Chorus profits double to NZ$66m despite loss of broadband customers

New Zealand fixed-line telecommunications provider Chorus has announced its first-half financial results for FY17, reporting earnings before interest, tax, depreciation, and amortisation (EBITDA) of NZ$335 million, up 21.8 percent from the NZ$275 million announced a year earlier.

Net profit doubled from NZ$33 million to NZ$66 million on revenue of NZ$529 million, up 10.4 percent year on year.

Chorus said its results a year ago were lower due to the impact of the New Zealand Commerce Commission's final pricing determination for broadband services being delivered over Chorus' legacy copper network in December 2015, which was NZ$50 million lower than that applied when Chorus separated from Telecom New Zealand in 2011.

Chorus' fixed-line connections shrank by 49,000 over the six months to December 31, down to 1.68 million in total: 1.1 million baseband copper connections; 244,000 fibre connections; 207,000 naked copper unbundled bitstream access (UBA) and VDSL services; 98,000 unbundled copper local loop (UCLL) services; 10,000 baseband IP services; 9,000 data services over copper; and 1,000 sub-loop UCLL (SLU) and sub-loop extension services (SLES).

Broadband connections were also down by 12,000 for a total of 1.21 million: 784,000 copper UBA customers; 231,000 fibre; and 199,000 VDSL.

Chorus attributed its loss in fixed-line customers to the increasing market share of local fibre companies and wireless broadband uptake, as well as university students disconnecting their broadband services during the summer break.

Chorus' rollout of the New Zealand government's ultra-fast broadband (UFB) fibre network was 61 percent complete as of December 31, with 505,000 premises passed and 681,000 customers able to connect. The UFB has seen 32 percent uptake, with 216,000 premises actually connected. Of all mass market fibre plans, 62 percent are now 100Mbps or faster.

Rolling out fibre now has a cost per premises passed of NZ$1,623 and a cost per premises connected of NZ$1,141, Chorus said, with the latter higher than previously forecast.

"Between July and December, we built 67,000 new fibre connections nationwide, up from 55,000 in the six months prior, and the average time customers wait for a fibre connection reduced from 17 days to 10 days," said Chorus CEO Mark Ratcliffe, who was on Monday replaced by former Telstra COO Kate McKenzie.

Chorus last month announced a deal with government-owned company Crown Fibre Holdings (CFH) to extend the UFB to 169 new areas and 203,000 premises across the country. Under the UFB2 rollout, Chorus said on Monday that it intends to pass 5,000 premises in FY18; 26,000 in FY19; 33,000 in FY20; 29,000 in FY21; 23,000 in FY22; 25,000 in FY23; 21,000 in FY24; and 6,000 in FY25.

The second stage of the UFB construction will begin in July this year, and is expected to be completed at a cost of between NZ$370 million and NZ$410 million for the communal network, plus an additional cost of NZ$1,500 to NZ$1,700 for connecting each individual premises.

UFB2 will connect regions throughout Ashburton, Auckland, Blenheim, Christchurch, Dunedin, Gisborne, Greymouth, Hamilton, Invercargill, Levin, Masterton, Napier, Nelson, New Plymouth, Oamaru, Palmerston North, Paraparaumu, Queenstown, Rotorua, Taupo, Tauranga, Timaru, Wellington, Whakatane, and Whangarei.

"With one in three broadband customers now having moved to fibre or a high-speed service like VDSL, we believe it's time for us to do more to raise New Zealanders' awareness of the better broadband choices that exist today," Ratcliffe added.

"It's our intention to bolster the support we offer retailers in migrating customers to our fibre network where it's available, or to VDSL as a fibre-ready transition step in other areas. We're also looking at accelerating our fibre rollout plans in some suburbs."

As part of this, Chorus partnered with Spark in December on a week-long trial of Spark's "street in a week" fibre installation program in Whakatane, where 400 premises were offered a fibre upgrade from their legacy copper service.

Customers on Chorus' UFB footprint have been offered 1Gbps speed broadband as of October.

Chorus reported a full-year FY16 EBITDA of NZ$594 million on revenue of NZ$1.008 billion and net profit of NZ$91 million.