. And we're advancing opportunities, including the battery energy storage and the feasibility of the inter-island subsea cable. In adapt, we see favorable pathways emerging on regulation. We'll seek shareholder approval to remove legacy ownership restrictions, whilst continuing to refine our operating model as our Horizon 2 gathers momentum. And finally, in pioneer, full copper retirement remains on track for completion by 2028, and we're focused on unlocking value from legacy assets.

To close, FY '26 demonstrates the strength of the Chorus business model. We delivered growth in fiber connections, solid earnings and cash flow, increased the value of our asset base, and returned more value to shareholders through a higher dividend. As we move further into Horizon 2, our focus remains clear: driving fiber uptake, simplifying the business, improving efficiency and pursuing disciplined growth opportunities. We're increasingly an all-fiber business. With copper retirement firmly in sight, we're unlocking new opportunities to simplify our operation and realize further value from our asset portfolio. We have a clear view of where future growth can come from. We're building a pipeline of opportunities beyond our core business, but we'll remain disciplined. Any investment must leverage our core capabilities, be strategically aligned and deliver scalable return. We remain very confident in the long-term outlook for fiber. Data consumption continues to grow. AI is accelerating demand for high-capacity, low-latency connectivity, and fiber remains the technology best placed to meet those needs. The future itself is increasingly digital, AI-enabled and dependent on fiber. And Chorus is uniquely positioned to power that digital future.

Thank you. Let's go to the phone line operator, please, for any questions.

[Operator Instructions] Your first question today comes from Ben Crozier from Forsyth Barr.

Just keen to just touch on the rationale for the price increases this year being slightly smaller than the last couple of price increases. But you're still sort of under earning the maximum regulatory revenue in my estimate this year. Like sort of when do you expect that gap to close? And sort of why was the sort of slightly lower price increases this year?

Ben, thank you. Yes, look, I mean, we obviously take a number of factors when we're looking at pricing. It's been a pretty volatile time over the last few years from a macro perspective and headwinds. I think at the half, we were seeing some signs of economic recovery. And obviously, that flipped back around with more of the geopolitical sensitivity and the Middle East conflict. So we're always mindful of a number of things that are happening in market. We use CPI as a reference, both historic and forward-looking. And so, we take a view across the plan. So I think on a weighted average basis, we're at 3.8%. At the top end, we've actually held our multi-gigabit [ plans or ] prices flat. So it's about a 0% increase, and that's indicative of us wanting to move customers in the market actually into a symmetrical multi-gigabit plans as well.

Look, you're right, I mean, from a [ MA ] perspective, it's something that we look at over the course of the regulatory period. And an actual fact for this regulatory period for RP2, we were asking the commission to actually smooth some of that headroom based on the washups, et cetera. I think, again, go back to the broader economy perspective, I think 3.8%, we would see, on a weighted basis, as reasonable at the moment. I think it also is reflective of the ongoing cost of living pressures that we're all going through.

That's clear. And maybe just touch on the sort of the size of these investment opportunities around that subsea cable and the battery energy storage systems, like not just sort of in FY '27, but if the trials and the feasibility studies are successful, sort of what's the sort of CapEx required and the revenue opportunities from them?

Yes. Look, I mean, I think we've been talking about this for a while now when we reset the strategy and the opportunity to move what we see as our infrastructure value stream from more of a passive model to being more active. And given the asset base that we have, I think, Chorus should absolutely be part of those growth opportunities. I referred to several of the products we've launched this year. I think they're indicative. They're smaller in scale at the moment, but they'll build momentum. With Express Connect, we're in 8 data centers now. We'll look to expand that over the coming year. Unified Transport has been received really well as a product and providing faster and simpler access as well to high-capacity fiber. TimeSync, not that you'd ever want anything to happen in new market and new technology, but some of the timing issues that -- related issues that we had in Australia recently with Telstra, I think, indicative of an opportunity around precision timing and looking at atomic clock use. So the feedback on that has been really positive to date as well. And those are ones that we've launched in market. They'll take time to scale, obviously.

The 2 that we're exploring that -- so there's excitement about on BESS for battery energy, we've had a number of conversations with partners, and there's a lot of excitement around that. Chorus is one of the largest property owners in the country, and that gives us line of sight to opportunities to diversify and look at how we might use our properties in a different way. So we've got 5 sites that we're looking at a trial. These will be low sort of 3 to 5 megawatt BESS installations. But again, quite excited about that potential opportunity and when you look at other markets overseas. And then, the other is obviously the subsea cable with an interisland cable. And that's in feasibility now. We've contracted a technical partner to undertake the feasibility, and that will happen over the next 3 years or so. But again, see that as a natural fit to the core. It's essentially linking the 2 islands with terrestrial fiber, and we just think about that as [ wet fiber ]. But coming to your question, and I go through it in detail because there is a lot there. From a CapEx perspective, the big one with the subsea cable, that's in a ballpark at the moment of $60 million to $80 million that we would see over the 3 years. The previous product launches would be a lot smaller, and BESS would be dependent on whether there's that successful trial and could you take that a lot further. I mean, we're only -- we are trialing this, but we can see a future where you could scale this significantly. And obviously, we have several hundred properties that we could potentially do that through.

That's good color. And maybe last just short one, like Home Starter connections, sort of the entry-level fiber product has been growing super strong over the last couple of years. Do you expect, again, pretty strong growth in FY '27 and beyond? Or do you expect that to sort of stabilize from here going forward?

Yes. Look, I think some of that, again, is relative to the economy and some of the broader macro headwinds. Again, we feel very validated of putting that entry-level fiber product in market. It was originally a 50 meg, and we boosted it to 100. I think that's been -- the appeal of that continues to grow. Just looking at numbers again this morning and the premises that have been off-net for over a year are continuing to reconnect. So there's a 30% annual growth in those premises reconnecting. So the plan is appealing, and it's appealing to premises that you would say weren't coming back to fiber previously, whether that was because of fixed wireless availability or other alternatives or whether the 50 meg plan for fiber wasn't hitting the mark. And that's certainly our sense.

From the growth in Home Fiber Starter, it's still 2/3 new connects, 1/3 downgrades. Again, I think that's partly reflective of the economy, and we'd rather provide that optionality. But it has stabilized. We're not seeing any particular movement. And obviously, we would hope with -- going forward, as the economy stabilizes and returns to growth again, that actually our push is to move people up the speed stack.

[Operator Instructions] Your next question comes from Entcho Raykovski from E&P.

So maybe I'll start with a question on connections. I'm just conscious that your connections growth just slowed a little in Q4 after a stronger Q3. And I'm just curious if you can just talk about some of the factors impacting that slowdown. I don't know if it was mainly price increases by the RSPs and perhaps some seasonal factors which drove this. And then, as part of the answer to that question, can you talk to how that impacts your connections outlook into FY '27? Do you assume the Q4 run rate continues? Or do you think there's a level of pickup?

Thanks, Entcho. As you said, there is seasonality in our quarterly connections run rate. And I'd say what we've seen in the last year will be kind of consistent for the year ahead. We see -- we work with all of our retail service partners. So it's based on the programs of work they have underway. We had a good July. So we're pleased with the start to the year. But we would see that as we typically see in Q2, you have the college students turning off, and so you always see reductions there, but also then the Q3 is always stronger. So that kind of connections trend is what we continue to see going ahead.

Okay. And then, my next question is around the dividend. I wonder if you considered increasing the dividend [indiscernible] remain lower than the Moody's threshold?

You just cut out there, Entcho. Can you repeat the question?

Yes, can you hear me okay now?

Yes, I can hear you. Go ahead.

Okay. Sorry. I wondered whether you considered increasing the dividend further, given that you're lower than the Moody's threshold of 5.25x debt to EBITDA and also the fact that your covenants have been relaxed? And I guess, if you're not considering -- well, you've obviously exposed to a floor of $0.62. So there seems to be some scope for an increase. But if not increasing it further, is there any scope for other capital management, given the room to the Moody's threshold?

Well, let me -- that's okay. I understand your question. So Moody's has not changed their thresholds. It's still at 5.25x, and we're at 4.75x in terms of what we're managing to. We don't anticipate them changing anything to the equity attribution with the NIFFCo sale. So we don't think that will change those numbers. For us, the $0.62 -- just a reminder, our capital management policy is that we have a growing sustainable dividend in real terms. So -- and the reason we set the minimum $0.62 is given the current geopolitical uncertainty and the impact that has on forecasting CPI for the year ahead. If CPI is higher than the 3.3%, which is the $0.62 or $0.60 growth, if it's higher than the 3.3%, then the Board will review the annual CPI at the end of the fiscal year to determine if an adjustment is needed.

I think if -- to us -- I mean, I think we've said this analogy before. Just because the bank increases your credit card limit doesn't mean we'll spend up to that limit. We look for growth opportunities and appropriate investments. And that's why we set our dividend for the year ahead and how we use the word minimum.

Okay. Maybe perhaps I wasn't so clear necessarily, is that 0.5 turn gap to the Moody's threshold. Is that something that you feel comfortable with? Or do you think that there's scope to narrow that a little bit?

No, we're comfortable with that gap.

Okay. Got it. And then, finally, I mean, a sort of query, whether that's necessarily so relevant, but the SpaceX IPO has made a topic also. I wanted to ask how you view the threat from satellite, particularly given that Starlink now makes up 27% of rural broadband connections. Is there anything you think you need to do from a product perspective to ensure you remain ahead of the satellite product? Or do you think that sort of usage and capacity provides you with a level of protection?

Yes. Entcho, I think you're right. I mean, when we consider the outlook and evolving trends around AI evolution, data center growth, et cetera, consumer behavior changing, always wanting more capacity and demand continues to grow as the connected devices, so every characteristic you would think in our mind lends itself to the fiber network. Starlink has seen significant growth, as you noted, but it has essentially been in rural. And in many ways, it's helped us to -- with the copper migration out and copper retirement. So, that doesn't mean to say that there aren't any Starlink connections or LEO connections in urban areas and particularly urban fringe where fiber may not have been as prevalently available. But we still see a significant differential between the technologies, between fiber and Starlink.

And so, look, for us, I think a lot of that --you asked what we would do. It's not really a product change. It's actually more an awareness piece. Fiber has been around for a while, and I think there's a risk that maybe there's some complacency around what fiber is and whether it's aging versus the new technology. And the reality is, fiber is fit for a lifetime. It runs at the speed of light. So whilst you can line all these broadband technologies up against each other, they are significantly different, and even so when you come to the difference between fiber and Starlink. But we'll remain vigilant, obviously, in urban areas. As I say, there are some places where that makes sense. But I think a lot of what we've talked to is driving the awareness, again, about fiber being fit for a lifetime.

And is there -- maybe a follow-on to that. Is there the opportunity for you to work with satellite operators in terms of providing backhaul to some of their ground station infrastructure? Is that something that you're considering at the moment?

No, there is, absolutely.

Your next question comes from Phil Campbell from UBS.

Just on the network revaluation, Drew, I was just wondering, is there like an implied [ EV ] to RAB multiple that was derived from that revaluation? Just to make sure I check my numbers.

No, sorry, Phil, it was done independently as a DCF model. And in the annual report, you'll see the methodology that was used to do the DCF.

