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Edited Transcript of CNU.NZ earnings conference call or presentation 21-Feb-21 9:00pm GMT

·55 min read

Half Year 2021 Chorus Ltd Earnings Call Wellington Feb 22, 2021 (Thomson StreetEvents) -- Edited Transcript of Chorus Ltd earnings conference call or presentation Sunday, February 21, 2021 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * David Collins Chorus Limited - CFO * Jean-Baptiste B. Rousselot Chorus Limited - CEO ================================================================================ Conference Call Participants ================================================================================ * Arie Dekker Jarden Limited, Research Division - Head of Research * Brian Han Morningstar Inc., Research Division - Senior Equity Analyst * Ian John Martin New Street Research LLP - Senior Telecommunications Analyst * Philip Campbell UBS Investment Bank, Research Division - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [1] -------------------------------------------------------------------------------- (foreign language), and welcome to our half yearly result announcements for FY '21. I'm JB Rousselot, the CEO of Chorus. And I'm joined by David Collins, our CFO. As usual, we'll start the webcast by a quick overview of some of the numbers and the trends that we've experienced in the first 6 months. David will then take us through the detailed financials, guidance and some latest update on the regulatory framework that we're experiencing. And then finally, I'll come back and talk more broadly about the broadband market, some of the initiatives that we have for the following 6 months and also update you on some of our other strategic focus. And then, of course, we'll have time for Q&A. But let's start with the key numbers for the half. This has been another complex period for us as we start seeing some of the COVID-19 impact on our business. Fiber is performing well with fiber connections up another 62,000 over the last 6 months and fiber uptake in our UFB area reaching now 63%. But we have seen a catch-up in copper line reductions following the very stable period that we experienced during the lockdown period late last year. These reductions were largely the continuous migration of coppers on -- of customers on legacy copper products, especially in non-Chorus UFB areas. We're also seeing some impact from COVID-19 on overall migration and the impact on broadband demand and also on price sensitivity, in particular, in the business segment. And then mobile network operators are also trying to reduce costs. And so as a result, they've been pushing inertia selling of fixed wireless. So the combination of all these factors saw a reduction of about 46,000 fixed line connections during the 6 months, and about 23,000 of those were broadband lines. EBITDA for the 6 months was $323 million, and net profit after tax was $24 million. David will give us a lot more details on those numbers and will also touch upon our ongoing effort on the cost line. Finally, we've confirmed a fully imputed interim dividend of $0.105, up from $0.10 for the same period last year. Now the UFB rollout is at 92% completion, and uptake in our UFB area has grown from 60% to 63% in the 6 months. We now have 813,000 fiber connections. About 1.25 million customers are now able to connect to fiber. 79% of our broadband connections in the half are now on fiber services with only 100,000 VDSL and 100,000 ADSL customers still on copper services. In the half, we completed 90,000 fiber installs. And we've managed to do this with an 8.2 customer satisfaction index, which is an increase to the 8.1 that we experienced last year. Finally, our field crews have increased back to levels that were reflective of pre-COVID activity. And as a result, we've also seen a reduction in the work in progress, given the activity that we're doing. We also continued to see strong fiber uptake growing right across the UFB1 footprint, and this is the footprint that we completed in November last year. We're now at 66% across that footprint. Invercargill is leading the way in terms of fiber uptake. But most importantly, Auckland, which is our largest market, continues to grow and reached 72% uptake in the last 6 months. As a proportion of our broadband connections in the Auckland area, now fiber represent 87% of our broadband connections. The strongest risk of growth were in areas such as Waiheke Island and Wellington/Kapiti areas. In Waiheke, we think that we're seeing the increasing demand from consumers to adopt fiber services in a working-from-home type of environment. And the encouraging thing for us with the Wellington/Kapiti area is this is an area that is also serviced by the HFC network, and to see strong fiber uptake in this area is really encouraging. Finally, we typically see in December a reduction in fiber connections linked to universities shutting down. You can see that playing out in the Dunedin numbers. But we also know that in the next quarters, the students will be back, and we'll see those connections come back. Demand for the gigabit plans have continued to grow, and it now reaches 17% of our connections. During the 6 months, we added 21,000 1 gigabit connections. To give you an illustration, over the last few weeks, about 30% of our net new fiber adds were 1 gigabit products. The majority of the fiber connections continued to be on the 100 megabits per second service, and that now represents just under 70% of our connections. The small business fiber plans that we introduced last year are also starting to gain momentum. Over the last 6 months, we've added 8,000 of those connections. And then from a pricing perspective, as part of our COVID-19 response, we delayed the CPI increase of fiber prices until October, and we even reduced the 1 gigabit price in July. And in the copper space, the annual regulated increase of our copper broadband services was applied in December with an increase of $0.62 to just under $43. As I mentioned earlier, we're seeing some ongoing effects of COVID-19 impacting the overall broadband market and our connections. This is in particularly strong when you look at these Stats NZ data on net migration into New Zealand. What usually was about a 6,000 net migration per month has virtually been brought back to 0 since the border closure in March. This means that we're no longer getting the same tailwind in demand that we were enjoying from population growth to help offset connection losses in non-Chorus fiber areas. Also, as we noted last year, COVID restrictions has affected the number of international students coming into the country and has had an impact on broadband demand. It is unclear yet how many of those students will be able to come back in 2021. Despite the effect of migration, there is still something of a building boom, given the current low interest rate environment that we face. And we see this driving continued demand for new property development. As you can see from the Stats NZ data, much of that demand is happening in the Auckland area with residential consents growing each year. Now clearly, there is a lag between the consent being granted and the property being built, but this is creating a very strong pipeline of activity for us. The trends that we're seeing are not as strong in the business segment. In the months since lockdown, business consumer are exhibiting some strong price sensitivity, and some of them have downgraded to more basic price -- basic products. There is also a slowdown in the demand for premium products such as fiber direct -- direct fiber. Now you can see the combinations of all of these trends in -- playing out across each of our 3 areas. In the local fiber company areas, the LFC areas, so the non-Chorus areas, the trends in the half are back to similar trends that we're experiencing pre-COVID-19. The same applies in our non-UFB areas, where fiber connections have grown from 20,000 to 24,000 over the period, partially offsetting some of the losses to fixed wireless competition. And then in our UFB area, copper voice reductions are consistent with pre-COVID trends. But broadband has reduced in the half, and part of that is triggered by the net migration impact, international student and fixed wireless in inertia selling that I've mentioned earlier. I'll talk more about some of these when I come back. But in the meantime, let's get David to take us