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