Yes. Okay. Awesome. Great. Just coming back -- the second question, just coming back on terms of the -- I suppose, the gearing of the business. I suppose the Board is committed to a BBB rating. But I suppose when you look at the ratios, like with the S&P threshold, I think the down driver is going to be 6x. So you should be reasonably comfortably within that. And then there is a possibility that Moody's obviously is going through the same evaluation of their methodology. They could see their 5.25x going up a little bit. So you could end up potentially kind of reasonably within those kind of thresholds. I suppose with S&P, there's even a chance you could get a rating upgrade. So is the Board mindful of that? And is that driving a dividend policy? Or are they just pretty much taking a more conservative view at the moment?

Well, our dividend policy is set through Horizon 2, right, growing dividend in real terms. As to S&P, obviously, they haven't come out with their final determination of the NIFFCo equity attribution to debt, where I said earlier that we'd be at approximately 5.5x. So again, if they come out with and they're at 6x, we'd be about 0.5 turn underneath that number. But again, we're waiting for their final determination. Under Moody's, yes, I haven't seen -- the request for comment period is open for another number of months. So we don't want to speculate in terms of what they may do. But at this point, we're at 5.25x down driver, and that's what we're focused on.

Great. Awesome. And then I suppose just coming back on the subsea CapEx. How much is -- because obviously, it seems as though within the FY '27 guidance, it does seem as though there's some CapEx for some of these new projects contained with that. Do we know how much of the CapEx within the guidance range is attributable to the new projects?

There is some allocation for a variety of the projects, not just the ones that Mark talked to on subsea and BESS, but the ones we've already previously announced, but it's not a material driver of the '27 CapEx.

Phil, just an overlay to that as well. I think we see a real opportunity for the -- I talked to the brownfields and infill opportunity, so the 200,000 or so premises that we've passed the premise with fiber today but hasn't had an installation, right? So our ability to go back now and look at where those infills or look at where premises that weren't installed previously, now that fiber is really well known and the market has changed. So that's another opportunity we see for install CapEx. Okay.

Awesome. And then, just -- the last one is just on the -- at the ASM with the shareholder vote on the shareholder cap, is that a 50% voting threshold? Or is it a 75% voting threshold?

75%.

There are no further questions at this time. I'll now hand back to Mr. Aue for any closing remarks.

Thanks, Darcy, and thank you to everyone who joined today. Thank you for those that have also asked questions. I appreciate that this is a really busy time of year. So again, we all appreciate you taking that time to join us. So thanks again, and we look forward to meeting with some of you over the coming days and weeks. Thanks very much. Take care.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Chorus HY '26 Results. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Aue, CEO. Please go ahead.

Good morning, everyone, and welcome to Chorus' results presentation for the 6 months ended 31 December 2025. I'm Mark Aue, Chief Executive; and joining me is Drew Davies, our Chief Operating Officer.

I'll begin with an overview of our results for the half year and cover some of the progress we're making on our strategy, having just entered our next phase into Horizon 2. Drew will then take you through the financials and FY '26 guidance, and I will close out with the outlook for the second half and long term.

For the past 2 years, we've noted the economic downturn and its material impact across our country. We'd recognize economic recovery is at best still lumpy. Over the same period, we've continued to highlight the resilience of fibre more seemingly as an essential service, and so I'm pleased to be reporting another robust result for the first half.

From a results perspective, comparing half-on-half, total fibre connections were up 3% at over 1.1 million, with uptake lifting to 72.4% and fibre revenues growing by 7%. Our ongoing focus on simplicity and efficiency has reduced operating expenses by 3%. Per previous thematic, this is despite inflationary pressures and non-tradable costs, such as rent rates and electricity.

EBITDA of $357 million is $11 million ahead of the comparative half with underlying operating cash flows in line with prior year. Gross CapEx was $158 million with sustaining CapEx of $79 million, driven in part by life cycle planning and project timing shifts into the second half. Finally, the Board has declared an unimputed interim dividend of $0.24 for the half.

In our last results announcement, I was pleased to speak to the foundations and groundwork we've laid to set us up across our 10-year outlook. Now 6 months into Horizon 2, focus continues shifting to growth, simplicity, and efficiency. We continue to build capability through new leadership and remain optimistic about fibre growth. Likewise, we're alive to adjacent infrastructure opportunities, evaluating several and discounting a number, but we'd also recognize these take time to commercialize and bring to market.

Brand fibre messaging continues to land, raising awareness of comparative differences in technology. Research trends continue to move favorably with fibre's preference as first choice interconnect connection now over 67% compared to 12% for fixed wireless customers.

Our accelerated retirement of copper continues at pace with just 3,000 lines remaining in UFB areas. This opens material opportunity through recycling, and we see positive pathways to regulatory change as only a question of time.

Turning to performance across our 4 strategic LEAP pillars. In Lead, we lifted fibre uptake to 72.4%. UFB2 areas increased to 63% and original UFB1 areas are at 75%. Encouragingly, we are seeing pockets where fibre has already exceeded our 80% target, while others like Auckland and Nelson are at 76% already. In the past, copper withdrawal provided a pipeline to fibre growth. But as the right-hand chart shows, we're maintaining fibre connection growth without the copper tailwind and are unlocking other growth pools.

Our plan mix remains positive with over 4 out of 5 customers on a 500-megabit plan or higher. Total churn as an off-net greater than 4 weeks is reducing with indications fixed wireless is plateauing. At the top end, demand for 1 gigabit plans is stable with hyperfibre adding roughly 500 connections per month now.

There is often discussion about our home fibre starter plan. I'd say we remain resolute. The introduction of our 50-megabit plan and subsequent boost initiatives to 100 and 500 megabits were the right decisions. Overlay high cost of living pressure, these provided optionality, and we're confident has opened us to markets and customers that existing fibre plans did not appeal to previously. Profiling shows in the main, these are distinct customer groups with lower usage and they have greater churn and reactivation rates than higher tier plans. Whilst we saw initial downgrades from higher plans, this was also exacerbated by some retailers moving pricing at the same time in Q1.

Now this has settled, we've seen encouraging trends over the past quarter in particular. Demand for the 100-megabit plans is strong with circa 75% of that growth coming from off-net and 25% from downgrades. Even more favorably, we're seeing a material shift in uptake for long-term inactive fibre premises with a 24% increase from premises off-net greater than 3 months, 32% from off-net greater than a year, and 62% from premises off-net greater than 2 years. Our hypothesis being the previous 50-megabit plan didn't appeal and/or the previous 300-megabit plan was too much. And that was also part of our boost rationale to create clear air between fibre and fixed wireless plans.

Downgrades of the 500-meg plan have now stabilized post boost with overall churn also reducing. We're also increasingly seeing upgrades into the 500-megabit plan with customers wanting either more speed or those customers who may have downgraded previously, but are now returning back to the 500-meg plan. Finally, we'd note intention to switch research continues to highlight fibre's tenure over fixed wireless. Fibre at 6.7%, even for the 100-megabit plan, versus 23.6% for fixed wireless.

Data demand continues to accelerate. Average monthly usage at 699 gigabytes in December increased even further to 722 in January, up 12% from a year ago. Across our base, 20% of fibre customers now use more than a terabyte of data each month. Peak events also continue to grow with a 14% average increase in peak usage. In part, that's also reflective of both the number and quality of connected devices, which has almost doubled over the past 5 years to 25 and is expected to do the same again over the next 5. We see this only playing to fibre's strength of resilience, quality, and the scalability of the network.

Turning to our Expand pillar. We continue to see opportunities for new infrastructure growth, but we'll take a disciplined approach to investment where the returns must be scalable to reach our Horizon 2 aspirations. These relate specifically to natural adjacencies with several we are exploring now, and expect to have a more fulsome update at our full year results.

In our core, while property sector has continued to see subdued activity, our new property development volumes have continued in line with pre-COVID levels. We delivered 11,000 lots in the first half and our pipeline continues to support our estimates of 20,000 to 25,000 lots per annum. Encouragingly, consenting volumes have grown 9% off the cyclical lows. And while early days, this is starting to show up again in incoming NPD volumes.

Mobile infrastructure connectivity continues to grow with 7% growth [Technical Difficulty]. Broader opportunities in connectivity of data center are also now being realized. Our new product, Express Connect is now in 5 data centers and has materially enhanced our go-to-market proposition and delivery, with plans to double the number of DCs served by end of this financial year.

Our Adapt pillar is a key lever of Horizon 2 in driving operational excellence. During the half, we've continued our focus on simplification and efficiency, refining our operating model. This has seen a realignment of teams, processes, and a 12% reduction of roles whilst building new leadership and capability in customer retention, data and analytics and AI integration.

Copper retirement is progressing well, enabling us to power down over 400 cabinets in the half with an intent to accelerate that in H2. We also continue to see positive regulatory pathways developing, having collaboratively worked with government and broader industry stakeholders. We're hopeful a decision relating to copper deregulation and the related TSO review within Q3. Likewise, a decision from the Ministry for Regulation review over a similar time frame.

Finally, to our Pioneer pillar. As I noted, just 3,000 copper lines remain within UFB areas, and we're on track to retire this fully by end of June. In non-fibre areas, copper connections have declined by 26,000 over the last year with only 54,000 lines now remaining. Relatedly, we've seen a $4 million reduction in reactive fault spend, with a 22% reduction in truck rolls. The copper network itself remains free cash flow positive but we continue to highlight our imperative with government to shift regulation and enable a pathway to a full exit of legacy technology that has been far superseded by alternatives. To other strategic opportunities copper recycling remains positively on track.

We're transitioning out of trial now into final contract phase of a fully operationalized work stream. With metals pricing at historic highs, our estimates for returns are now at the top end of the $30 million to $50 million range. To fibre expansion, we were encouraged the Infrastructure Commission had endorsed our fibre expansion plan to 95% of the population. However, the reality of funding and competing government priorities during an election period have forced us to refocus.

Whilst we maintain New Zealand would benefit significantly, both financially and societally, it is clear even joint funding and partnership is not viable in the short term. We've instead shifted greater focus to our other large opportunity pool as brownfields infill, where roughly 200,000 premises have previously been passed with fibre during the initial UFB rollout but were not installed or connected.

Finally, to property optimization, where alternatives are enabled as we retire and exit from the copper network. We continue to review high sites and how these may be broken into tranches as a test case, and we have several parties interested.

I'll now hand over to Drew, to take us through the financials.

Thank you, Mark, and hello, everyone. Overall, as Mark said earlier, we delivered robust results in a challenging economy and we continue to see solid fibre revenue growth annually, offset by the continuing copper legacy revenue reductions. Turning firstly to our overall income statement.

EBITDA was $357 million, up $11 million from half year '25. Revenues of $506 million were up by a net $6 million. For operating expenses, we made cost savings from the changed operating model, incurred lower consulting fees and made good progress on reducing legacy costs. That helped us absorb inflation and a number of cost lines. Having completed the accelerated depreciation on our copper assets in Chorus UFB areas in the prior period, depreciation and amortization was $216 million in the half, down $19 million from half year '25. As a reminder, copper cables and copper-related ducts and poles in local fibre company areas will be fully depreciated by June this year. Those in non-fibre areas will be fully depreciated by June 2030.

Net finance expense was $6 million higher half-on-half. While our weighted average interest rate on debt reduced from 5.7% to 4.9%, we repaid the majority of our EUR 300 million notes early with EUR 9 million of settlement costs. Income tax expense of $11 million is up $4 million from half year '25, primarily driven from our higher profits. Overall, this meant we recorded $15 million of net profit after tax for the half year compared to a loss of $5 million in half year '25.