through some of the detailed financials. -------------------------------------------------------------------------------- David Collins, Chorus Limited - CFO [2] -------------------------------------------------------------------------------- Thank you, JB, and good morning, everybody. It's good to be with you today. Starting with our income statement, we are reporting EBITDA today of $323 million for the half. Calling out some of the key trends, revenue continues to see the benefit of fiber connections growing and ARPU growth but is also seeing an ongoing loss of copper voice lines and copper broadband lines in LFC areas. Our expenses line is reducing, and we would expect that to continue as we transition from build to operate. Looking at the depreciation line. Depreciation is growing in line with the continued investment in our network both in terms of communal build and installations CapEx. We would expect that to continue whilst those projects or programs are completed or start to taper off in the case of installations. Looking at interest expense. Interest is falling in line with the refinancing program of our business. We refinanced the GBP bond in April of this year. And as a result of that, along with a couple of other initiatives during the year, our weighted average interest rate has fallen to around 4% for the half, which compares to 5.2% for full year '20. Looking at income tax. Our effective tax rate is about 35% for the half. It's higher than the corporate tax rate due to the treatment of Crown infrastructure interest and also amortization of Crown funding. It's also important to note that in half 2 full year '20, there was a one-off benefit for the reintroduction of building depreciation. Hence, there was a benefit in half 2 '20. Looking at revenue specifically. Revenue has come in at $473 million, so down $10 million on the prior corresponding period. The key trends here are growth in fiber connections, we're up to 813,000 fiber connections across the business; growth in ARPU, as you can see on the slide, driven by the 1 gig product uptake, which is up to around 17% of our product mix; and also, CPI changes during the half. Copper, on the other hand, we see a continuation of previous trends in terms of voice and copper broadband losses. Looking at a few of the other key revenue lines. Field services revenue, down a little bit due to copper chargeable maintenance starting to diminish. But greenfield revenues remained strong for our business. Looking at expenses. Expenses are flat versus the prior corresponding period, and we would expect looking forward that our expenses in total would reduce for our business. A couple of key callouts: Labor. Labor, we had an impact of redundancy costs in the period of about $1 million, but we have reduced our labor line. And looking forward, we would expect that to continue as we transition from build to operate. Whilst our total FTEs are actually slightly higher, most of those increases are capital in nature and are to support our managed migration and installation program. Network maintenance, I'll talk more about on the next slide, but that is -- have been impacted by weather during the period and the mix of work that we've undertaken. Other network costs, pretty much flat period on -- against the prior corresponding period but noting that half 2 of full year '20 had the impact of serco support payments, which we made to support our sercos. IT spend, we've called out some copper electronics decommissioning costs in the exchange buildings, and consultant costs is more of a timing issue around regulatory costs. More specifically onto maintenance and looking at our reactive maintenance spend. Of our total maintenance bill of $34 million, roughly $31 million is reactive maintenance. This is the same slide that we show each period. And broadly, when you look at fiber, the trajectory continues with growth in fiber maintenance costs, albeit the half 2 of full year '20 was impacted and depressed by the COVID impact in that period of time. With copper maintenance specifically, whilst copper volumes are diminishing, we did see the impact of inclement weather in the half. And also, the mix of jobs that we completed were higher cost in nature. So the average cost per fault was higher. But overall, the trend in maintenance continues, and that is a fall in copper maintenance and a lift in fiber maintenance costs as our footprint expands and as the number of installations grows. Moving on to CapEx. We report gross CapEx of $353 million for the half, of which about 85% is fiber in nature. The UFB2 communal spend was worth $86 million in the period. We have accelerated that build in conjunction with our sercos and have brought forward some CapEx on UFB2 communal from future periods, which we think is a really positive move for us strategically. The bulk of our CapEx spend was, of course, on installations at some $146 million, and that's supporting 90,000 -- or 70,000 installations in UFB1 and 20,000 in UFB2. Importantly, on the other fiber connections and growth line, included in that is the West Coast Fiber build project, which, as a reminder, is government-funded or at least, the majority of it is government-funded. Lastly, customer retention costs continue to grow, supporting our efforts in market to push fiber and grow our fiber footprint. Looking specifically at fiber connections and layer 2. The $146 million spend on installations was mostly driven by 90,000 connections for SDUs or single dwelling units. Cost per premises connected for both UFB1 and UFB2 was within our guidance range. We are seeing slightly lower volumes on premium business and backbone due to MDUs. And layer 2 spend is a little higher, which is mostly a timing impact as we've sought to bring forward some electronics expenditure to manage any potential COVID supply risk. Looking at copper and common CapEx. Key thing to call out here is copper CapEx continues to fall as it has been in prior periods. Common CapEx is relatively stable or flat across the periods. Sustaining CapEx is an important metric that we focus on each period. We define sustaining CapEx in accordance with our dividend policy in place for full year '22. We report $93 million of sustaining CapEx for the period, which is consistent with our overall message to the market in terms of the steady-state sustaining CapEx of $200 million per annum going forward for our business. Fiber, of course, will grow over time, and copper will diminish over time as connections fall. Moving on to guidance. Starting with EBITDA, we've reiterated our EBITDA guidance at $640 million to $660 million per -- for the period. You will recall that we allowed, in setting that guidance range, an impact for COVID of $10 million. We've seen an impact in the half in the range of $6 million to $7 million on the revenue line. The key drivers of that are, firstly, significantly lower net migration numbers into New Zealand, which has impacted our connection base or the growth rate in connections. We had a deferral of CPI for quarter 1 on revenue. And also, the shutdowns in Auckland have had an impact on the number of connections we can physically do. So as a result of that, we are guiding to the lower half of our EBITDA guidance range and, again, the total range at $640 million to $660 million. Looking at CapEx. CapEx, we are lifting our guidance in full year '21, up to $670 million to $700 million. There are 3 key drivers of this: Firstly, UFB2 communal. As I mentioned earlier on, we have accelerated and are ahead of program. This represents merely a bring forward of CapEx and does not represent an increase in CapEx over the short to medium term. Secondly, new property developments or greenfield expenditure. We're seeing a significant strong market around new property. This is, of course, revenue-generating for us, but the CapEx we are seeing as strong and continuing to be so for us. And lastly, installations. We'll talk a little more about our managed migration program a little later on, but we are -- have lifted our installation CapEx. Once again, similar to UFB2, we see that as a bring-forward CapEx, not an increase over the short to medium term. West Coast fiber was worth some $30 million in the period of CapEx. As I mentioned before, that is mostly government-funded. Moving on to dividend. We are declaring a dividend of $0.105 fully imputed interim for full year '21. The full year guidance is