Chorus shares jump, but still wary on copper pricing split

Wednesday 7th August 2013

Shares of telecommunications infrastructure owner Chorus bounced 5.9 percent when trading opened on the NZX this morning after Communications Minister Amy Adams announced a new way forward on the vexed issue of regulated pricing for copper network services.

By mid-morning, Chorus shares were at $3.07, above their listing price of $2.94 in November 2011 for the first time since March.

Chorus is welcoming the discussion document released today proposing a new way to approach regulated pricing for access to broadband services running on either old copper or new fibre-optic networks.

But it's reserving judgement on the exact impact on its earnings and capital expenditure plans until it's clearer how the proposed regime would split reduced copper pricing costs between the two elements involved: unbundled copper local loop and unbundled bitstream access.

If the larger cut were in the UCLL pricing, "that would still create some challenges for Chorus," the company's spokesman, Ian Bonnar, told BusinessDesk.

"On the face of it, it (the discussion document) is a good first step, but there's still some stuff under the hood."

Telecom Corp's chief executive Simon Moutter welcomed the discussion document for the clarity it should bring to the pricing of fundamental elements of existing and any future new product offerings.

"Telecommunications service providers like Telecom just need pricing certainty so we have a clear understanding of the costs involved, across various technologies, for providing services to our customers," said Moutter. "Pricing certainty will allow us to get on with what's most important - competing in the marketplace through innovation, product differentiation and quality service."

"In particular, Telecom notes that the first phase of the review, which will look at the current regulatory framework for fixed access services in the transition from copper to fibre networks, seeks to get clarity on copper pricing by no later than 30 November 2015 and possibly by 30 November 2014. Legislative changes to put the new framework into effect are due to be made by the end of 2013."

Shares in Telecom, which is a customer of Chorus, fell 1.1 percent to $2.285.

Chorus chief executive Mark Ratcliffe drew attention to Communications Minister Amy Adams's identification of the need for policies that deal with a "period when large investments are being made in a once-in-a many-generation upgrade of our telecommunications infrastructure that will deliver significant benefits for New Zealanders well into the future".

"Chorus believes this goes to the heart of the challenges the review tackles," said Ratcliffe in a statement.

Adams said the monthly regulated price for access wholesale fibre would sit in a range between $37.50 and $42.50, assuming proposals in a discussion document released today are adopted.

That range is slightly below the $42.50 monthly charge nominated by Ratcliffe in earlier statements.

Adams pitched the government's new proposals as seeking to ensure consumers "have access to high quality, competitively-priced services, based on world-leading technologies," she said.

BusinessDesk.co.nz

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