Chorus enjoys calm before regulatory storm

Summary:New Zealand network operator posts a flat result, but a regulated reduction in the prices it can charge for copper broadband services looms in December.

New Zealand network operator Chorus has reported total sales of NZ$1.05 billion for the year ended 30 June, a shade ahead of its 2013 result. However, net profit of NZ$148 million was down from NZ$171 million.

However, Chorus also reported both the Ultra-fast Broadband (UFB) and Rural Broadband network rollouts are ahead of shedule and a tight focus on the costs of those project appears to be delivering results.

31% of Chorus’ UFB rollout is now complete and the average cost per premises passed was NZ$2,948, at the bottom end of guidance of $2,900 to $3,200. The standard cost to connect premises averaged $1,680 during the period. 

Chorus said it remains focused on reducing these costs.

425,000 end users were now within reach of improved broadband services. As a result, Chorus said, New Zealand was now 15th in the world for broadband penetration, ahead of the USA and Japan,

The company reiterated its concerns that a reduction in regulated prices from 1 December will cause a "significant funding  gap". No final dividend will be paid.

“Chorus has delivered a solid financial performance during the year, but this success has been overshadowed by the need to reshape Chorus operationally and financially to address the challenges posed by the ongoing uncertainty with the regulatory framework and revised copper pricing,” Mark Ratcliffe, Chorus CEO, said. 

He said a top to bottom review was completed in February and Chorus is now five months into programme to help put the company back on a sustainable path.

“We have worked closely with Crown Fibre Holdings to negotiate amendments to our contract to roll out fibre that give Chorus additional flexibility, as well as a funding backstop," Ratcliffe said.

“We have presented our banks with a credible plan and they have supported us with some important changes to our funding arrangements. We have also stopped the payment of a dividend until a dividend policy is financially sustainable and there is sufficient certainty around Chorus’ outlook."

Total broadband connections increased by 51,000 to 1.16 million during the year. Vitally, fibre broadband connections more than doubled to 42,000. Total lines fell by 3,000 to 1.78 million.

Topics: Telcos, New Zealand

About

Rob O'Neill is a writer for CBS Interactive based in Auckland, New Zealand covering business and enterprise technology for ZDNet. He has previously worked for IDG, The Sydney Morning Herald and Melbourne's The Age as well as various business titles, most recently editing the Business Sunday section of New Zealand's weekly national news... Full Bio

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