unchanged at $0.25 per share. The dividend reinvestment plan will remain in place with a discount of 2% per annum. As we mentioned in previous presentations, we do expect looking forward that due to our changing tax payment profile, our ability to fully impute will remain only through until full year '22. So we expect from that point that we will be partially imputing the dividend profile for the company. Until over the short to medium term, we return to a taxpaying situation. Looking at net debt to EBITDA. We do see slightly elevated gearing levels for the company, which are driven by mostly timing issues. We are at 4.37x on the S&P metric against a threshold of 4.25. The key drivers are, as I mentioned before, the bring forward of UFB2 communal; the higher installation and greenfield capital expenditure; and lastly, just timing of RSP payments over the 31st of December period. Our commitment to our credit rating remains. The rating agencies, when they look at us, will look at the sustained metric over a period of time and will look through timing-related issues, which is what we believe is driving our higher metric at present. We also reiterate that our view is that when we are in a new regulatory regime, we believe that a higher down-driver threshold is appropriate to reflect the revised regime that we will be moving into from January of next year. Moody's, in particular, have stated that they will revise our metric when we have -- or when they have more clarity over our new regulatory regime. Looking at Crown financing. Crown financing, we've drawn just over $1.1 billion out of a facility of $1.3 billion. Looking at the chart on the right, that's our standard maturity profile. Key things to call out are, firstly, we have an upcoming maturity in the first half of calendar '21, which is our New Zealand dollar bond, $400 million. We have cash on hand at December of $268 million, plus an undrawn revolving credit facility of $350 million to finance that repayment. Moving on to Chorus' regulated fiber revenues. We've had questions from investors and analysts recently around what our view is of our forecast regulated fiber revenues. With the completion of the input methodologies process, we're now able to provide a view of what we believe our historic and forecast regulated fiber revenues look like. The chart on the left-hand side reflects by calendar year our view of our forecast and historic actual regulated fiber revenue. More specifically, for financial year '20, we estimate that our regulated fiber revenue was $480 million -- or $470 million, I should say. And for half 1 '21, we estimate $270 million. I'd like to make a few comments about the maximum allowable revenue or MAR. It's important to note that the Commerce Commission will set our MAR in the current calendar year, and that MAR will be measured against the actual revenues that the business generates or the actual fiber regulated revenues. What we represent there on the chart for the RP1 period, '22 to '24, is our best view based on our business plan that has been approved by our Board of what our forecast fiber revenues will be. From our perspective, it's important to note that in order to achieve a fair financial loss asset in our starting regulated asset base and also to ensure a smooth transition into the new regulatory regime, our perspective is that the MAR should be above our forecast fiber revenues. When you look at the history of the UFB project, we are now at 63% uptake. When this project was commenced, the forecast was to be at 20% in full year '20. We've been able to support data growth at significant and ongoing levels, and we've been able to meet customer expectations and meet customer demand. All of that has happened because we've had the incentive to do so. We've had the incentive to invest and the incentive to improve the customer experience. We believe it's critical that in the first regulatory period, that incentive remains. And from our view, the ability to grow into our MAR gives us the incentive to do exactly that. If you look at most of our customers or end consumers at the moment, roughly 2/3 are on the 100 meg product. However, as we look forward, we're seeing growing demand for the 1 gig product. We're seeing many more products and services come to market, and we're seeing a growing demand for higher speed products that require investment from Chorus. Our view is the regulatory regime needs to support this. A couple of other factors just to consider when we think about the MAR versus our regulated fiber forecasts. Firstly, we're currently 63% connected. When we look forward to RP1, we will be higher than 63%, but we will be well under 100%. It doesn't feel right that the MAR could be the same as our forecast when we're not even fully connected yet. Secondly, when I think about our financial loss asset, our starting RAB will include a significant financial loss asset. That asset will have built up over 10 years, from 2012 to 2022. It doesn't feel right that, that could be fully absorbed or recouped in just 3 years. So to summarize, we do believe that the MAR should be above our forecast fiber regulated revenues. We do note that customers are protected no matter what the MAR is in terms of price outcomes due to the CPI cap that exists on our 100 meg product or anchor product. My last comment on this slide is, as we talk with the commission in the coming months, the commission does have the ability to profile depreciation within the regulatory model or to look at options for accelerating depreciation, otherwise known as depreciation tilting. So this is an option that the commission does have and we will also consider as part of working through the MAR process with the commission. Moving on to the input methodologies key parameters. We've summarized on this slide both for the period up to the start of RP1 being our loss asset period and also, for the RP1 period on the right-hand side, the key parameters that were set during the input methodologies process. Two brief comments to call out: Firstly, the risk-free rate for RP1 will be set in June of this calendar year, and that will be based on a 3-month average of the 3-year risk-free rate. I also note that in the input methodologies, the commission did refer to their ability to reopen the WACC to reflect COVID impacts. So that is a tool that the commission has within its toolkit also. And lastly, on to the regulatory timetable. As we're looking forward in the current calendar year, the commission have said that they will release a draft decision in May of this year on our RAB and on our MAR and a final decision in September of this year. So we will see over the course of the calendar year the establishment of Chorus' regulated asset base and MAR for RP1. Just a few weeks ago, the commission published our regulatory expenditure proposal or price quality proposal from December. A couple of caveats on this. It does represent, of course, a proposal. It is just that. The commission will review it and form its own view. Specifically, with regard to the cost allocation assumptions within that proposal, they will ultimately need to reflect the allocation assumptions within the starting regulated asset base. So as we referenced in the December presentation, we will need to reflect the final cost allocation between fiber and copper based on the initial asset value or RAB process. And my last comment before handing back to JB, just repeating some of the conversation we had in December when we released our price quality expenditure proposal. It does include over the RP1 period approximately $500 million of sustaining capital over 3 years. That's consistent with our overall guidance to market of $200 million per annum sustaining CapEx or a little under, for those mathematically minded. It also includes $500 million of growth CapEx. That is consistent with our internal business plans. It's consistent with our capital management policy and the comments that we've made to market previously. We do expect that growth CapEx over time will taper down. What we are doing in the current year is bringing forward CapEx in a couple of key areas. So I'll stop there and hand back to JB. -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [3] -------------------------------------------------------------------------------- Thank you very much, David. As David was saying, in the expenditure proposal that we've submitted to the commission