Chorus Limited, Annual Meeting 2025

25 October 2025

Chorus Limited (CNU)

The company will hold its Annual Shareholders Meeting at 10.00am Wednesday 5 November 2025.

It will be a virtual meeting. You can join the meeting online at this link.

Company Overview

Chorus is a provider of telecommunications infrastructure. The company was de-merged from Telecom New Zealand in 2011 as a condition of winning the majority of contracts for the Government’s Ultra-Fast Broadband Initiative. It is the owner of the majority of telephone lines and exchange equipment and was responsible for building approximately 75% of the new fibre optic network. With development largely complete, it is now focusing on developing new revenue streams and optimising remaining non-fibre assets. It has 1.2 million connections with 31,000 added in FY25. This lifted fibre demand to just over 72% of addresses passed. Its aspiration is 80% uptake by 2030.

Current Strategy

The company sees its strategy being achieved over a 10-year horizon with three distinct phases:

• Horizon 1 (FY25) has been about getting ‘future fit for purpose’, embedding strategy, changing organisation structure, and building new capability to ensure it can achieve its future aspiration.
• Horizon 2 (FY26 to FY30) is where the benefits of change are realised progressively, and Chorus is reflective of a simpler, more efficient, and more innovative and competitive business.
• Horizon 3 (beyond FY30) is the transition to a single state technology, switching off copper and becoming an all-fibre business.

Previous Year Shareholder Meeting

NZSA recorded the following key items at last year’s annual shareholder meeting:

1. The shutdown of the copper network is forecast for 2030. There are only 139,000 copper connections remaining across New Zealand.
2. New dividend payout policy at 70-90% of net operating cashflow after capex, which was an increase from the previous setting of 60-80%.
3.  NZ is 17th in the OECD in terms of percentage of the population who have taken up fibre.

The meeting report is available at this link.

Disclaimer

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Key

The following sections calculate an objective rating against criteria contained within NZSA policies.

Governance

NZSA assessment against its key policy criteria are summarised below.

Directors Fees:  Excellent disclosure. We note that the Board Charter states that “the Board may pay additional fees and allowances to a Director to reflect additional services provided.” We note, though, that no such payments were made in FY25 or in recent financial years.

Director Share Ownership:  Chorus’ Minimum Shareholding Policy sets the expectation on Directors to hold, at a minimum, shares equal in value to one year’s Director base fee (after tax). “If not held at their date of appointment, the policy expects Directors to accumulate this holding over the first three years from that date.”

The time frame of three years to achieve the target implies a 33% purchase rate, meaning that a Board applicant would require existing wealth to serve on the Board. NZSA believes that ability is not defined solely by wealth. In this context, however, we observe that the company operates a Minimum Shareholding Policy with the Chair holding discretion to waive the requirement depending on a Director’s personal circumstances.

CEO Remuneration:  The company discloses its remuneration policy on its website, which includes an overview of the remuneration philosophy applicable to the company. The People Performance and Culture Committee are responsible for implementing the policy.

Incentives: The CEO is paid a short-term incentive (STI) in cash and a long-term incentive (LTI) by way of performance share rights.

NZSA encourages fulsome disclosure in relation to any incentive payments made to the CEO, including disclosure of measures (or measure ‘groups’), weightings, targets, and the level of achievement versus target for each component associated with any awards. This methodology is supported by the new NZX Remuneration Reporting Template.

The STI is awarded at a target of 50% of base salary. The measures, weightings, and level of achievement against each component are well-disclosed, with the overall STI award being made at 66% of target.

Performance rights are awarded under the LTI at 55% of base salary. Vesting then occurs after a three-year performance assessment period. The measure is total shareholder returns (TSR) which is favoured by NZSA.

The company is one of few that discloses both the gender pay gap and CEO/employee remuneration ratio.

Golden Parachutes: In the interests of transparency, NZSA believes there should be explicit disclosure around the severance terms and notice periods associated with the CEO, including whether specific termination payments are offered.

Chorus offers best-in-class disclosure of the severance conditions and associated notice periods for the CEO in the Annual Report.

Director Independence:  All Directors are independent.

Board Composition:  Whilst the Annual Report includes a ‘collective’ skills matrix it does not attribute skill sets to individual Directors to demonstrate who they contribute to the governance of the company.

The company does not participate in the IoD’s Future Director programme designed to develop and mentor the next generation of Directors. NZSA expect NZX50 companies to participate as part of a responsibility to develop and mentor the next generation of Directors. As mitigation, however, NZSA notes that Chorus currently has three Directors for whom this represents their first public company Directorship.

