Between $9 million and $10 million could be wiped off the
operating earnings of telecommunications network operator
Chorus following a decision yesterday by the Commerce
Craigs Investment Partners broker Chris Timms said the latest
decision by the commission was another example of bureaucracy
eroding the wealth of shareholders.
''This causes uncertainty and we know sharemarkets don't like
that. If there is any potential for legislation interfering
with a company, you can expect volatility.
''Having an outside agency changing the law makes it
difficult for investors to make informed decisions. It
becomes a bit of a lottery,'' he said.
The Wellington-based company expects earnings before
interest, tax, depreciation and amortisation (ebitda) will be
$9 million to $10 million lower in the 12 months ending June
30, as a result of the regulator's decision to align the
price for Chorus' unbundled copper low frequency services
(UCLFS) with the benchmarked unbundled copper local loop
(UCLL), backdated to December 3, 2012. The backdating means
Chorus will have to repay its overcharged customers with
After 2014, the company expects ebitda to be about $6 million
lower in the subsequent years, in line with its December
guidance on the potential regulation.
Chorus said it now expected 2014 ebitda to be between
unchanged and 9% lower than last year's $654 million.
UCLFS lets telecommunications companies provide voice
services using the low frequency band on the copper local
loop network. UCLL lets telecommunications companies use the
copper network between an exchange and an end-customer's
premises to offer their own voice and broadband services.
The Telecommunications Act requires the UCLFS price to be the
same as the UCLL price.
The commission set the UCLFS charges in November 2011, the
month Chorus was officially carved out of Telecom, saying at
the time it would update the connection and transfer charges
for the service once the UCLL pricing review was complete.
In the UCLL determination in 2012, the regulator affirmed its
view a single price for the services was appropriate.
The UCLFS component of the copper lines is a small part of
Chorus's ongoing dispute with the regulator as to what it can
charge for its services.
Chorus has warned the regulation of its unbundled bitstream
access services, which lets internet retailers use Chorus
components on the copper lines without having to replicate
them, could cut ebitda by up to $142 million.