and to the industry late last year, we talked about New Zealand's gigabit head start. If you think about it, the UFB has given New Zealand a world-class network, but COVID-19 has really highlighted the fact that we need to continuously invest in capacity on that network and to introduce new services to meet growing consumer demand. We believe that the pace of change is only going to continue to accelerate, especially when you look at what's happening around the world. Today, about 20%, just under 20%, of our connections are on services with speeds of more than 100 megabits per second. In other countries such as Korea, 60% of connections are on services that are 500 megabits per second and above. So there's still a lot of room to grow. And as countries close on 1 gigabit as kind of a benchmark, fiber technology continues to increase. In November, we extended the coverage of our 2 gigabit and 4 gigabit Hyperfibre services to all of the UFB1 footprint. We now have several hundred Hyperfibre customers despite the fact that those services are currently only being provided by a number of nimble, smaller RSPs, and 2/3 of those services are under 4 gigabit service. So it's still early days for those Hyperfibre products, but we're very encouraged by the growth that we're seeing in them. We're already trialing 8 gigabits per second. And when you look at the road map of equipment vendors, you already see 25 gigabits on the horizon. As speed increases, so does data consumption. The average monthly usage was 390 gigabytes per month in December. And for fiber, that number was 460 gigabytes per month, almost double the same consumption on copper. And Telstra's CEO made the observation just a few weeks ago that this ongoing growth in data demand means that 5G will remain complementary to fixed line services, not replace them. As he said, 5G simply can't carry the same amount of data, but it will help develop new Internet of Things type of services that aren't suited to a fixed connection. The Commerce Commission latest broadband monitoring report also supports that view. The report continues to highlight the reliability and high performance that consumers are enjoying when they're on a fiber technology compared to any other technology, including fixed wireless. Fiber is simply unmatched when it comes to performance measures like high-quality video streaming and low latency, and we continue to be strong advocates of clear and transparent reporting of relative network performance in the New Zealand market. As I said at our annual meeting in November, we're concerned by how some mobile networks operators promote fixed wireless services despite the fact that independent monitoring shows that even VDSL is outperforming fixed wireless for average download speed and for latency. The commission itself has noted the confusion that consumers face when comparing communication services and pricing. Yet, we continue to see consumers posting online, saying that they've been subject to inertia selling with fixed wireless modems pitched to them as upgrade. The copper service is then migrating, unless they object. Many consumers don't seem to realize that they've been switched to a wireless technology, and many of them also reports difficulties trying to have their copper service restored. Chorus clearly advertise the performance of its fixed network and continues to invest to make sure they are not congested. Why should it be different for fixed wireless? Other countries do not allow inertia selling. In Europe, there is an industry push to have the type of network technology, fiber, copper, wireless, clearly advertised for the benefit of consumers. And in Australia, wireless providers are compelled to clearly explain to customers the type of speed performance that they should expect during peak hour time. We continue to believe that urgent action is needed to ensure that consumers in New Zealand can make the same educated choice. Last year, we launched a simplified strategic framework highlighting 4 key pillars, and the good news is that we're making strong progress on all of them. In winning in our core fiber business, our active wholesaler approach, and in particular, our focus on managed migration, continues to deliver. Of the 90,000 fiber installs that we did over the last 6 months, 30,000 of those were the results of our managed migration program. And this chart shows the evolution of the intensity of that program in addition to the normal RSP incentive and campaigns that we do. As you will see in H1, we more than doubled the number of installs that we were doing through managed migration. And close to 15,000 consumers activated an already existing fiber connection. On average, we continue to see about half of our managed migration installations activated service within 6 months. And in the first 6 weeks of 2021, for example, we've had almost 3,000 of those connections being activated, which represent about twice as much what we saw for the same period last year. At the same time, we're also seeing good growth in the number of activations that are coming from off-net consumers. And those are premises that would typically have been serviced through fixed wireless technology or HFC technology. The next slide shows the degree to which our open access network and incentives continue to support retail competition and differentiation. The 90-plus retailers outside the largest 3 have seen their overall market share in fiber grow by 4 percentage points over the last year. And as we've noted previously, electricity providers have played a key role in this growing trend for diversification. What's more impressive is the degree to reach those smaller ISPs are capturing an even bigger slice of the growing 1 gigabit market. They now hold 36% of our gigabit connections compared to 27% of overall connections. These players are truly bringing the full benefits of our fiber network with 1 gigabit products to the entire nation. Product differentiation is also entering a new phase. Sky TV's entry into the broadband market will take the bundling of broadband with content to a next level, given the very large consumer base that they have in pay TV. Flip has recently introduced an entry-level fiber plan that gives budget-conscious customers a $15 per week entry price for fiber broadband. 2degrees have recognized the importance of reliability for the emerging working-from-home segment with the launch of a symmetrical 100 megabits per second service upload and download that is bundled with web filtering and with a high-spec modem. And Vodafone has tackled one of the biggest consumer issues, home WiFi, with a new WiFi guarantee that uses the latest WiFi 6 devices. Although the market is diversifying, there is still a high concentration of market power amongst the vertically integrated retailers. And this makes the in-market incentives and education campaigns that we support across all retailer all the more important. We're continuing to refine our active wholesaler focus and have some new initiatives planned in the next few months to keep driving uptake. We're continuing to provide credits for copper late adopters of $300, and we're upgrading credits to the winback of off-net customers to the 1 gigabit service to $600. Linked to these, our marketing campaign and migration activities will be concentrated on the UFB1 areas that have lower levels of uptake. We've also announced a new incentive for retailers that have a stand-alone price point of $60 or less on the entry-level 50 megabit plan. These will receive $104 credit for a new fiber connection, which will support them in promoting fiber to price-conscious customers. Finally, we've seen good changes in government to the tenancy law, which means that we'll also be able to help connect rental properties, where tenants had previously been frustrated by landlords making blanket oppositions to fiber connection. On our second strategic pillar of growing revenue, we also continue to make progress with the launch of our new services. I've already talked about the progress that we're making in selling 2 and 4 gigabit Hyperfibre product. Our WiFi ONT is now in market with some smaller ISPs having already begun using it after a soft launch late last year. Fiber connections to smart locations such as CCTVs and traffic lights continue to grow, although we do believe that COVID-19 will have an impact in potentially reducing this market as a