Notwithstanding our comments related to Director share ownership, the nature of the company’s board indicates a commitment to thought, experiential and social diversity, with relevant experience for Chorus.

Director Tenure:  NZSA looks for evidence of ongoing succession or ‘staggered’ appointment dates that reduce the risks associated with effective knowledge transfer in the event of succession. We also prefer a term maximum of 9-12 years, unless there are exceptional circumstances that may apply.

Director appointment dates range from 2016 to 2024. 

ASM Format: Chorus Limited is holding a virtual meeting. NZSA expects a hybrid meeting (i.e., physical, and virtual) as a way of promoting shareholder engagement while maximising participation.

Almost 70% of NZX companies hold hybrid meeting. The company has over 19,000 shareholders so we would expect a physical meeting rotated through the main centres to allow shareholders to engage face to face with the Board, CEO, and senior management. 

NZSA notes that the company has experienced extremely low turnouts to physical meetings in prior years and has clearly made a trade-off in favour of cost savings. Despite this comment, however, we do not see cost as being a barrier to a company as large as CNU.

Independent Advice for the Board & Risk Management:  NZSA looks for evidence, through disclosures, that a Board has access to appropriate internal and external expertise to support board assurance activities. We also look for evidence that Boards are across their risk management responsibilities. 

In both cases there are comprehensive disclosures in the Annual Report. The company makes thorough disclosures of strategic, climate-related, business, and financial risks, as well as the processes that support risk management. We note there is more limited disclosure of mitigations in the Annual Report.

We note that “A director may, with our chair’s prior approval, obtain professional advice (including legal advice) and request the attendance of advisers at Board and Board committee meetings.” The Company Secretary and Internal Auditor have unfettered access to the Board. The Board approves the internal audit programme and operates a ‘co-sourced’ model for internal audit.

Audit

NZSA assessment against its key policy criteria are summarised below.

Audit Independence:  Good disclosure.

Audit Rotation:  The company ensures the Lead Audit Partner is rotated at 5 years as required by the NZX Listing Rules. There is no disclosure as to the tenure of the current audit firm. NZSA also expects disclosure of the appointment dates of the Lead Audit Partner and Audit Firm in the Annual Report to improve transparency for investors.

Environmental Sustainability

Overall approach: Chorus has continued to strengthen its sustainability and climate reporting in FY2025. FY2025 reports show clear progress, with an updated corporate strategy centred on becoming an all-fibre business by 2030, supported by science-based emissions targets. NZSA notes Chorus’ ongoing use of adoption provisions under the CRD regime, which remains appropriate as the company refines its climate data and modelling.

Sustainability Governance: Chorus provides a Board skills matrix, which explicitly includes sustainability, climate and ESG as a key competency. Governance of climate matters rests with the Audit and Risk Management Committee (ARMC), which reviews climate risk and progress against the company’s climate strategy. The company maintains a Sustainability Team, led by a Head of Sustainability, that drives implementation of the strategy and provides regular updates to the Board and Executive.

Strategy and Impact: Chorus’ updated strategy explicitly links its core business purpose, transitioning to an all-fibre network, to its climate transition plan. Fibre is positioned as a lower-emissions technology, and Chorus provides a documented Transition Plan outlining milestones, including copper withdrawal, electrification of the fleet, and renewable energy trials. The disclosures highlight ongoing investment, such as solar PV installations at exchange sites, and progress against decarbonisation targets. The integration of climate adaptation and mitigation into capital planning is clear evidence that climate issues are influencing business strategy.

Risk and Opportunity: Chorus identifies both physical and transition risks, and its disclosures map these against likely impacts and mitigations. Scenario analysis has been expanded, and a climate risk register is updated regularly within its enterprise risk management framework.

Metrics and Targets: Chorus discloses Scope 1, 2, and 3 emissions, with clear breakdowns and comparative data. The company’s verified science-based targets include a 62% reduction in Scope 1 & 2 emissions by FY30, supplier engagement for Scope 3, and electricity use reduction targets. Interim milestones and progress are reported transparently, for example, a 25% reduction in Scope 1 & 2 emissions achieved by FY25, although electricity reduction progress fell short of its interim target. Broader operational metrics such as waste diversion are also included.

Assurance: In FY2025, Chorus obtained limited external assurance from KPMG, but this remains restricted to its greenhouse gas (GHG) inventory only. The assurance report explicitly notes that KPMG’s conclusion “does not extend to any other information included or referred to in the Climate Statement.” This means the governance, strategy, risk management, and other narrative elements of the Climate Statements were not subject to assurance.

Ethical and Social

NZSA assessment against its key policy criteria are summarised below.

