Chorus Ltd.

The stable outlook reflects our expectation that Chorus' strong network position, increasing free operating cash generation, enhanced financial flexibility, and disciplined approach to capital management will offset risks associated with the group's remaining FTTH capital-expenditure program and risks associated with wireless substitution, line loss to other local fiber companies, and migration from its legacy copper network. We will monitor the extent to which Chorus is forced to respond to wireless substitution risk in the context of its new regulatory framework. We may adjust the company's debt capacity at the 'BBB' rating level, either upward or downward, to reflect the prevailing competitive landscape. Downward rating pressure could occur if debt to EBITDA exceeds 4.25x or a material decline in the group's

...We expect Chorus Ltd.'s financial flexibility to improve. Chorus' credit profile remains underpinned by its leading position in New Zealand's fixed-line network. We anticipate Chorus will materially improve its free operating cash generation from the year ending June 30, 2022, when New Zealand's fiber broadband network build concludes and capital expenditures fall, improving Chorus' financial flexibility. In our view, the execution of, and cost escalation risks associated with the UFB (ultra-fast broadband) fiber-to-the-home (FTTH) network rollout have materially reduced, given that 90% of the UFB rollout is now complete. We expect Chorus to maintain a disciplined approach to shareholder returns and financial policy decisions. Chorus remains committed to supporting credit quality at the current rating level. We expect the debt-to-EBITDA ratio to not exceed 4.25x over the next two years. From fiscal 2022, Chorus will transition to a dividend policy based on a payout range of free cash flow....

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