number of the organizations that typically purchase these services face different challenges. The biggest area of development has been in the backhaul space. Our new mobile access service is starting to grow as rural towers are being built by the RCG Group, and we've also seen good interest in urban areas. We've soft launched our peering service in conjunction with the New Zealand Internet Exchange to enable RSPs to peer via our Mount Eden exchange. And if RSPs don't have connectivity to that exchange, they can use our new EdgeConnect service to connect their traffic from elsewhere. We've had a lot of interest in this service, and we believe that it will significantly improve the interconnectivity between service providers in New Zealand. At the same time, the 14 rack spaces in our original Mount Eden EdgeCentre space are now full. We don't intend to compete with fully fledged data centers, but we continue to believe that there is a strong opportunity for us to use our exchange space to support the growing shift in cloud computing services to network edges. We're also expanding our backhaul networks to third-party data centers. Our new service will connect data centers to our exchange and to other data centers, and we see this as an area of growing interest. Our third strategic pillar is to optimize our nonfiber asset, and there is a lot happening in there, too. In late December, the Commerce Commission published the final Copper Withdrawal Code, and it now enables us to start small trials of this between now and the end of 2021. We are required to give customers a 6 months' notice of our intention. And so we'll be starting trials focused on a small sample of 30 cabinets with just above 250 copper customers on them, and none of those cabinets will be turned off before September of 2021. As we said previously, copper withdrawal is not going to be an overnight shutdown. It will be a street-by-street, very progressive process that we'll be going through. Once we have the result of the initial trial, we'll consider extending the trial to another 400 cabinets between now and the end of 2021. But this will only affect less than 1% of the close to 0.5 million customers that we still have on copper. We'll also continue to reduce ongoing maintenance cost. Over the last 6 months, we've disposed of another 7 nonessential sites. These were typically old radio sites or surplus exchange sites. We have a team dedicated to this program, and they have a strong pipeline of future opportunities to go through. We also have a program to reduce -- rationalize the legacy network equipments that we have in Spark exchanges. Finally, we're doing a lot to work on moving towards our future operating model. As this chart shows, the UFB rollout is really nearing completion, and the number of premises to be passed is rapidly decreasing. Installations are now our biggest volume activity, but they will also inevitably reduce given that we're nearing 2/3 uptake. And there are already many changes underway within our structure to reflect these changes. Our investment in systems to automate fiber fault handling is starting to provide real benefits, as larger RSP connect to our systems to automate these. About 85% of fiber faults are now fully automated on our systems. Our people are also embracing technology, with employee averaging 2 to 3 days of remote working. The number of employees that are working remotely has more than doubled since pre-COVID-19. Our technology teams and other key business units are also increasingly adopting agile practices. Given the impact of all these changes on our business, we expect to continue to adjust our operating model to simplify our processes and system and, as a result, to reduce our total number of employees. As a first step, our executive team was reduced from 9 to 7 to allow streamlining and simplification of accountabilities. We also have a net recruitment freeze that limits replacements to any critical roles. Now all of these are really big changes that we -- and we're navigating them through a rapidly changing environment. And it's increasingly difficult to do so when we do so with a missing piece of the puzzle. And the missing piece of the puzzle is the regulatory outcomes from the commission's ongoing process that David mentioned earlier. As we said in November, the level of return provided by the commission's final input methodology determination did not reflect our commercial reality and the risks that we took rolling out the UFB network. As a result, investors have given us very direct feedback that we shouldn't provide any further investments in network expansion beyond our current UFB commitments. In their view, commitments to a fair return at the beginning of the rollout have not been met in retrospect. That makes the outcome of the current expenditure process all the more important. The commission's upcoming decisions will shape our future focus and will determine the degree to which New Zealand can truly leverage its gigabit advantage. Our expenditure proposal aims to unlock the potential of the network that we've already built. We need to keep investing in capacity and in new services to meet growing consumer demand. We need to keep supporting the evolution and efficiency of our industry partners by streamlining our systems and our processes. We need to continue to drive fiber uptake so that the costs are shared across a more -- a larger number of consumers and to maintain the sustainability of the fiber network going forward. And because of our market structure, we need to continue to invest in incentives and in customer education to ensure that more diverse and effective retail competition can flourish. So this is going to be a truly big second half for us as we work very closely with the commission, with the industry and with our people to write the next chapter of our fiber journey. The fundamentals of the business remain strong as we continue to grow the fiber footprint and as growing demand for data and for speed continues to push customers to adopt fiber, high-speed broadband. We continue to roll out the UFB2 footprint, and it brings the benefit of this great network to smaller and smaller community around New Zealand, like Fox Glacier on these pictures. And on that note, I'm going to conclude this presentation and turn over to questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question is from the line of Arie Dekker from Jarden. -------------------------------------------------------------------------------- Arie Dekker, Jarden Limited, Research Division - Head of Research [2] -------------------------------------------------------------------------------- Yes. Just a few questions from me. Starting firstly with the net debt, which you've obviously talked to that, the credit metrics sort of ticking up a little and the temporary nature. Can you just confirm in terms of sort of the outlook for the next 12 months, I guess, in particular, that -- on your forecasts that, that's going to track back down to sort of 4.25x or below while maintaining the dividend at its current levels? -------------------------------------------------------------------------------- David Collins, Chorus Limited - CFO [3] -------------------------------------------------------------------------------- So sure, Arie, thanks for the question. The key drivers of the metric being where it is are mostly timing. So we do expect it to track back down again to around about 4.25 or thereabouts at year-end. It's always subject to timing issues. And also, the agencies will look through an exceedance for 1 or even 2 periods as long as the trajectory is going in the right direction, which clearly, for us, when you look forward, it is. So in terms of specifically on full year '22 dividend, whilst we've given no guidance yet, I don't expect that would be impacted by the level of the S&P metric. -------------------------------------------------------------------------------- Arie Dekker, Jarden Limited, Research Division - Head of Research [4] -------------------------------------------------------------------------------- Sure. Great. Then just in terms of the managed migration project, which obviously had been very successful, is my interpretation of that chart correct that you have about a base now of 30,000 installs that are in (inaudible)? And if that is correct, can you just sort of talk to what you've sort of seen? So take first half '19 as an example, where there's sort of a 50% uptake in that period. What have you sort of seen over the 2 years since in terms of those that didn't take it up within the first 6 months of those that didn't uptake there in terms of the lag in profile? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [5] -------------------------------------------------------------------------------- Yes. Arie, thanks very much for that question. It's JB here. We really are very encouraged by what we're seeing with the managed migration program. The incentives that we put in place earlier this year was to really double up on the volume of installations that we were doing, and the risk was that this could have translated into a reduction in how many of those were actually translating into activations within a short period of time. What we've clearly seen is despite almost doubling the number of installations that are waiting with this managed migration program, the ratio of those that convert into a live connection within 6 months has continued to be roughly about 50%. Clearly, beyond that 6 months, some of the consumers are also migrating to fiber. But for us, the real focus is on how quickly we see within the first 6 months some of those managed migration installs translating to a live connection. What you've seen in the last 6 months is 30,000 connections being built. That means that we now have a really strong pipeline of premises that have a non-active ONT that will come to that 6-month time frame and ultimately convert to a live service. So we'll continue that effort on managed migrations because we see it as a really strong way for us to make sure that more consumers have the opportunity to place an order easily. And we actually see it translate directly into growth in connections. -------------------------------------------------------------------------------- Arie Dekker, Jarden Limited, Research Division - Head of Research [6] -------------------------------------------------------------------------------- In terms of that incentive that you've sort of introduced or emphasizing for price-sensitive customers, is that directed at some of these customers that haven't signed up yet in the managed migration program? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [7] -------------------------------------------------------------------------------- No. It's probably more a reflection of the trends that we see in the market. Clearly, with the impact of COVID-19 playing up, there is a segment of the market that is becoming increasingly price-conscious. So we wanted to make sure that we were providing an opportunity for RSPs to create products that could address that potential demand. And it's really encouraging for us to see the likes of the Flip offer being in market because it's really something that can satisfy consumers that have concerns about long-term, high-expensive commitments and give them a really good entry level into fiber experience. -------------------------------------------------------------------------------- Arie Dekker, Jarden Limited, Research Division - Head of Research [8] -------------------------------------------------------------------------------- Yes. And obviously, I'm sort of just focusing on the other side. And clearly, you're making really good progress still with fiber connections. And also, this migration program is working well. But just in terms of also that gap, say, between the 79% broadband penetration you've got in your area versus your overall penetration, what sort of strategies are you thinking about for dealing with closing that gap and those customers that aren't on a broadband connection but where you have fiber passing? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [9] -------------------------------------------------------------------------------- Yes. And listen, clearly, for us, this is the ongoing challenge, is to make sure that while we can celebrate 63% overall take-up rate in our UFB product, the way I look at it is continue to say that's 37% that haven't yet placed an order. We really believe that the managed migration is one way for us to incentivize people to consider the uptake of fiber. We're not in direct conversation with consumers because that's what the RSP roles are doing. We are a wholesale provider. Managed migration is a way for us to incentivize those customers to really accelerate their consideration of fiber. And then again, doubling up on some of the incentives that we have in place so that RSPs that do want to grow their market share in fixed fiber connection can do so is really the things that we are pushing for the next 6 months and beyond that. -------------------------------------------------------------------------------- Arie Dekker, Jarden Limited, Research Division - Head of Research [10] -------------------------------------------------------------------------------- And then final one from me. I mean, I think if I interpreted it correctly there at the end, you were sort of talking about investor feedback not to take on any new investment commitments under this regime. I just came to sort of reconcile that was the bring forward of CapEx that you're doing at the moment and also the fact that you're clearly very active in greenfields investment. I mean, what's core of the approach still to investing in the growth of that asset base over those -- that feedback? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [11] -------------------------------------------------------------------------------- I think I'd echo what David was saying, which is a lot of this is purely more of a bring forward rather than any increase in that spend. UFB2 commitment is one that we have made. It is significantly funded by the CIP funding. And so accelerating it for us brings the benefit of bringing fiber networks and potential connectivities forward, which is something that we think is a good strategy. On the new property development, again, those typically turn into revenue that we can recognize relatively quickly. So we do see this as a CapEx program that is very quickly turning into increased revenues. So on both of those, we continue to see that increased investment compared to our previous guidance as something that is a good story and when that will translate into revenues. David, do you want to... -------------------------------------------------------------------------------- David Collins, Chorus Limited - CFO [12] -------------------------------------------------------------------------------- Sure. Sure, JB. And what I would add, Arie, just in terms of installations, CapEx is the third driver of the higher CapEx. That's actually a form of bring-forward CapEx as well on the assumption that we would have made those connections in the future. So we see it as growing the fiber penetration on our existing footprint, not growth of the footprint itself, which is more what JB was referring to in terms of our future investment expectations. -------------------------------------------------------------------------------- Arie Dekker, Jarden Limited, Research Division - Head of Research [13] -------------------------------------------------------------------------------- But just to be clear, we shouldn't expect to see you guys pulling out of greenfields investment, for example, excluding your current commitments? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [14] -------------------------------------------------------------------------------- No. No. Greenfield continues to be something that turns into real revenue very quickly. So we will continue to support that. -------------------------------------------------------------------------------- David Collins, Chorus Limited - CFO [15] -------------------------------------------------------------------------------- And quantum-wise, Arie, that was $12 million in the half. So it's higher than what we expected, but it's not material in the overall context. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Your next question is from the line of Phil Campbell from UBS. -------------------------------------------------------------------------------- Philip Campbell, UBS Investment Bank, Research Division - Analyst [17] -------------------------------------------------------------------------------- Just a few questions from me. I suppose I was just interested in, obviously, for the first time, we've got the forecast of the fiber revenues. And obviously, I think your expectation is that the fiber MAR will be higher than that based on your estimates of RAB. I suppose the anchor product is still very high at the moment, I think it was 69% or just under 70% of overall connections. And I suppose going back last year, it was kind of around 71%. So like if I was kind of -- even if I said there was a 3% change in mix over the next 3 years, we'd still end up with over 50% of your base on the anchor product, which is obviously capped at CPI. So I suppose just the first question was just kind of trying to figure out how you can kind of close that gap between the fiber revenues and the MAR, even if you were tilting depreciation just because you've got the -- such a high percentage of anchor products. So that was the first question. The second one was just on the UFB2 kind of acceleration. I thought my understanding was that you couldn't do that in the past because there was a lot of servco constraints. But I was just wondering if that obviously must have changed so you are able now to kind of bring forward some of that CapEx. And then the last question was just on the couple of moves in the parent verification report. I just noticed in the report, there was quite a big change between the draft report and the final report. I just wanted to see if, David, you could give us a bit of color on what was the reason for that in terms of some of the allocations. -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [18] -------------------------------------------------------------------------------- Okay. Let me tackle the first two. So on the percentage of customers that will be on the anchor product or even on the entry-level products, the 50 megabits per service per second, the encouraging thing for us is really this continuous growth in data demand. When you look at the numbers, during COVID, it went up very significantly. It then flattened up a little bit for a couple of months, and now it has restarted to grow in the kind of consolidated average growth rate that we had experienced for a number of years. So when you put that into perspective, ultimately, people will have to grow from the 100 megabits per second service to higher speed plans if they want to continue to navigate on that growth path. So that's kind of the underlying fundamental of the business that we get a benefit from now. Now how quickly we go up that demand curve is a bit difficult to forecast. I mentioned earlier that other countries are significantly at higher speed plan. I think I mentioned South Korea, 60% were at speeds of 500 megabits per second and above. How quickly New Zealand goes onto that growth path is the thing that is uncertain, but we believe that the trend is there. And ultimately, the anchor product will play a reducing role in our ARPU going forward. Your second question on the UFB acceleration, it is true that as we get to smaller and smaller UFB footprint to be built, the existing serco resources that we had that were geared to build a bigger footprint can now be refocused on the remaining footprint that we need to build. And that has enabled us to bring it forward. So that indeed has been one of the possibility that has been opened to us as we get to the tail end of the UFB2 build. We have more serco resources that rather than continue to extend for a long time, we've decided to bring forward the build so that they can keep being used and leveraged. I'll pass it on to David for the... -------------------------------------------------------------------------------- David Collins, Chorus Limited - CFO [19] -------------------------------------------------------------------------------- Thanks, JB. And Phil, just to add one more thing on your first question, the slide that we have on forecast regulated fiber revenue, which is Slide 24, that represents our assumption or our Board-approved business plan on both volumes and prices. So those prices reflect an assumption on the anchor product, which we believe is a key protection for consumers. So that has the effect of depressing our forecast revenues but should not depress the MAR itself. The issue of depreciation profiling would become particularly relevant if the MAR was below our forecast revenues. And it would work in the way of bringing forward depreciation in that particular building block so as to lift the MAR back to where our forecast revenues are or where the actual revenues will be. But again, to repeat, we believe our MAR should be above our forecast or actual fiber revenues. In terms of the CutlerMerz report and the independent verifier, so this was part of the process of building out expenditure submission last year. We did have CutlerMerz review our submission in phases over a 12-month period. I would describe the difference between their draft and final report as a reflection of our natural evolution growing into our first regulatory submission. So we improved after the draft report our internal systems. We further developed our thinking on allocations between fiber and copper. And I'd also note on allocations, that journey is not yet done because ultimately, it is the starting RAB view on allocations, which will determine the basis of the expenditure submission allocations. So it's more of a journey or an evolution, Phil, or a maturity level for us as a business, as we built up to lodging our submission in December of last year. -------------------------------------------------------------------------------- Philip Campbell, UBS Investment Bank, Research Division - Analyst [20] -------------------------------------------------------------------------------- Okay. Great. Just sorry, just one quick follow-on. You did talk a little bit about price sensitivity in the business segment. Is there any kind of signs of that in the consumer space as well? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [21] -------------------------------------------------------------------------------- No. At this stage, we really haven't seen it, as evidenced by the fact that we still migrated 62,000 more customers to fiber, that the 1 gigabit speed plan continues to perform well and, to a certain extent, that the 2 gigabit and 4 gigabit plans are also starting to show some good signs of growth. It's primarily in the business segment, and you would expect that given the current economic environment. And again, how quickly the economy recovers will really drive this going forward. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- Your next question is from the line of Brian Han from Morningstar. -------------------------------------------------------------------------------- Brian Han, Morningstar Inc., Research Division - Senior Equity Analyst [23] -------------------------------------------------------------------------------- JB, when it comes to competition from fixed wireless on your business, is it mostly having an impact on your (inaudible) and 150 megabits per second segment? Or is it starting to have a (inaudible) within your 100 megabits market? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [24] -------------------------------------------------------------------------------- Thanks, Brian, for the question. What we really see is fixed wireless as a substitution is really something that potentially is affecting people that are currently on lower speed copper services. The churn once people are on fiber is very, very low. Once you have experienced fiber, you stay with it because of the quality, reliability and speed performance that you're getting. So what we're seeing is that fixed wireless and, in particular, the inertia campaigns are targeted towards consumers that are currently on ADSL or slow-performing VDSL because they're very far from the exchange or the cabinet. We do not see it yet being something that's directly directed towards our high-performing services. When you look at the comparative performance monitoring that the Commerce Commission is publishing on a regular basis now, you can see why that is the case. The average speeds that you get on a fixed wireless services does not compete with 100 megabits per service -- 100 megabits per second service. So that's where we see most of it being directed to. -------------------------------------------------------------------------------- Brian Han, Morningstar Inc., Research Division - Senior Equity Analyst [25] -------------------------------------------------------------------------------- Okay. And while you're there, medium term, in the 13-odd percent of the population where there won't be fiber, can you talk about how much these economies of scale Chorus may suffer in those areas being subject to the old legacy copper regime? