No extra funding for Chorus in UFB deal with Crown Fibre

Tuesday 11th March 2014

Chorus won't get any additional government funding from Crown Fibre Holdings as part of a deal to help the telecommunications network operator manage cash flow and provide more certainty for the ultrafast broadband roll-out.

The Wellington-based company has been given greater flexibility in building the network provided it meets the agreed deadline to complete the national fibre network, and Crown Fibre Holdings will more closely align its existing funding with completed work provided it meets certain conditions, Chorus said in a statement.

The deal will give Chorus more scope in deploying UFB to areas where it already has existing fibre to meet property user targets by the end of next year, will let it make use of existing cabling to deliver UFB services to multi-dwelling units, and charge property developers for the reticulation of lines in greenfield UFB areas.

"While Chorus is firmly focused on managing its costs, both parties have worked on the basis that we need to find innovative ways to deliver better outcomes, and that would require a degree of give and take," chief financial officer Andrew Carroll said. "This flexibility will enable Chorus to better manage its cash flow through the peak of the balance of the capital intensive period of the build, as well as addressing some of the $1 billion funding gap."

Last month Chorus announced plans to scale back re-investment in its ageing copper network, which faces regulated price cuts, while introducing new unregulated revenue streams and cutting costs including probable job cuts. It also suspended payment of an interim dividend.

Last year the Commerce Commission proposed cutting the network operator's pricing on its copper line services, which Chorus says has left a $1 billion hole in funding the roll out of the government-sponsored ultrafast broadband network.

Other changes to the agreement will see Chorus increase its non-standard installation fund by $8 million, while cutting its annual fibre marketing spend in half to $2.5 million.

The new agreement with Crown Fibre Holdings takes effect from tomorrow.

Chorus shares rose 0.5 percent to $1.56 yesterday, and have gained 8.3 percent this year after being punished by investors last year over the regulatory risk.

This is the telco that has the government contract for Ultra fast broadband.

The share price has been smashed since it was separated from Telecom.

Click here to see what IRG Research has to say about the stock.

BusinessDesk.co.nz

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