Whistleblowing:  Good disclosure.

Political Donations:  The Annual Report discloses no donations were made during the year however there is no disclosure around whether political donations can be made. NZSA expects an explicit disclosure.

Financial & Performance

Chorus’s share price rose from $8.74 to $9.43 (as of 8^th October 2025) over the last 12 months – an 8% rise. This compares favourably with the NZX 50 which rose 7% in the same period. The capitalisation of CNU is $4.1b placing it 17^th out of 115 companies on the NZX by size and makes it a large company.

¹ per share figures based off actual shares at balance date (not weighted average)

Revenues were unchanged at $1,014m and EBITDA rose 1% to $705m and a very small NPAT of $4m was reported giving EPS of $0.009.

Operating cashflows were up 9% to $559m and these (or to be more precise the expectation of these), are the driver for the valuation of Chorus. Measured in cent per share, operating cashflows were $1.29.

NTA per share fell substantially to -$0.06 as total equity continued to fall, down another 33% to $567m and CNU trade at infinite premiums to their NTA.

Of note: Dividends paid by CNU are well in excess of EPS. Chorus has large cash flows but also very large depreciation expenses ($390m). Depreciation is a non-cash item and affects EPS, but not the ability to fund the dividend payment. Dividend payments increased by 21% to $0.575 and are expected to increase again in FY26. Due to the low EPS and minimal tax payments dividends are not imputed.

We believe that Chorus should look to alternative and more tax efficient means of returning excess cash to shareholders. The share buyback program which was operating last year is no longer in place. We do note that Chorus’ net equity has declined over the past 5 years, as the company has shifted its funding model towards debt funding (2021: $2.4 billion, 2025: $3.1 billion).

CNU have very high debt levels with their debt-equity ratio at 9.74 (6.15). Two items called Crown Funding and Crown Infrastructure Partners Securities comprise $1,502m of non-current liabilities. In addition, interest bearing debt increased to $2,918m. Total non-current liabilities are $5,016m. This is large when compared to total equity of $567m. We note that finance net finance expenses rose slightly to $210m and this figure consistently dwarfs the NPAT figure.

The company provided shareholders with an investor presentation in which forward looking guidance is provided. They expect EBITDA for FY 26 of between $710m-$730m, gross capex of $375m-$415m and an unimputed dividend of $0.60 per share.

Chorus shares are widely held by a variety of institutions and individuals.

Resolutions

Sue Bailey was appointed to the Board 31 October 2019. She is an experienced director with a career of more than 30 years in telecommunications spanning fixed telephony, mobile and broadband services. Responsibilities included product and brand marketing, customer lifecycle management, strategy, and leading large-scale transformation. She is currently Chair of Careflight. Her previous roles include member of the executive leadership team at Optus, CEO Virgin Mobile Australia, Senior Vice President Virgin Mobile USA. Sue is a member of the Australian Institute of Company Directors

We will vote undirected proxies IN FAVOUR of this resolution.

Will Irving was appointed to the Board 26 October 2022. He has more than 25 years of telecommunications industry experience having held a range of senior roles in the telecommunications industry in Australia ranging across strategy, wholesale, small and medium business customer sales and service, and as a lawyer. He is currently Chief Strategy and Transformation Officer NBN Co Limited (company established to design, build and operate Australia’s wholesale broadband access network). His previous roles include Interim CEO Telstra InfraCo, Group Executive Telstra Wholesale, Group Managing Director Telstra Business. Prior to his commercial management roles, Will was Group General Counsel of Telstra.

We will vote undirected proxies IN FAVOUR of this resolution.

Mark Cross was appointed to the Board 1 November 2016 and appointed Chair October 2022. He is an experienced director with more than 20 years of international experience in corporate finance and investment banking. Mark is a Chartered Fellow Institute of Directors NZ, Member of Chartered Accountants A&NZ, Member, Australian Institute of Company Directors. Previous roles include Chair Milford Asset Management; Director – Z Energy, Genesis Energy, Argosy Property. Current roles include Director of Xero, Board member Accident Compensation Corporation (ACC); Director Fisher & Paykel Healthcare and Chair Vocus (Australia).

We will vote undirected proxies IN FAVOUR of this resolution.

This is an administrative resolution.

We will vote undirected proxies IN FAVOUR of this resolution.

Proxies

You can vote online or appoint a proxy at https://www.investorvote.com.au/

Instructions are on the Proxy/voting paper sent to you.

Voting and proxy appointments close 10.00am Monday 3 November 2025.

Please note you can appoint the Association as your proxy. We will have a representative attending the meeting.

The Team at NZSA