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [26] -------------------------------------------------------------------------------- Yes. And listen, rest of New Zealand, as we call this particular area, is one where we will need to be very focused in terms of cost efficiency. I mentioned already that we are rationalizing a number of our sites. So as you see some trends in those market, we'll continue to shape our network as much as we can to limit the cost and the impact on these. One of the questions that we're starting to being asked is, how do we view things like low Earth orbit satellite solutions? In some ways, we think that this might actually be a very complementary offering to service some of the more rural and remote areas of New Zealand rather than continue to try to do that with what will become costly copper services. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Your next question is from the line of Ian Martin from New Street Research. -------------------------------------------------------------------------------- Ian John Martin, New Street Research LLP - Senior Telecommunications Analyst [28] -------------------------------------------------------------------------------- I just have a few questions around the idea you floated that there should be no new investment under the current regulatory regime. And I just wonder, is that -- how substantial you've made that decision. Is that something now that's in your business planning (inaudible) question? Is it -- does it affect the revenue you projected in that initial regulatory period, for instance? And then thirdly, at the full year results, you talked about smart locations and potential -- as a potential area of new revenue growth. Presumably, there's not much, if anything, in that initial regulatory period from smart locations. And I just wonder, given the potential implications, about whether there's an opportunity to come to a new arrangement with government where you know what your potential outcomes are before you make that commitment rather than leave it in the hands of the regulatory gods. -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [29] -------------------------------------------------------------------------------- Okay. So let me handle the first part of the question regarding the commitments to further network expansion or capital expenditure. Let me be clear: What we're saying is that growing the fiber footprint in terms of UFB3, UFB4, so growing further fiber rollout outside of our current regions is what we're saying we're not going to be doing given the current setup that we're seeing. We're continuing to invest in capacity in the network. We're continuing to invest in new property development. So to the extent that we can, we will continue to roll out fiber. But it's the idea of potentially targeting completely new virgin areas and investing further capital to do that, that we're saying we are not going to be able to do in the foreseeable future. To your second question, which was around -- sorry, what was the second question? -------------------------------------------------------------------------------- David Collins, Chorus Limited - CFO [30] -------------------------------------------------------------------------------- Sure. So Ian, in terms of would that position impact the forecast fiber revenues that we've shown on Slide 24, no, we haven't, in our existing Board-approved business plans, included significant footprint expansion or expansion in growth other than the usual level of greenfields expenditure, the completion of the communal build and our installation CapEx program. So there would not be a significant impact on those revenue forecasts. -------------------------------------------------------------------------------- Ian John Martin, New Street Research LLP - Senior Telecommunications Analyst [31] -------------------------------------------------------------------------------- And then thirdly was on the question of whether there's an opportunity to go back to the government and negotiate a clearer understanding about risk and so on before you make any subsequent investments. Is that something -- is there a possibility, for instance, for smart locations or UFB3 or 4? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [32] -------------------------------------------------------------------------------- Yes. I'll disconnect UFB3 or 4 from smart locations because smart locations is basically an extension within our existing footprint of new locations to be connected. And so far, the programs that we've supported, recently, we did one with the Auckland transport in the Auckland area, have been profitable investments. So we could justify building that additional network given the revenue that we were getting as extension of the existing fiber network. -------------------------------------------------------------------------------- Ian John Martin, New Street Research LLP - Senior Telecommunications Analyst [33] -------------------------------------------------------------------------------- But are they covered in the MAR, those smart locations, as the Commerce Commission made a decision on whether they're included in the MAR at this point? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [34] -------------------------------------------------------------------------------- Yes. We believe that they will be. -------------------------------------------------------------------------------- David Collins, Chorus Limited - CFO [35] -------------------------------------------------------------------------------- We would expect yes. -------------------------------------------------------------------------------- Ian John Martin, New Street Research LLP - Senior Telecommunications Analyst [36] -------------------------------------------------------------------------------- Okay. And so the opportunity to go back to government for any footprint expansion and just know where you stand in terms of being able to risk incentive rather than expose (inaudible)? -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [37] -------------------------------------------------------------------------------- Yes. Anything beyond the UFB2 footprint would have to be negotiated with the government, would need an increased investment from government because as we get into more and more remote location, it gets harder and harder to justify the investment. So we clearly remain open to conversation, but it's not something that is part of the current regulatory submissions. It would be something that would be outside of that. -------------------------------------------------------------------------------- David Collins, Chorus Limited - CFO [38] -------------------------------------------------------------------------------- And Ian, an example of that is the West Coast fiber build, which is mostly government-funded. And whilst not technically a footprint expansion, it is an example of a government-supported project. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- (Operator Instructions) Further questions at this time. Gentlemen, please continue. Thank you. -------------------------------------------------------------------------------- Jean-Baptiste B. Rousselot, Chorus Limited - CEO [40] -------------------------------------------------------------------------------- Okay. Well, thank you again for joining us today for this half yearly update. As we said at the beginning, this is a complex period that we're navigating. And the industry as a whole is trying to really understand the overall impact that COVID-19 will have on the industry. But the fundamentals of the business remain very strong. We're still building more fiber footprint. And the demand in speed and data continues to fuel more and more customers wanting to migrate to a stable, high-speed fiber product. The fact that we've added 62,000 of those in the half year is really encouraging. The fact that 1 gigabit continues to grow is very encouraging, and we look forward to updating you again at the quarter on connections update and at the full year. Thanks again for your interest and for attending this webcast today.