Looking in more detail at our revenue categories. Our fibre broadband revenues were up 7% or $26 million from the prior year, driven by fibre connections up 31,000 lines, along with an approximate 4% increase in ARPU to end at $57.73 for the year. With total copper connections down 60,000 or almost 50%, this resulted in combined copper broadband, voice, and data revenues being down $18 million or 43% lower annually as we continue to execute our multiyear copper exit strategy. We continue to see copper connections and revenue declining in the second half similar to the first half.

Field service revenues were down slightly, primarily driven by lower new property development activity, as Mark spoke to earlier, and was partly offset by higher revenue from new connections and brownfields projects. Other revenues were stable annually and were lower on a sequential basis as the prior half included approximately a $3 million net gain from copper cable recycling sales based on the trial we conducted in that fiscal year. Based on the learnings from that trial, we have completed a tender process with vendors and expect in the second half of this fiscal year to implement this program to realize a similar level of net sales from copper recycling in the low single millions.

As I've spoken about previously, we intend to adopt the new accounting standard, IFRS 18 for this financial year, reporting to June 30. The new structure allows us to be more prescriptive in our income statement, and we're currently working through what this will look like in our full year results.

Total operating expenses were $149 million for the half year and were $5 million or 3% lower than the comparative period. We continue to drive strong cost management disciplines to offset the persistent inflationary pressures, which rose in the half year, mainly from nontradables, such as rent and rates.

Labor costs were $41 million, down approximately 4% annually as a result of our new operating model with about 100 fewer roles in the business. The labor capitalization rate reduced from 45% to 42% as network build activities declined versus prior periods, primarily from fewer fibre footprint expansion projects.

For network maintenance, costs were down $7 million half year on half year. The key drivers were lower copper fault volumes to premises as copper connections continue to decline, resulting in a 22% reduction in truck rolls, partly offset by network-related fault costs. This has been complemented by improved cost efficiency programs implemented across maintenance activities. For half 2, network maintenance costs will not decline as much as prior periods as contractual CPI increases occur along with the seasonal increase in weather-related faults, which impact network-related fault volumes, especially in more rural areas. IT expenses were up slightly as a result of some one-off cloud-based system implementation costs included in this half. Other network costs were $5 million higher than HY '25. This was mainly due to higher payments to service companies from better service levels this year, higher engineering activity as a result of weather events.

We also saw timing differences on project spend annually, including the one-off copper cabinet shutdown costs we incurred to power down each cabinets. Electricity expense was up $1 million annually. And while our electricity consumption continues to decline annually by approximately 6%, this favorable trend was more than offset by higher lines charges.

Consultant expense was down $4 million annually as the prior year consultant spend included investments to explore the potential new revenue opportunity in the trans-Tasman subsea cable. Advertising expenses of $5 million are traditionally lower for Chorus in the first half, and we expect this will increase in the second half, similar to prior years.

Moving now to CapEx. Gross CapEx for the half year was $158 million, down $41 million from the prior half. Within gross CapEx, $79 million was sustaining and $79 million was for growth. Gross CapEx was supported by $20 million of customer contributions for roadworks, new property development and rural broadband upgrades. While CapEx was lower during the first half, we see an uplift in CapEx spend in H2 as a result of our planned project expenditures during this financial year. This includes phasing of large national fibre build projects underway, major network property refurbishment projects, and large IT project deliveries.

This slide shows CapEx using regulated categories for the fibre regulated asset base, RAB. CapEx attributable to investing in the RAB, which excludes capital contributions, is estimated to be about $125 million for the half year. For the non-RAB CapEx, as you can see, copper CapEx was $3 million, down annually and was mainly funded -- third-party funded. Total RAB increased by $73 million over the calendar year to $5.98 billion, with core RAB increasing to $5.11 billion, up $203 million, offset by the financial loss asset declining by $130 million to $0.86 billion as the FLA depreciates further.

Our total net debt as of December 31st was $3.2 billion, up approximately $100 million from June 30th, primarily as a result of issuing $400 million in euro notes in November. Proceeds were used to repay EUR 243 million of the EMTN 300 notes due in December '26, along with paying down entirely the revolving credit facility.

We have 2 rating agencies that issue credit opinions on our leverage, Moody's and S&P. Moody's rates Chorus as Baa2 stable with a threshold of 5.25x debt-to-EBITDA down driver, which we are currently at approximately 4.8x. S&P rates Chorus as BBB positive outlook. As we have updated previously, S&P introduced a new digital infrastructure rating criteria covering tower companies, fibre companies such as Chorus and data centers. This new criteria uses the funds from operations to debt ratio for its leverage calculations and have set a threshold of 9%. Chorus is currently well above this threshold at 17%. This new leverage criteria is equivalent to 7x down driver of debt to EBITDA when using the prior methodology.

As I will speak to shortly on the status of the NIFFCo security sale, the final determination by S&P on their leverage calculations and final down driver metrics will depend on the outcome of the NIFFCo security sale later this year. The table on this page provides our bank covenant calculation using the revolving credit facility, which has remained at no greater than 5.5x senior debt-to-EBITDA ratio, and we're currently at 4.49x. While S&P have changed the methodology, importantly, Moody's have made no change to their threshold of 5.25x. So this is our leverage down driver that is our focus for our capital management policy. Lastly, about 70% of our interest rate exposure is fixed for the next 3 years.

Turning to the next slide. In December, the New Zealand government announced the sale process will proceed for its bespoke Crown funding securities provided to Chorus. The key terms of the securities are set on the right-hand side of the slide. And the face value of the combined securities is $1.16 billion, of which $683 million are classified as equity securities.

Chorus will not participate in buying these NIFFCo securities in the current government sale process. And importantly, if securities are sold to a third party and transit from the Crown, the terms of the securities to Chorus cannot be altered without Chorus' agreement. If the sale process does conclude later this year and depending on the acquirer, S&P may reclassify the $683 million of equity securities as debt rather than as equity as they currently treat them in their leverage calculations. On a pro forma basis, if S&P treat all of the NIFFCo equity as debt, this would mean the S&P leverage calculation would be increased to approximately 6x net debt to EBITDA. So still well below the current 7x down driver. On an FFO to debt basis, this would be approximately 13%. We will not know the final S&P leverage calculations of course until later this year, until after the NIFFCo sale process is complete. But in all scenarios, we are below the leverage thresholds.

Finally, on dividend and guidance, we've announced an interim dividend of $0.24 unimputed to be paid in April. The DRP is not available. Dividend guidance for the full financial year remains $0.60 unimputed and reflects the ongoing positive trend in cash flows. Net cash flows from operating activities were pro forma $257 million on the same basis as last year as we note that a $29 million payment from one customer missed the cutoff for half year results and was paid in early January. FY '26 EBITDA guidance remains at $710 million to $730 million, and we now expect to be in the upper half of this EBITDA range. And we base this expectation to be in the upper half based on increasing fibre connection growth and corresponding revenue increases and continuing disciplined cost management.

CapEx guidance for fiscal '26 also remains at $375 million to $415 million, and we now expect to be in the lower half of this range. Correspondingly, our sustaining CapEx guidance range of $195 million to $215 million for fiscal year '26 also remains, and we expect to be in the lower half of this range. This reflects the capital project deliveries in the second half that I spoke to earlier. Overall, we continue to track well, and we're pleased with the progress we are making in this early phase of our strategic objectives for Horizon 2 through 2030.

I'll now hand back to Mark to run through the outlook.

Thanks, Drew. I've spoken previously to our overarching purpose for Chorus, and this is anchored in enabling better futures for Aotearoa at an intergenerational level, in many cases, a driving role we play through connectivity.

So we're proud to be launching an Equity Fibre product designed to provide affordable and accessible connectivity at a time where we know nearly 400,000 households cannot afford a package of meaningful digital access in New Zealand. Our Equity Fibre product is a key tool in our digital inclusion efforts. It's shaped through extensive research and deep collaboration with community partners and is now available for retailers to activate. Given the inherent complexity of hardship, our trusted community partners will be vital in helping to identify and connect eligible families. And we're encouraged by an initial interest from smaller community-focused RSPs and we're working towards broader retailer participation.

Digital inclusion is a shared challenge. And whilst ideally, we'd have a national government-funded program that isn't realistic in the short term. Instead, as Chorus, we're taking it upon ourselves to drive initial change, prove this is feasible, show how digital connectivity materially improves lives and develop a use case for this to be scaled nationally. We're not waiting for someone else to make a difference.

Turning to our focus for the remainder of FY '26. As we step further into our Horizon 2, we're certainly on a fast track to being an all-fibre business. Under Lead, formal pricing changes across our products came into effect from January 1, although retailers had previously revised pricing. The connection trends I noted earlier are encouraging and we expect the run rate uplift in half 2.

Awareness and preference of fibre over other technologies is clear. Broader industry thematics of connected devices, growing usage, need for resilience, evolving content quality and an AI revolution, all aligned to fibre's superiority. We retain our 80% uptake aspiration and our conviction of growth opportunities in our core fibre business through underpenetrated pools. We expect improving data and analytics capability will also reshape our execution with retailers through smarter and more efficient means. Likewise, that analysis will inform our approach to brownfields fibre infill to premises passed by fibre but not yet installed. We've shown through our prior Frontier initiative, bringing fibre to almost 10,000 new addresses. This can be executed at pace and a faster conversion to connections.

We're good at building fibre and we'll have qualified rollout intentions for infill over the course of H2. To expand, core product growth continues, leveraging existing fibre assets and an expected uplift in NPD greenfield volumes as property developers ramp back up.

Earlier, I noted we're assessing several infrastructure-related initiatives over H2 and we'll provide a more substantive update at the full year results. There is some commercial sensitivity to these given market competition and the provision of infrastructure services. To adapt regulatory focus and driving formal decisions to outstanding reviews is a priority for us. But as we've noted, through ongoing collaboration, we see favorable pathways emerging. Cost discipline will continue as will the drive for simplification and efficiency, which will lead in turn to further savings.

In Pioneer, we're accelerating copper retirement and the exit of cabinets over H2. UFB will be completely retired by July, and we're still estimating LFC areas by end of calendar year '26. H2 will see our copper recycling program in full operational mode with delivery partners and expected returns in year of low single-digit millions. Development of extraction plans and timing will also be completed by the full year results. We would also hope to confirm an exit approach to our noncore high sites by full year, and we'll work with interested parties over the coming months. More broadly, exchange footprints could also yield beneficial outcomes in coming years with alternative asset owners or lease models to space in desirable transport locations. As a worst-case scenario, this represents a material cost-out opportunity for what become noncore assets.

So to wrap, we're pleased with another robust set of results, again, reflective of the resilience of fibre. Economic recovery is still lumpy but improvements will only be favorable to our uptake and mix. Equally, we're pleased with the foundational groundwork laid in Horizon 1 that enabled us to step into the first 6 months of Horizon 2. We have a clear aspiration. And whilst the benefits of change will be realized progressively out to 2030 in our plans, we can already see a shift in focus, capability and execution. Horizon 2 is focused on growth, simplicity and efficiency. We're clear on growth opportunity pools. And paired with the superior fibre technology, it really comes down to execution.

Today, we're already delivering greater simplicity, efficiency and savings. Exiting legacy copper technology is tangibly in sight and opens new opportunities to optimize our portfolio of assets. We've shown our discipline, leveraged our superior fibre assets and sought to exit from noncore ones. Investments will be core to our business or natural adjacencies but they must be scalable on returns. As we've said many times, an investment in digital infrastructure is both for today and the future. And our fundamental belief that fibre is technologically superior in every way that matters holds firm.

Thank you all, and let's go to the questions on the phone line, please, operator.

[Operator Instructions] Your first question comes from Entcho Raykovski with E&P.

