Chorus shares plummet on news

Chorus shares plunged in value yesterday following the release of a draft decision on pricing by the Commerce Commission.

They closed last night at at $2.91, down 49c or 14.4%. A total of 9.4 million shares were traded throughout the day when a "typical day" for Chorus was between 500,000 and 1.5 million shares traded.

Craigs Investment Partners broker Chris Timms said sales were right across the board as 3% of the company changed hands. The market would look for clarity later this week after reports that Prime Minister John Key might be prepared to legislate if the commission's reports were unchanged.

The commission released a final determination on unbundled copper local loop (UCLL) and a draft regime for unbundled bitstream access (UBA), conceding ground on the regime for copper (UCLL) while signalling a sharp cut to UBA pricing.

But the decision appeared to please nobody.

Chorus said it was reviewing the potential impact of the announcement.

Among concerns was the potential for much lower copper network pricing to deter investment and uptake of ultra-fast broadband, using the government-subsidised fibre network being laid throughout the country, the company said.

The regulator set the new UCLL rates at a geographically averaged price of $23.52 per month per line from December 1, 2014, a 3.9% reduction to the prices set in 2007. Urban UCLL prices are $19.08 and rural is $35.20, effective immediately.

UBA prices will be provisionally set at $32.45 per month, effective from December 1, 2014, from the existing $44.98.

Kordia New Zealand chief executive Scott Bartlett said the UCLL decision held the interests of Chorus ahead of New Zealand internet users.

Holding the price of copper artificially high would damage investment in technologies and new services which would mean broadband speeds languished.

"We hope the draft decision on UBA, for implementation in December 2014, remains because it is in the best interest of the uptake of broadband ...

"We think the benefits of fibre are strong enough to foster migration over the next nine years as the network rolls out," he said.

Chorus was spun-out from Telecom as a separately-listed company last year to free up the telecommunications company from its regulatory burden and allow the network operator to successfully win a $1 billion dollar subsidy to build a national fibre network and rural broadband system.

The network company's revenue is 80% derived from the ageing copper network, which is subject to the Commerce Commission's pricing review.

 


EXPLANATION

UCLL: This service lets telecommunication companies use the copper network between an exchange and an end-user's premises to offer their own voice and broadband services.

UBA: Gives access to Chorus' electronics, software and transport over the network, meaning telcos do not have to build their own.


 

 

 

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