Chorus slows customer loss as annual profit falls 24%

Monday 27th August 2018

Chorus profit fell 24 percent as the telecommunications network operator slowed the number of customers switching to different providers or technologies in an increasingly competitive market.

Net profit dropped to $85 million in the year ended June 30 from $113 million a year earlier, the Wellington-based company said in a statement. Still, that was a smaller decline than in the first half, and earnings before interest, tax, depreciation and amortisation of $653 million were at the top end of the company's guidance, pipping forecasts from First NZ Capital and Forsyth Barr analysts. Revenue slipped 4.8 percent to $990 million.

"Investing to promote better broadband that's already available to many New Zealanders - our role as an active wholesaler - has succeeded in slowing the pace of connection decline," chief executive Kate McKenzie said. "Continuing competition from wireless and other fibre networks saw our total fixed line connections reduce, but the pace reduced considerably with 76,000 connections lost compared to 125,000 last year."

Chorus increased marketing efforts in response to Spark New Zealand pushing its own hybrid wireless technology as an alternative to the network operator's copper lines. At the same time, the state-sponsored ultrafast broadband network roll-out has continued at pace and customers outside Chorus's catchments have switched services to their local fibre companies to access the newer technology.

That fightback was successful with Spark converting fewer customers to wireless than expected in the six months through June. Chorus's June quarter connection numbers were ahead of analysts' expectations. Chorus's fixed line connections shrank 5 percent to 1.53 million, while broadband connections edged up by 1,000 to 1.19 million.

The network operator expects a small decline in earnings for the 2019 financial year in what's seen as the peak year for the fibre roll-out. It forecasts ebitda of $625 million to $645 million, before returning to modest ebitda growth the following year. That forecast includes $10 million-to-$15 million of spending on innovation, regulatory processes, branding, and other one-off transformation costs, it said.

"Our return to broadband connection growth in FY18, together with strong forecasts for urban housing development and underlying broadband trends, such as fibre uptake and the demand for streamed video content, give us added confidence in our strategy," McKenzie said.

The network operator's capital expenditure was $810 million in the year ended June 30, of which $620 million was on the fibre roll-out. Chorus anticipates capex of $820 million to $860 million in the coming year, with fibre accounting for $660 million to $690 million of that spending.

The board declared a final dividend of 13 cents per share, to be paid on Oct. 9 to shareholders registered on Sept. 25. That takes the annual return to 22 cents, and Chorus expects to pay dividends of 23 cents per share in the coming year.

The shares last traded at $4.41 and have risen 5 percent so far this year.

(BusinessDesk)

Comments from our readers

No comments yet