So my first question is around the guidance. You've moved EBITDA guidance to the top half of the range. I'm just curious whether that means that you're seeing any improvement in underlying economic conditions or whether you're seeing perhaps some better mix than what you expected back in August. I'm just conscious that the fibre connections trajectory is not dissimilar to the trend in FY '25, and you spoke back in August about being in the bottom half if economic weakness persisted.

So is there something in particular that you're seeing in the outlook which is more encouraging, or is it mix? I mean, that's my first question. I've got a couple of others, but I might hold off on those for now.

Thanks, Entcho. I'll start with that. I mean, clearly, H1, I think, is still a tough economy. I think there's no doubt that it was challenges. I wouldn't say that we're seeing significant changes in H2. But as we spoke to NPD, consents to build are increasing. So that's opportunity. The way we look at our connections growth, we have targeted incentives with all of our retail service partners. And as we look forward into H2, we're seeing initiatives take hold with their plans. So that's why we spoke to increasing connections growth and the corresponding revenue. So that's where we see some opportunities there. And we've also been very disciplined in cost management in H1. We did see inflationary pressures. And as I spoke to there, we have seen some areas that we brought down. Other areas have gone up as the inflation effects have taken hold in rent, electricity and rates. So we feel very good about managing through that and continuing into that to the second half.

Yes. Maybe just to add to that, too, Entcho, I think for our Q3 uplift, you referenced the connections as well for the first half. We're quite encouraged by Q3. Our January result was the strongest for -- I think since mid-2024. And again, we talked to some of those encouraging trends on mix. So we're seeing churn actually come down that we're stabilizing on the volumes of downgrades we've seen previously as well. And then equally starting to see the reactivation rates from premises that have been off-net longer term, which for us, the hypothesis being the 100-meg fibre plan in particular, is appealing to customers and premises that the 50 megabit plan didn't previously. It's been a distinct shift in the reactivation rates that have been off-net for over a year, over 2 years even and one that we hope obviously continues.

Great. And you sort of touched on OpEx, but I'm wondering if you can give us an idea of what the underlying OpEx growth was in the first half ex any one-offs in the PCP. I think you incurred about $9 million of one-off costs for the entire FY '25. So I don't know if you can break that down first half, second half. And just as a follow-on to that, do you still expect to see low single-digit growth in OpEx on a net basis in FY '26 from -- I think you've spoken to about $300 million net in FY '25?

Yes. I mean to speak to H1 '25, there was the $4 million that we -- in consulting fees that we incurred that half. And so that's what I spoke to in the consulting fees were down $4 million. So you can see that pretty clearly as -- the rest of it would be organic in the sense that our operating model change. That did take hold after H2, so you can see the impact of that in our H1 '26 results.

Inflationary factors, it's pretty clear in terms of some of those line items in terms of rent rates and electricity where we've seen some of that increase. In other network costs, that's where we have our copper cabinet power down costs. And so while we've -- and I did call out that we'd increase that in H2 as we continue to get customers off cabinets, work with the retail service partners and the lines companies to coordinate together to get those cabinets powered down. So that will increase slightly. I did call out that the reduction in network maintenance costs will not be as great as what we've seen before, primarily as we've gotten more customers off the premises-based copper connections to network faults. So we've seen -- we still see that stabilize. So hopefully, that provides enough color. And I did call out advertising. It's always seasonality and that would be up approximately $2 million in H2.

Final one, I mean, you've spoken about the updated S&P criteria for digital infrastructure assets. I guess, is it too early to say how it may impact your capital management policy given it's now being applied to Chorus? I mean, as you said, under all scenarios, you have plenty of headroom. And I mean, perhaps as part of that answer, do you expect Moody's will make any changes to their methodology or is just S&P specific?

Well, let me answer -- so it's a capital management policy that was set for RP2, which says a growing sustainable dividend at real rates. And so that's where we set the $0.60 this year. So we've achieved that, and we're very happy -- the Board is very happy with that. Under S&P, there are so many moving parts in terms of the NIFFCo sale and what that will do ultimately based on the owner. And again, if you take the 2 scenarios for S&P, the security sell, the equity is treated as debt, we're at 6x pro forma leverage with a 7x down driver. If the NIFFCo securities don't sell, S&P has called out in their credit notes that they would increase this to BBB positive that would reduce the down driver to 6x approximately, as well as reduce the FFO to debt to increase to 13%.

So the amount of headroom is not as much as people see just based on where we stand today based on that uncertainty of the NIFFCo security sale. For Moody's, there's been no change. And they've always treated the equity as debt essentially for their calculations with -- they've been ambivalent to the owner of the securities. So there's no change coming from them. Their down driver is 5.25x. We have our annual credit opinion discussion at the end of March. There have been no indications that they're changing that criteria at all. So I would expect that, that would be remaining as our down driver at 5.25x, which now sets for our capital management policy, what we manage to.

Your next question comes from Ben Crozier with Forsyth Barr.

Just one question on sort of the infrastructure revenue. I think at the Investor Day just over a year ago, you talked to that infrastructure revenue in aggregate was sort of $155 million and you're targeting $180 million to $200 million. Can you give us sort of an update on how that's progressing in terms of an aggregate and where that sort of revenue sits today?

Yes. Look, it's probably at similar levels today. I think we've also spoken to some of the legacy products that over time will be retired. So that drops down before then going back up. So you drop below the $150-odd mark and our aspirations for Horizon 2 would get to $180 million to $200 million of revenue.

So as I said, we're continuing to look at a number of initiatives, several that we're actively looking at right now. We've discounted a number -- you may have seen already that from the LoRaWAN IoT that we were exploring as a trial and we've actually moved away from that. So we don't believe that's a scalable opportunity for Chorus in the current market at the moment. So we'd rather put that investment and resources, et cetera, into areas where we think they can be scalable. And there is some commercial sensitivity to several of the options that we're looking at, hence, my reference to a more substantive update at the full year result.

Perfect. Second, just on sort of the MAR or regulatory revenue achieved in the first half. I think at the full year, you sort of gave an indication of how much of the total revenue was regulatory. I don't know if you have that idea. And presumably, you've underearned your MAR, a decent amount in this first calendar year of the second regulatory period, as expected, given the meaningful step-up in the MAR. Sort of -- can you also sort of talk to when do you expect that gap to close? Are we sort of at the end of the second regulatory period and then the rest to be caught on a washout?

Yes. I mean, so we're in year 1 of RP2. And so you're correct, we earned under the MAR, but that's deliberate to give us time to grow into it. And so we don't have the final numbers that will be produced as part of our ID reporting comes out in end of May. But in essence, we will continue to focus on how much we want to close the MAR over the next 3 calendar years. So we do factor that in, Ben, as a function of connections and price increases and so forth and mix. So we're very focused on and closing a gap. And did what we did in RP1, which we got within $1 million of the MAR at that point. So we need headroom at the beginning and will increase over the next 3 years.

Maybe last just on sort of satellite and Starlink. Do you think -- have any data or have any inclination of -- are they sort of attacking some of these sort of fringe suburban areas where fibre is available, but maybe Starlink as well is sort of getting a bit of an uptake, or do you think Starlink is pretty much just a rural product at the moment?

I think primarily, it's still an option for customers and premises that can't access fibre. So more of the non-fibre areas or rural New Zealand. That said, we wouldn't say that there is no Starlink in any of the metro areas. Some of the multi-dwelling units that may not have had fibre installed at the time of build, they create optionality for those premises that are looking at fixed wireless or satellite. So there is likely some in metro areas. But predominantly, we still see it as areas where there's not fibre available.

Your next question comes from Arie Dekker with Jarden.

Just firstly, just maybe a little bit more color on these infrastructure opportunities, and I appreciate you talked to the commercial sensitivity. But could you just sort of give perhaps an indication of the extent to which -- and you said, I think there were several that they utilize your existing infrastructure and also whether any of those opportunities would involve you acquiring existing infrastructure already in place?

Look, yes, there is some commercial sensitivity to them. We've always been really clear that they would need to be either core or natural adjacencies to our core. And I can say they're all in that camp. They're all scalable opportunities. We're really defining what the opportunity is and not wanting to invest or spend our resource time on areas that we don't think we have a natural right to play. But they are all natural adjacencies. To your -- and look, timing-wise, I think as I said, what we would recognize is they take longer to bring to market and to commercialize. It's a competitive market. But we certainly see that there are opportunities where we have a natural right to play.

To your second point on inorganic opportunities, yes, absolutely. We're looking at both, whether we can build the capability internally into our own infrastructure network or likewise, whether there's something that could be acquired into our existing infrastructure as well.

Great. Then just with regards to the fibre infill build where you're turning your attention given the lack of government support for expansion and you sized the 200. Could you just talk a little bit about how you'll go about assessing that, whether you see the opportunity sort of a more dense urban as more attractive than sort of more on the fringes. Just how you're looking at the assessment and where you think the best opportunity will be for you?

Sure. So look, the 200,000 premises are premises already that were passed and they have a premise on them. It's about 70,000 or so premises that we do pass with fibre but they're vacant lots, right? So we know that there's roughly 200,000 and there is a home there. Obviously, they split up between single dwelling units and multi-dwelling units. Equally opportunities with retirement villages, with second homes and holiday homes as well. I think the opportunity for us and where I've really wanted to drive our focus is leveraging better data analytics, being smarter about our execution.

There's some opportunity to be a bit smarter, too, with AI and look at where -- if you were to take, say, like Fibre Frontier, where are the next 10,000 premises out of 200, where is the second 10, the third 10, et cetera. So wanting to filter them rather than a mass market type approach and actually being a lot smarter about how we engage with retailers as well and looking at products that they themselves in many cases, are offering. So I think the short version of that, Arie, is that we're looking to be a lot smarter with our tools and execution where it's a lot more targeted.

Then just on the -- a little bit further on the 80% aspiration in that. And I think you've talked at various points on the call about what you're doing on that. But I guess just firstly, just in terms of your conviction, like would that still sit at the same sort of level as just over a year ago when you introduced it? Or do you think that your conviction level on getting to that point is a little bit lower now than it was a year ago? And then also just of the various initiatives, what would be, I guess, the 1 or 2 key ones you would call out as being the focus in the next 12 months or so to lift the penetration rates, which are sort of stabilizing even in some of your higher penetration areas like Auckland?

Sure. Okay. So my conviction, yes, absolutely unwavering on 80%, even a year on. I think the learnings from a year on that, as I've just talked to around being smarter on the execution, using AI, using data analytics, being more targeted in our approaches I'd say that, that's more broadly how we will execute. I think we gave a figure that broadly we needed to be at about 40,000 new net fibre connections each year over our Horizon 2. But that was more as a -- look, on average, you need to do that. The work we did in Horizon 1, the foundational piece, building capability, building organization structure, being clear around the aspiration, having that clarity and specificity of where we would go, we needed to do all that work. So my sense is that it's going to take a little bit of time to build up.

So some years might be lower, some might be -- would need to be higher. But my conviction remains at the 80%. I think that is achievable, looking at the underpenetrated pools that we have. And to talk to those in the main if we start at a holistic level, there's 200,000 premises as brownfields infill. They're in our denominator. We need to do something with those. And I think there's real opportunity here when the fibre passed the premise previously. But for whatever reason, either it wasn't eligible for a subsidized build of fibre back then or the premise didn't exist back then. I think we can go back and relook at that because the fibre that's running past the premise is essentially a sunk cost today. So I think that gives us the ability to think about the economics in a different way for a further build-out. So that's 200,000.

