Fallout from Chorus may spread wide

The fiasco over access to Chorus' copper wire network may deter overseas investors from spending their money on NZX-listed companies they see as at risk of regulation, Craigs Investment Partners broker Chris Timms says.

New Zealand-listed power companies, such as Meridian, Mighty River Power and TrustPower, infrastructure company Vector and Sky Network Television were all at risk of, or had faced threats of regulation, he said.

''If this sort of thing becomes standard, overseas investors will look at our sharemarket and say it's too difficult to invest and give it a wide berth.

''If they cannot get certainty, they will go away. Now, they have to look at a company, how it makes money, whether it reports a profit and pays dividends. The uncertainty around the regulatory regime will cause concerns about the companies being able to carry on their business in a normal way,'' Mr Timms said.

The banking sector was also a target of Opposition parties after the recent year-end reporting of the four major banks operated in New Zealand by Australian owners. A change of government next year could have a major impact on the New Zealand sharemarket, he said.

''This is wider than just one company called Chorus.''

Chorus shares fell further yesterday, last trading at $2.10, down 53c from before the commission announcement. The commission announced earlier this week it was halving the cost for access to Chorus' copper wire network. Chorus estimated the loss of revenue would wipe about $142 million from its 2015 profit and cost it about $1 billion of funding over the next few years.

More than $210 million has been wiped off the company's value since the announcement.

Communications and Information Technology Minister Amy Adams yesterday wrote to Chorus chief executive Mark Ratcliffe asking him to advise her by Monday, November 18, on the next steps the company intended to take. Ms Adams noted Mr Ratcliffe said he intended to discuss with the Crown whether Chorus was still a credible ultra-fast broadband (UFB) partner in the way intended at the demerger from Telecom.

He was also considering how Chorus might deliver the balance of the UFB programme, despite the ''very material'' funding gap in Chorus' business implied by the commission's decision.

''The Government has committed to an investment of $929 million in Chorus as a UFB partner and is committed to rolling out the UFB programme given the significant benefits it offers to New Zealanders,'' Ms Adams said.

In order to be sure there was a robust understanding of the implication on Chorus' delivery of its share of the UFB programme, the minister had directed the Ministry of Business, Innovation and Employment to work with Crown Fibre Holdings to commission independent advice on Chorus' financial position and capability to deliver on its contractual obligations to the Government.

Ms Adams promised to make the report available publicly, with any commercially sensitive material redacted.

Mr Timms said there was no good news for either Chorus or shareholders in the announcement by Ms Adams.

'' There is no encouragement for people to stay with the stock.''

 

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