The other large pool holistically is the inactive on -- they are intact, but inactive. That's another 200,000, right? Now between those 2 pools, there's lots of crossover to fixed wireless, obviously. So that's inherent on us around execution. And how do you keep raising that awareness and the differences on fibre to other technologies. I think the trends in the market are going to exacerbate that anyway. But the INTAGs are an opportunity for us. The fibre is already there, right? So actually, again, working with retailers in a smarter way, what our go-to-market execution is, that's inherent on us. But I'll stop at the 2 large pools because between them, you have 400,000 premises essentially that are potential, half of which already have fibre installed today.

Yes. Then just last one for me, just going a little bit further with the Starlink. I mean you talked to metro. But I guess just interested in your view on where the extent of competition you're seeing in those areas where in the rural or in the fibre extensions, some of those smaller settlements where I think in RBI -- sorry, UFB2 and the extension, your penetration is sort of mid-60s or so. Like do you notice -- is there a lot of Starlink there? And are you sort of thinking about working with retailers on initiatives there to sort of tackle Starlink?

I think to work backwards from that, absolutely working with retailers and whatever means that we need to where we're seeing competition. As I said, look, I said metro and I think it is relatively low. I think it's a fair point that on fringes, of large areas or small settlements, then there could well be penetration of Starlink. We wouldn't say that there's not at all. I think ultimately, though, we look at the broad thematics where usage is developing, content is developing, AI is developing and think that, again, I know we're biased, but we only see fibre as a technology that will actually manage that future demand.

Your next question comes from Wade Gardiner with Craigs Investment Partners.

You mentioned briefly weather impacts. Can you sort of talk to -- are you seeing anything in the second half, particularly around the recent really poor weather that we've had? And maybe also around that, just split out the maintenance costs into sort of copper versus fibre?

Well, fibre faults are significantly lower than copper. So they're nowhere near. And so it's not -- we don't give the dollars, but fault rates are substantially lower than copper. And yes, there have been weather events, as you can read the news. And so we kind of deal with it. We have a team that stand up and get react quickly. So those -- but that's normal for our course of business in terms of seasonality.

I don't think, Wade, to add to that, but copper is an aging technology. And given the severity and frequency of these weather-related events we're having, copper just doesn't perform. The fault rates are significantly higher than fibre. I think at the same time, though, the positives we take out of it is our ability to respond quickly as an industry. We are looking at resilience, obviously, all the time, but you can't plan for these things where the next event is actually going to show up. But it's always inherent in our cost assumptions.

If I go back to August, I think there was 755 FTEs at that stage, and you were sort of talking about 30 vacancies. So that looks like it's changed now. You're down to 751. And what's the vacancy situation like?

Well, we still have vacancies at BAU, and I'd say it's still around -- it's a little bit lower than that now. So we filled some of those roles.

But equally driving further simplicity and efficiency. So I think we did -- what we'd recognized as part of that Horizon 1 was a very deliberate shift. Looking at organization structure, the way we establish value streams for infrastructure and for access, they were really deliberate. I think what we're seeing now over time is where we're investing in further capability and leadership; so I think to AI, to data analytics, customer retention, things that Chorus didn't have as mature frameworks previously. So we're still investing in those. But at the same time, where some of these projects that we're either shelving or moving away from, we're continuing to see a lot more efficiency in our base that becomes more BAU.

So any thoughts on what that FTE number will go to?

No, not -- I guess, what I would say is we're not about to do another deliberate shift. I think we're comfortable with the Horizon 1 foundations that we've built, the organization structure that we've got. We've got a clear strategy, clear aspiration and purpose that we can anchor to our execution around, our prioritization and the way our projects are, we're clear on. So one of the references I said in my opening that it really does come down to execution now. So I'm not -- I don't foresee that there is another substantive shift down again.

Just in terms of the down trading that we saw that, say, 6 months ago or longer. And you mentioned in your presentation that it was sort of 25% of the additions into the 100-megawatt -- 100 megabit bucket with sort of downgrades. But you also mentioned some people upgrading. So is that 25% a net number?

Roughly speaking, yes. Encouragingly, we are seeing some of those trends. So we're seeing more upgrades go from the 100 into the 500, some of which are -- we can see our premises that had downgraded previously and have gone back.

Right. But in total, it's still a net down trading that you're seeing...

Broadly...

That continued in recent months or...

Yes. Look, I mean, it's improving a little bit on that. But yes, broadly speaking, about 25%. I mean, previously, it was about 1/3, I think, when we were sort of talking 2/3 of off-net growth and 1/3 of down trades. Certainly saw post the boost initiative and change in mid last year or start of Q1 for us, it was -- those downgrades were exacerbated by a lot of the pricing changes that a number of the retailers have put through. So I think we've seen that stabilize now as well. So you'd hope to see over time, ideally for us seeing below that 25% is coming from downgrades.

Just finally for me, you mentioned, I think it was positive pathways to regulatory change. Where do you get that confidence from?

Look, I could be wrong, but I think we've got -- we've been really open and really transparent. From a copper deregulation as an example, and you look at the TSO, we've been really collaborative, really open. We want to work with all of the stakeholders, setting our time line at 2030 was as much about putting us all on notice, all stakeholders and how do we all work backwards collectively so that we can find and confirm a pathway to exiting copper technology, right? So I just -- I think we're so far into fibre now.

We look at the rates that copper connections are dropping off. You look at the Commerce Commission's own reporting on rural connectivity. There's just this bow wave that I would say that actually, I can't see any pathway other than copper actually disappearing. It's just a question on timing for deregulation. But we've been really supportive in working with the government and other agencies around how we do that in the best way where customers are essentially protected regardless of the fact that actually already 97% can access 1 of 3 other technologies other than copper.

Right. So you're talking more around deregulation around copper than anything to do with a change to the fibre building blocks...

I think, yes. No, good point to qualify. Yes, I'm talking more about copper, exiting legacy technology. I think -- and that's those legacy constructs. I think we've had a number of discussions around. The share cap ownership is the other that's being reviewed by Ministry for Regulation. I think on the fibre input methodologies, that happens over the coming couple of months. But I wouldn't be in a position to suddenly say that we think we know what the outcome is going to be. We've got to work through that.

Your next question comes from Brian Han with Morningstar.

You said somewhere that Chorus doesn't care who owns the NIFFCo equity shares. But do you know whether the government is as ambivalent as you are with respect to who buys the securities?

Well, thanks, Brian. So since it's not our process, I can't speculate as to who the government would want to sell the securities to. I mean when I say that, it's because the terms are set. And so we know we're very comfortable with the payments, which is 2030, 2033 and 2036, 0 coupon debt. So that's where we see very comfortable in that construct. Again, it's a government's process and we'll kind of wait to get further updates on them as the year goes on.

Drew, while you're there, just more on labor costs. As you simplify and become more efficient, is there a ratio or a target you guys are looking to with respect to labor costs as opposed to FTEs?

Well, I mean, if you can look at our $41 million, which is at a 42% cap labor rate, I'd say without the fibre expansion programs underway, you'd see capital labor rates around that low 40% range. I think we're just too early to say of any AI changes, as Mark spoke to, earlier FTEs, we have no big programs to change. So in the medium term, we expect them to be at the same level.

Your next question comes from Philip Campbell with UBS.

Just a few questions from me. The first one, just on the government's kind of regulatory reviews. I think, Drew, you said you're expecting third quarter. Is that third quarter fiscal or are we looking more kind of third quarter calendar for an update from the government?

I would -- I'm hoping for and would really like a decision by our Q3. So from a calendar year Q1, I guess. But this is a process that has been going for a long time, a lot of engagement. Our priority is getting confirmation, particularly on an exit pathway to legacy technology. So I would really hope that we get confirmation by the end of this -- of our financial year at the latest. But obviously, anything before that is an advantage.

Just a follow-up to that on the TSO. Like obviously, in Australia, we've had a lot of issues around the Triple Zero problems with mobile and so forth. Is that -- I'm assuming that was obviously feeding into this -- any decision on the TSO?

Well, I mean, I think we've always said the TSO kind of goes hand-in-hand with a view on property regulation anyway because the TSO only applied to a subset of customers back in the early 2000. So as far as the Triple Zero outage in Australia, we've done a thorough investigation here as well and I can say that more broadly for the telco sector as well. And we don't have the same risks that were inherent in Australia.

Just on the S&P situation, assuming that the Crown securities are sold, and then they treat the Crown securities as debt. My understanding was that they count the debt as the PV of the debt. So I end up with a lower number than 6x. So I just wanted to check if that's your understanding or do you think they bring in the face value of the debt in that calculation?

Well, S&P and Moody's treated differently from Moody's does on the PV basis. When you read the November credit note from S&P, they basically make and further treat all of it as debt on a total basis. And that's how they even calculate around 6x down driver.

Just another question for you, Drew. Just again on the balance sheet, just with the retained earnings being a negative balance. Like is there any plans to like try and revalue the fibre network at some point?

Well, we've indicated previously that certainly asset reval is in our strategy. Certainly, Phil, I think in August, we'll have much more definitive update on that. So I'd say if you want to wait until August results, we can get more specific on the numbers.

Then just the last one for me was just, obviously, with Sky launching the 4K product. Are you kind of noticing any increased usage as a result of that or is it pretty minimal at this stage?

Pretty minimal at this stage, I think Phil would be the answer. I think because it was essentially isolated to 2 events with the Ashes and the Australian Open. You can see a difference in the usage profiles because obviously, it needs more bandwidth given the content quality. But versus the whole network, you need to see that running at multiple channels where it becomes more like your standard as 4K.

That does conclude our question-and-answer session. I will now hand back for any closing remarks.

Great. Well, thank you again. And as always, thanks for your time, and we appreciate you joining. Hopefully, we've been able to answer your questions with color. And we look forward to seeing many of you over the coming days. Take care, and enjoy the rest of your day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

[Foreign Language] Good morning, and welcome to Chorus' 2025 Annual Shareholders Meeting. I'm Mark Cross, Chorus' Chair. We're joining you virtually this morning from the Chorus Network Lab in Auckland. On the information conveyed to me, I confirm that a quorum of shareholders is present and declare the meeting open. The minutes of the last Annual Shareholders' Meeting have been approved. The Notice of Meeting, including the explanatory notes, has been circulated to all shareholders, and I intend to take it as read.

We have a fairly short agenda today in terms of the formal business of the meeting. As the video clip we played just before shows, our network helps Kiwis across the countries meet every day so we think it's only appropriate that we showcase our own technology for today's meeting.

On to today's agenda. I'll start today's agenda with a short summary of the year and some of the things the Board has been focused on to deliver value to shareholders. Chief Executive, Mark Aue, will then cover what's happening at an operational and market level. After that, we'll move to resolutions, questions and voting.

First, some information on how to ask questions and vote. Shareholders and proxies have the ability to ask questions and submit votes. If you have a question submit during the live meeting, the Q&A is always open, so please feel free to submit questions throughout the meeting. These will be addressed at the relevant time. To submit a question, simply select the Q&A tab on the right half of your screen, type your question into the field and press submit. Please be as concise as possible and ensure they relate directly to the matter being considered. We will not aggregate or edit questions unless inappropriate language is used and will provide plenty of opportunity for follow-up questions. Any questions not answered in time will receive an e-mail response after the meeting.

Voting today will be conducted by way of a poll on all items of business. I'll shortly open the voting for all resolutions. To give you enough time to vote, you'll shortly be able to cast your vote on all resolutions under the vote tab. Your vote has been cast when the tick appears against the available options. You can change your vote up until the time I declare voting closed. Simply select "change your vote" to do so.

I now declare voting open on all items of business. I'll give you a warning before I move to close voting near the end of the meeting. If you need assistance at any time, simply type your query into the question field via the Q&A tab and someone from Computershare will respond, or you can call Computershare on 0800-650-034. I and my fellow directors intend to vote all undirected proxies we hold in favor of the resolutions. I'll call for voting once I have given an overview of each resolution and each director standing for reelection and election has addressed you.

I'd firstly like to introduce your directors to you. Joining us online are Sue Bailey; Neal Barclay, Will Irving, and Jack Matthews. Directors, Kate Jorgensen and Miriam Dean also join me here at the Auckland Lab. Sue, Will and myself are standing for reelection today in accordance with the NZX listing rules. We also have with us today key personnel, including Drew Davies, our Chief Operating Officer; and Kristel McMeekin, our General Counsel; as well as representatives from our auditors, KPMG, and our legal provider, Chapman Tripp.

Before I cover off the FY '25 year-end review, I'd like to thank and acknowledge our people, our partners and our customers. At the heart of what we do is ensuring the high performance and reliability of our network as digital connectivity becomes increasingly essential to daily life. As we noted in our August results announcement, Chorus delivered another consistent and reliable financial result, proving the resilience of our digital infrastructure assets in a challenging economy.

Our fiber connections continue to grow, up 3% versus FY '24, and we continue to see improvements across our key financial metrics. EBITDA was $705 million, up from $700 million last year. Operating cash flows of $559 million were strong and up 9% on the prior year. These results enabled total unimputed dividends of $0.575 per share for the year, an increase of $0.10 or 21% from the prior year.

Fiber enables a more resilient future for our stakeholders, and we're pleased with the sustainability results delivered during the year. Fiber networks are widely acknowledged as the greenest broadband technology because of their data transmission capacity relative to electricity. By retiring legacy network equipment, we reduced our electricity use by 5% from FY '24, and we saw a 25% reduction in Scope 1 and 2 carbon emissions from our FY '20 base year.

Investing in our people, partners and their safety, along with ensuring assets are safe, resilient and efficient is a critical part of Chorus' business. On safety, we continue to rank well ahead of industry benchmarks. Meanwhile, our people engagement score was 8.4 out of 10, remaining in the top 5% of technology industry benchmarks. Pleasingly, Chorus achieved its targets for FY '25 in all 4 drivers of health and well-being.

We're proud of the work we do to support community good with a focus on digital inclusion. Our efforts on digital equity are very important to us, and we exceeded our FY '25 target of 1,000 digital equity connections by some margin. As in previous years, we note here the focus areas that our Board anchors to. These are the things we consider are most important to Chorus' success.

Highlighting a few of these, on our managed exit from copper, New Zealand now has just 78,000 copper lines remaining, of which only 9,000 are in the Chorus fiber area. We fully appreciate the need for certainty with the retirement of our legacy copper network, particularly for those parts of New Zealand where fiber is not available.

The reality is, though, while the network did play a valuable role in connecting Kiwis for over a century, copper lines now have a high fault rate, are vulnerable to weather events and are no longer providing the service that most consumers demand. At the same time, most rural consumers now have access to 3 alternative technologies that are often more affordable, better performing and more reliable than copper.

Our recent experience with the retirement of old radio system technology on the copper network has shown rural consumers can successfully move to modern services like these and get a better service equal to, if not better, than old copper lines. and these were in some of the most remote parts of New Zealand like the Chatham Islands and a high-country Gorge in South Canterbury.

As far as a managed exit in rural areas goes, I can assure you that as part of the copper network retirement by 2030, Chorus is committed to a clear consumer-centric process that supports the transition of customers to modern services. We're collaborating with a wide range of stakeholders to ensure that happens. In the meantime, for any queries or help on switching services off copper, you can contact our team at [email protected].

Moving on now to look at some of the other Board focus areas. Prioritizing long-term value through capital allocation remains a key area of focus for the Board. We were pleased to have our regulatory settings for fiber confirmed to the end of 2028. These new settings will underpin our cash flows for the next 3 years.

We maintain the view that a solid investment-grade rating is appropriate for Chorus as a digital infrastructure company. Based on the S&P ratings down driver of 5x EBITDA, we remain of the view that 4.75x is an appropriate internal limit that allows sufficient buffer for our current BBB rating, and we're comfortable to operate up to that level. At the end of FY '25, net debt was 4.52x EBITDA. We will continue to use the balance sheet to fund CapEx where it meets our investment hurdle rates. Any growth investment must deliver greater shareholder value than returning it to shareholders.

A core pillar of our capital management framework is a sustainable growing dividend. Our intention is to maintain that dividend growth at least at the rate of inflation within the bounds of our dividend policy, which is to pay an ordinary dividend in the range of 70% to 90% of our net operating free cash flows after sustaining capital expenditures. The step-up in dividend that we see on this slide has been driven by our solid results, the freeing up of cash flow as we move from build to operate, confidence in our future operating cash flows and a more efficient use of our balance sheet to invest in the business.

For FY '26, we provided dividend guidance of a further increase to $0.60 per share, unimputed, subject to no significant adverse changes in circumstances or outlook. This continues to meet our objective of delivering real dividend growth.

On the right-hand side, the chart shows our Total Shareholder Return performance against the NZX50. TSR performance is important for aligning management incentives with our shareholders' experience and to encourage longer-term decision-making. As the chart shows, Chorus has comfortably outperformed against the NZX50 companies over the last 5 years.

Standing back now to look at some of the sector dynamics that we see ahead of us and drive our long-term thinking. We recognize that New Zealand is years ahead of many other jurisdictions in fiber deployment uptake and copper withdrawal. At 87% fiber coverage and 72% connected, this ranks us ninth in the OECD and 19th in the world. Meanwhile, copper in New Zealand is almost retired compared to many European countries, which are still heavily reliant on it. A bold vision got us to where we are in New Zealand today, and we want to continue that momentum. The benefits of fiber are real, measurable and highly scalable.

Last year, Deloitte's Unleashing Fiber white paper estimated the ultrafast broadband program had added $31 billion to New Zealand's economy. Fiber is important to industries such as film, animation, gaming and cloud services, unlocking a wave of high-value, weightless exports. And the gains don't stop there. Deloitte projects those benefits could grow to $160 billion over the next 10 years.

Extending fiber coverage from 87% to 95% could add another $17 billion in economic benefits. We estimate the cost to achieve that is around $3 billion, a strong 5.6x benefit to cost ratio. In an overall national infrastructure context, it's interesting to note that the 5.6x ratio for fiber compares to the 1.4x for the recent roads of national significance investment. We have submitted a proposal through the government infrastructure priorities program process because we believe there's a strong case for this, and we were pleased that this was endorsed by the New Zealand Infrastructure Commission as the only one of 17 projects that were submitted.

But let's be clear, Chorus can't fund this entirely through shareholder capital. The returns we speak of aren't ours. They're economic and social benefits for New Zealand. We know the benefits of network expansion will be realized in the communities where fiber reaches rather than by the network builder, and that necessitates some form of public input and investment. There are significant merits in this proposal, and we look forward to discussions with the government on how we can partner to bring this to life.

Extending fiber further isn't just about additional streaming. This is for the farmers using Precision Agritech to optimize yields, monitoring real-time pricing and connecting directly to global markets. Remote health care providers using telemedicine to deliver specialist care and small and medium enterprises scaling up using digital tools, cloud platforms and e-commerce to reach global customers. The more we extend fiber, the more New Zealanders can unlock its potential.

Of course, it won't all be fiber. In places where it's not viable, high-quality fixed wireless and satellite must play a complementary and vital role. But what matters most is this: everyone deserves the right to participate in the digital economy. That means access to infrastructure that's fit for purpose, scalable and future-proof.

Global demand for high-capacity connectivity is only growing, driven by remote work, data-heavy applications and digital commerce. If New Zealand wants to stay competitive, we need to stay ahead of that curve. Other countries like Australia, Japan, Singapore and South Korea are not waiting for demand. They are already moving ahead on coverage and speed. In global terms, if we're not extending the network and increasing speeds, we're going backwards as a country.

And we can't leave New Zealanders behind. We understand the intergenerational role we and digital connectivity play in shaping New Zealand's future. We believe everyone has a right to participate in the digital economy. Yet today, 1 in 5 people are digitally excluded with access, affordability and adoption being key barriers. So we're bringing fiber to more communities through a community co-funded fiber build and recognize that we have a social obligation to drive digital equity.

We've also completed a proof-of-concept trial with 1,500 low-income households. Through our charitable partnerships, we're also tackling related challenges, device access, digital literacy and flexible pricing. But to scale a real solution, we need industry, retail service providers and government working together. We all have a role to play in delivering digital equity and ensuring every New Zealander has the opportunity to connect and thrive. Digital equity isn't optional. It's essential for full participation in today's economy.

To wrap up, I'd like to acknowledge Chorus' staff. We've driven a lot of change in the business during the year as we shift to becoming a more efficient operator of an all-fiber business. It hasn't been easy for our people at times, particularly in a challenging economy, but we have renewed energy and focus on the strategy to continue to deliver to our customers and shareholders. Thank you to our staff for all of your continuing efforts. I also want to thank all our shareholders and my Board colleagues for your continuing support.

I'll now hand over to Mark Aue for the CEO's address.

[Foreign Language] Greetings and a warm welcome to everyone. As Mark has noted, we're pleased with our resilient FY '25 financial results, particularly given the broader macro challenges. Over the past year, we have made good progress and laid the groundwork for changes in strategy and execution that we outlined at our previous Investor Day, recognizing a shift in our operating model from the great network builder to a great network operator.

Our Road to 2030 strategy sets a clear aspiration: as a simpler, all-fiber business with 80% uptake by 2030. At the heart of that strategy is our purpose. We see this as unleashing potential through connectivity, enabling better futures for Aotearoa. This recognizes the intergenerational role that we play in enabling better futures for our people and our country.

This year alone, we've doubled speeds for more than 700,000 households. We've extended fiber to over 9,000 homes and businesses beyond the original footprint because communities ask to be part of the future, and we've listened. We launched our digital equity pilot targeting 1,500 low-income households, wrapping together affordable fiber plans, refreshed devices and trusted community-led training. And where scale builds aren't viable, our Community Co-Funded Build Program aims to partner with local leaders to get fiber in the ground.

As a public company, we're delivering solutions, not just aspirations. FY '25 or Horizon 1 marks the foundation of our 10-year journey. We've completed key initiatives and made solid progress, now shifting our focus to simplicity and efficiency, doing less, becoming leaner, reinvesting in capability and prioritizing scalable growth. Horizon 2 spans the next 5 years out to 2030, where the benefits of these changes will be progressively realized, shaping Chorus into a simpler, more efficient, innovative and competitive business.

Horizon 3 is where we transition to a single-state technology, fiber, having fully retired copper by 2030 and ideally earlier. Over this time frame, we believe fiber's advantages as the gold standard in broadband will only continue to grow in relevance.

Operationally, we continue to see accelerated demand for data. Average monthly data usage at 668 gigabytes as at September is up from 623 in the prior year. Annual network usage has increased 10% over the same period. To put that increase into context, that's the equivalent of 29,000 years of continuous high-definition streaming. So we continue to see the shape of consumer behavior evolving, and this only further plays to fiber's strengths.

We've repositioned ourselves as a market challenger, driving education and awareness of fiber's superiority versus other broadband technologies. Our recent TV campaign highlighted the potential shared limitations of wireless broadband, where neighborhood traffic competes with your living room at peak times versus the dedicated connection of fiber. Consumer surveys run in parallel also confirm the growing awareness of these differences, with fiber well ahead of both 4G and 5G fixed wireless on Net Promoter Scores and preference. With a stronger economy and shifting technology trends, we remain confident our uptake goals are within reach.

We continue to see opportunities for new infrastructure growth. While the property development sector remains subdued, new build volumes are stabilizing at pre-COVID levels of around 20,000 to 25,000 lots per year, with around 80% of new homes activating fiber within 5 years. Connectivity growth remains steady across cell site and smart locations with emerging opportunities in data center and mobile infrastructure.

As we continue to optimize for an all-fiber future, we're seeing positive pathways emerge to regulatory simplification. The Commerce Commission's recent recommendation for the deregulation of copper services is very encouraging. The decision strongly recognized the availability of alternative technologies for rural voice and broadband services and highlighted the continued decline in copper demand.

This is complemented by a review of outdated legacy constructs such as the Telecommunication Service Obligation and the Chorus' shareholder cap, to be led by the Ministry for Regulation. Both play a vital role in shaping a regulatory framework that prioritizes investment where it delivers the greatest benefit for New Zealanders. More broadly, we're on track to retire copper in fiber served areas by the end of 2026, with full retirement by 2030, as we say, ideally sooner, through a clear people-centric transition across industry, government and communities. We look forward to a resolution that will provide certainty to rural customers and a migration path to alternative services.

Looking to copper recovery, we expect this program to step up in 2026 as the urban retirement of copper completes. Estimated net proceeds could still be in the order of $30 million to $50 million over the next 3 to 7 years. And as a flow-on, copper retirement also enables us to optimize other property assets as they become noncore. But as we've said, this will happen progressively over our Horizon 2 time frame.

As Mark outlined earlier, we were also pleased to recently have the government's Infrastructure Commission endorse our proposal to expand fiber to 95% of New Zealanders. This was the only private sector submission to be endorsed, recognizing rural connectivity as a critical national issue. This would see around $17 billion in economic value creation over the next decade across 1,000 communities and 160,000 families and businesses.

Focusing on infrastructure that delivers economic growth for New Zealand is critical. These are the kinds of choices that matter now because they compound over time. But as we note, whilst the economic benefits of expanding fiber to more communities is substantial, so are the cost of deployment, and that, therefore, necessitates public investment.

Our strategy is underpinned by our belief that fiber will continue to serve consumer needs well into the future. As we look ahead to 2030, the likely thematics favor a fiber world, one that we see 1 terabyte becoming the average data usage per month, where multi-gigabit plans become mainstream. We linear broadcast TV that has largely shifted to IP streaming and content quality and adoption of 4K and beyond continues and where copper has been fully retired. And through all of this, we expect fiber to still be the gold standard as the most reliable, scalable and future fit-for-purpose broadband technology.

In summary, this year, we've continued to demonstrate the strength and resilience of both our digital infrastructure and our earnings despite ongoing economic headwinds. While conditions are expected to improve, that recovery will realistically begin from early 2026. Innovation remains a key differentiator. We'll continue to drive greater awareness of fiber superiority, particularly as AI accelerates demand for high-performance connectivity. We're actively progressing strategic opportunities. Some are already delivering returns, while in others, we've had the discipline and clarity not to proceed.

On the regulatory front, emerging pathways offer potential for favorable near-term shifts, addressing outdated constructs. Copper retirement and fiber areas is now within sight and will increasingly unlock value from noncore assets. And finally, we've laid the foundation for our strategic reset and entered Horizon 2, focused on growth, simplicity and efficiency. Our conviction in fiber now and for the future remains absolute. It is technologically superior in every way that matters.

On that note, I'll pass back to Mark.

Thanks, Mark. We now come to the resolutions outlined in the Notice of Meeting. We have Sue Bailey, Will Irving and myself retiring by rotation under the NZX listing rules and standing for reelection. The Board unanimously supports the reelection of each of those directors. A brief biography for each director standing for reelection was included in the Notice of Meeting. The fourth resolution relates to the fixing of the fees and expenses of our auditors, KPMG. Voting today will be conducted by way of a poll on all items of business.

As a reminder, for those of you online and eligible to vote, you can cast your vote by clicking on the Vote tab and selecting your voting directions. Your vote is cast when the tick appears. There is no need to hit a Submit or Enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I'll give you a warning before I move to close voting. If you wish to ask a question, please press on the Q&A icon. This will open a new screen. At the bottom of that screen, there is a section for you to type your question. Once you finish typing, please hit the Send button. You can also ask general questions that will be addressed at the end of the meeting.

We now move to Resolution 1, Sue Bailey's reelection as a director. She retires under rotation under the listing rules and offers herself for reelection. It's my pleasure to propose Resolution 1, the resolution to reelect Sue as a Director of the company. I now invite Sue to address the meeting, noting that this has been prerecorded.

[Foreign Language] My name is Sue Bailey. This morning, I'm pleased to have the opportunity to seek your continued support and my reelection as an Independent Director of Chorus. I've had the privilege of being a director at Chorus since 2019. And in that time, much has changed. The ultrafast broadband network now reaches over 87% of premises in Aotearoa. Copper connections have reduced to fewer than 100,000, and we are now into the fourth year and second period of a price quality regulatory framework. During COVID and since then, we have all seen firsthand the benefits that an all-fiber network delivers to the people, communities and businesses of Aotearoa.

It is evident in the way that since 2019, average data usage on Chorus' fiber network has nearly doubled to over 670 gigabytes per month. Wow. One thing that hasn't changed, though, over that time is the commitment of our people to deliver a future-proof and resilient fiber network. Under the leadership of our CEO, Mark Aue, and to use his words, Chorus now moves from being a great network builder to a great network operator.

What do I bring to Chorus then? Well, my professional career includes over 30 years in telecommunications in roles spanning operations, sales and marketing, transformation and as a CEO. With this extensive industry experience, I believe I can continue to contribute at Chorus, both as an Independent Director and as the Chair of the People, Performance and Culture Committee as we move towards becoming a simplified all-fiber business, pursuing our purpose of unleashing potential through connectivity, enabling better futures for Aotearoa.

On a more personal note, I have long admired New Zealand and New Zealanders for your innovation and can-do attitude. And with your support, I hope to add my bit through the role that Chorus plays in furthering that spirit of achievement. [Foreign Language]. Thank you very much. Over to you, Mark.

Thank you, Sue. Kristel, have we received any questions for Sue or about Resolution 1?

No questions have been received on Resolution 1. Thanks, Mark.

Thank you. I now move as an ordinary resolution that Ms. Sue Bailey be reelected as a Chorus Director. The Board fully supports Sue's reelection. If you've not already done so, I ask that shareholders vote on Resolution 1.

We now move to Resolution 2, the reelection of Will Irving as a director, and the Board fully supports Will's reelection. I invite Will to address the meeting and again note that this has been prerecorded.

[Foreign Language] Good morning, shareholders. I'm seeking reelection today, having first been elected in 2022. It's been a privilege to contribute to Chorus' journey over the past 3 years, and I'm pleased to have the opportunity to seek your support for my reelection as an independent director.

Firstly, why do I want to be a member of Chorus' Board and why am I seeking reelection? I've now completed my first term as a director. And in that time, I have contributed as both a Board member and a member of the Audit and Risk Management Committee. I've contributed industry insights and practical experience, having led a wide variety of corporate customer and operational telecommunications teams across Australia over many years.

Secondly, what can I continue to contribute to the Chorus Board? As I've just mentioned, my broad experience working within the telecommunications infrastructure and regulatory environments in Australia gives me a unique perspective. From 2019 until last week, I was the Chief Strategy and Transformation Officer at NBN Co in Australia, the company established to build, design and operate Australia's wholesale broadband access networks. It is Australia's equivalent of Chorus. In that role, I've led teams across areas as diverse as the Chief Technology Officer and network planning, strategic partnerships, legal and regulatory, business continuity and security and new property developments, which is NBN's primary growth business. As of Monday this week, I'm now NBN's Chief Strategic Transactions Adviser in a part-time capacity.

Prior to joining NBN, I was the interim CEO of Telstra InfraCo, Telstra's wholesale business. And before that, I led Telstra business, its small and medium businesses, customer sales and service division with revenues of over NZD 5 billion. And before that, I was Telstra's Group General Counsel. So my experience in wholesale and retail telecommunications across infrastructure, end customer sales of service and strategy gives me a strong strategic lens to assist Chorus with both the challenges and importantly, the opportunities it faces. Blend of legal, operational and strategic experience lets me contribute meaningfully as your company seeks to modernize its regulatory environment, build its customer base and unlock further value for shareholders.

Finally, Chorus is a business that makes a very real difference to Aotearoa's society and economy. high-quality, reliable connectivity at home and for businesses, governments and community organizations is essential for a modern thriving nation. With your support, I look forward to the opportunity to work with my fellow directors and Chorus' strong management team to grow shareholder value and provide positive outcomes for New Zealanders in the years ahead.

[Foreign Language] Thank you. Over to Mark.

Thank you, Will. Kristel, have we received any questions for Will or about Resolution 2?

No questions have been received on Resolution 2.

Thank you. I now move as an ordinary resolution that Mr. Will Irving be reelected as a Chorus Director. If you've not already done so, I ask that shareholders vote on Resolution 2.

We now move to Resolution 3, my reelection as a director. I retire under rotation under the listing rules and offer myself for reelection. For full transparency, I'd first like to draw shareholders' attention to a proxy adviser's voting recommendation in relation to the choice of virtual format for this meeting and my reelection. As shareholders may be aware, proxy advisory firms provide advice to institutional shareholders on how to vote. ISS has recommended voting against my reelection as Chair, citing our decision to hold this meeting as a virtual-only event, which they view as a significant governance concern. This is the first time a proxy adviser has issued a negative voting recommendation on that basis with respect to Chorus, although we did have a virtual meeting last year.

In response, let me explain why we elected to have a virtual-only meeting this year. At our last hybrid meetings, we had 10 or less shareholders with very few questions in person or online. So that's 10 shareholders out of over 19,000. The financial and environmental costs of a virtual meeting are significantly less than a hybrid meeting. The resolutions this year are largely administrative in nature. The meeting technology used by shareholders to attend this virtual meeting is tried and tested and allows full participation. It's also consistent with the NZX listing rules and the NZX Corporate Governance Code, and our constitution does permit virtual-only meetings.

However, we're not wedded to the virtual meeting format and having received some feedback for the first time this year with a preference for a hybrid over a virtual meeting, our intention is to revert back to a hybrid shareholder meeting next year. As always, we'd welcome shareholder feedback on how we can improve our meetings generally.

I'll now hand over the role of Chair of the meeting to Kate Jorgensen, the Chair of the Audit and Risk Management Committee, who will introduce the resolution relating to my reelection as a director.

Thank you, Mark. Good morning, shareholders. It is my pleasure to propose Resolution 3, the resolution to reelect Mark Cross as a Director of the company. The Board fully supports the reelection of Mark. I now invite Mark to address the meeting.

I'm seeking reelection today as required by the NZX listing rules, having first been elected in 2016 and reelected in 2019 and 2022. Having taken over as Chorus Chair in October '22, it's been a privilege to have led the Chorus Board for the last 3 years and to have been a director for the 6 years previous to that. I should note that this is the end of my third 3-year term. And on the Chorus Board, we've tended to observe 9-year tenures.

Stepping into the Chair role provides some flexibility to that general tenure guideline. But in standing for reelection today, my intention is to ensure an orderly handover to a new Chair during this next term. The usual planning for that succession is already underway as part of our normal Chair and direct succession program. So with that said, I'm pleased to have the opportunity today to seek your support for my reelection as an independent director. I'd like to briefly address today why I'm here and what I can contribute as a director of your company.

So firstly, why do I want to be a member of the Chorus Board and why am I seeking reelection? Chorus' purpose, unleashing potential through connectivity, enabling better futures for Aotearoa says it all for me. Chorus' fiber network is a critical national infrastructure business. As New Zealand's demand for data increases and become more reliant on connectivity, Chorus' role will only grow in importance. For a director, serving on the Board of such an entity means being involved in decisions that are economically, socially and technologically fundamental to New Zealand's future digital infrastructure.

Secondly, what do I bring to the Chorus Board? So my current and previous Board roles as well as my prior executive career in investment banking have given me exposure to a wide range of industries, companies, markets, people and situations. And I bring all of these experiences to the Chorus Board table. I'm satisfied as Chair with what we've achieved over the last 3 years, Director, CEO and executive succession, a revised strategy, a regulatory review and a capital management and dividend reset. Activity is one thing, but outcomes for shareholders are more important.

Chorus has performed well in total shareholder return as noted in my earlier address. We're clear on our strategy, on executing that strategy and on managing our capital in a way that delivers predictable and growing returns to our owners. With your support, I look forward to continuing to work hard alongside my fellow directors and our executives and staff to achieve those goals. Thank you.

Thank you, Mark. Kristel, have we received any questions for Mark or about Resolution 3?

No questions have been received on Resolution 3.

Thanks, Kristel. I now move as an ordinary resolution that Mr. Mark Cross be reelected as a Chorus Director. If you have not already done so, I ask that shareholders vote on Resolution 3. I now pass the role of Chair of the meeting back to Mark.

Thanks, Kate. We now move to the final resolution, Resolution 4, the auditor's fees and expenses. In accordance with the Companies Act, Chorus' current auditors, KPMG, have been automatically reappointed as Chorus' auditor. Under that act, auditor fees and expenses must be fixed in the manner determined at the annual meeting.

Kristel, have we received any questions about Resolution 4?

No questions have been received on Resolution 4.

Thank you. I now move as an ordinary resolution that the Board be authorized to fix the fees and expenses of KPMG as auditor. If you've not already done so, I ask that shareholders vote on Resolution 4. I now invite shareholders to raise any other questions, comments or discussion, whether related to any of the presentations, the financial statements or the management of Chorus. While we're waiting for people to raise any items of general business, an e-mail address for your feedback is here on the screen. We welcome your feedback at any stage.

Kristel, have we received any general questions?

Yes, we have, Mark. Our first question is from Stephen Mayne. How many full-time equivalent staff do we currently have? And is this likely to fall over the coming 12 months with the rapid rollout of AI? Which parts of our business and operations are the most prospective for AI productivity gains? And how energetically are we embracing those opportunities?

Great. Thanks, Stephen. Obviously, a very topical question. I'll get Mark to answer that one.

Thanks, Stephen. A couple of parts to that. Firstly, if I look back, we talked to our Road to 2030 strategy, the foundational work we've done through Horizon 1 over this past financial year, part of which included an organization structure review and redesign to better align capability and focus. That saw roughly a 10% reduction in our headcount in FTE, so circa 750 FTE at the end of FY '25. At the same time, we've also recognized we're investing in new capability as we move into that great network operator space, so data intelligence, retention, churn management and AI, in fact. So I think we could probably see that resettle somewhere around 800 headcount, maybe just south.

To the second part of your question on AI, where we have a new CTO from June, Martin Sherk, who've worked with previously as well. And one of the mandates I have given to Martin is to advance our AI maturity. I'd say there's certainly opportunity for us. In terms of the areas, the natural ones that stand out IT process and simplification. I think workflow management still around ongoing installations, property development, et cetera. So I would expect in operations, there is clear opportunities.

As we exit from copper withdrawal as well, I think, again, the ability to exit and drive some simplification and efficiency is an opportunity. But to be honest, we see AI having a pervasive impact across our internal business. So even areas such as our people and culture team already looking at systems and processes and where we could leverage AI as well. So I think there is certainly a lot of enthusiasm. I think there's some questions and some unknowns, but we're certainly stepping into that area at pace.

Thank you, Mark. I've got a second question from Mr. Mayne. New Zealand is regarded as a governance back order by some Australian investors for refusing to mandate annual voting on remuneration reports, which is standard in many countries. This issue was raised last year, but still you haven't followed the need to lead of zero in Fletcher Building and voluntarily introduced a nonbinding vote on a remuneration report. Why not? Have any other investors requested a remuneration report vote?

Thanks, Stephen. And yes, this does get raised from time to time by some of the proxy advisers. I think our position remains as it has in the past, but we're not close-minded to it, of course. Our focus has been on really transparent reporting and disclosure of our remuneration, noting we are a purely domestic New Zealand company. We think our remuneration structures are actually fairly clear and straightforward compared to many. And so far, we have improved our disclosure over time. And at this stage, as far as we're aware, shareholders are generally happy with those disclosures. So that will be our current position. But as I say, we're not close-minded to that.

Thanks, Mark. We have another question from [ Christopher Robert Malcolm ] and [ Helen N. Malcolm ]. Would you please outline how the Chorus UFB funding securities issued to the government work and how it will affect normal shareholders if the government sells them?

Thank you for the question. And actually, it's a good opportunity to address this because there was some confusion caused in the recent announcement by the government. And I would direct you for the real details, I'd direct you to our annual reports and going back in terms of the detailed terms of the security. But if we go back to the origins of the securities, they were issued, that was essentially a way for the government to part fund the build-out of the UFB program. And the government never wanted to take up a voting or a shareholding position in the company, but they did want to lend Chorus the money to partly roll out the program.

So they are nonstandard securities. They are not to be confused with our ordinary shares, which you would hold or our other retail debt securities. They are more like infrastructure-type funding, noninterest-bearing. And so the holders of those as the government has announced recently, as you alluded to, that they are looking at, at this stage, only looking at selling those securities to another holder to enable them effectively to redeploy the money tied up in that asset into other assets like hospitals and schools. And at this stage, it is just a scoping study and the outcome of that scoping study won't be known until next year.

The face value of those securities is about $1.1 billion, but I refer to face value because of the terms of the securities, one would expect them to sell for some hundreds of millions less than that, and that's just based on the fact that they are noninterest-bearing. As we are obviously interested in that study and will be consulted during it, we've made the comment that we wouldn't expect as a result of this for the terms and conditions of the securities to materially change.

In effect, think of it as our ordinary shares every day are changing hands from one owner to another. And effectively, that's the way to look at these debt securities. If they change hands from the government to another holder, it doesn't actually impact Chorus. And so as I say, look out for the outcome of that government scoping study, and then we'll decide what to do at that point.

Thank you, Mark. Our next question is from the New Zealand Shareholders' Association. Some worry that Chorus' dividend is unimputed. Of course, this is not a concern for the many charities that hold Chorus shares. Some think that a more tax-efficient distribution policy could be employed. Has the Board considered this matter? I also read some research that suggested imputation credits might be attached to dividends from FY '28. Is that a possibility?

I think the first comment is, and I go back to my earlier address is that our focus is on delivering a predictable and growing dividend. So when I say predictable, something that shareholders can count on each and every year as opposed to some of the more tax-driven forms of distributions might be special dividends or share buybacks. I think it's more -- it's better to have that consistency of return through an ordinary dividend.

And also, we would not make decisions based on tax driven by the sort of capital allocation policy that I referred to earlier. And yes, I would repeat the comment that we have flagged that in time as we get back into a tax-paying position that we will expect to partially impute dividends in the medium term. So it's all about a function of our taxpaying status.

Thank you, Mark. We've got another question on that topic from [ Philip Simon ]. Some years ago, Chorus lost the ability to attach imputation credits to dividends. It was indicated at that time that these would be reintroduced when able to do so. Could you please give an update on the current taxation situation and a time line for this to occur again?

Thank you for the question. I probably won't repeat the answer, which all applies here. But again, I would say, as I think the key words are when able to, we will certainly be passing on imputation credits. And at this point, we've indicated in the medium term.

Thank you, Mark. Our next question is from [ Liam Wallace ]. For a fiber company, virtual meetings make complete sense, and I strongly disagree with the proxy statement. Why would you suggest we go back to a hybrid when we had such poor turnout?

It's a fair point. And I think what we're balancing here is the pragmatic sort of cost-based reality here that the turnout at our meetings in the past in person hasn't been significant, but we also respect the feedback we've got that shareholders want to ensure that the Board is available to be held to account in person when matters. That's not this year for us, and we don't expect that next year. So we respect that feedback. And to reassure you, we don't expect that if we add a studio audience as it were to our current setup this year that we think that, that's manageable and that would be our intention to do that.

Thank you, Mark. Our final question is from [ Edmond Good ]. What progress has been made regarding the proposed projects outlined at last year's Annual Shareholders' Meeting, specifically the proposed trans-Tasman network?

Thank you. I'll get Mark to comment on that.

Thank you. If I start with the trans-Tasman project or we'd refer to it as the Tasman Ring. When we started exploring this as an opportunity, we had indicated some of our investment criteria and that it was predicated on securing presales commitment to help with what would have been a substantial capital build. And timing is also key. I think from what we've seen, though, from a global perspective, obviously, there's a lot of demand for subsea cable builds. Every other article seems to be around connectivity, data centers, subsea cables. But what we had landed on is that it didn't meet our investment criteria. So it's not something that we are actively pursuing at the moment.

We will continue, though, to keep a watch and observation over this. What we would say is we want to ensure that a connected New Zealand is a better New Zealand. And frankly, there is a lot of opportunity for subsea cables to create diversity and increased connectivity down through the South Pacific, certainly from the western side of the U.S. as well. So we will continue to look out for that. But at the moment, the Tasman Ring is not something that we're actively pursuing. In other areas, though, as I said during my own presentation, we do continue to see opportunities in infrastructure. So data center connectivity, in particular, we play a relatively smaller role in that space today and believe that given the quality of the Chorus fiber assets, that's an area that we should be playing more of a role into.

Mobile infrastructure is another example and other products that we're also exploring. The third area I'd say is copper recovery. Last -- over the last year, we had run -- we've completed a trial and that returned around $3 million of net benefit, and we recycled around 1,100 tonnes of copper. It is a complex process. I would say it's a high-cost extraction process, but the market rates for copper at the moment are also attractive. Having completed the trial, we're intending now to operationalize that. And as I'd indicated earlier, across 2026, looking to stand up a more broader copper extraction process. And as we see that, that's in the order of $30 million to $50 million of net benefit over the next 3 to 7 years. So the trial has proven worthwhile. Thanks...

Thank you, Mark. Kristel, do we have any further questions?

No further questions. Thanks, Mark.

Okay. Thank you. So ladies and gentlemen, that concludes our discussion on the items of business. I'll close the voting system shortly. Please ensure that you have cast your vote on all resolutions. I'll now pause briefly to allow you time to finalize those votes.

[Voting]

Voting is now closed. The results of these votes will be released to the NZX after this meeting.

There being no other matters of business, I thank you for connecting with us today, and I now declare the meeting closed.