Chorus fibre rollout hit with 'extreme costs'

Chorus has said that the expense of its fibre rollout in New Zealand has blown out, pushing the total cost of the project up by NZ$300 million.

Chorus has blamed the "extreme cost" of rolling out fibre to the last 10 percent of areas covered by the Ultra-Fast Broadband (UFB) project for increasing the amount of capital expenditure from between NZ$1.4 billion and NZ$1.6 billion up to between NZ$1.7 billion and NZ$1.9 billion.

The company's CEO Mark Ratcliffe said civil work for the fibre-to-the-premises (FttP) project caused costs to rise in the half.

"While we have made progress and reduced deployment costs for about 90 percent of our Ultra-Fast Broadband build areas, we did not anticipate the extreme costs in the remaining 10 percent of areas," he said in a statement."This is specifically because of the significant variability in regional compliance requirements and civil work that is driving up the cost per premises passed."

As a result, Chorus would need to spend up to NZ$1.9 billion in the 2013 financial year on the network build. The cost per premises passed also grew from between NZ$2,500 and NZ$2,700 up to between NZ$2,900 and NZ$3,200.

The telecommunications infrastructure company yesterday announced a half-year net profit of NZ$84 million, with the addition of 10,000 new fixed-line connections to 1.8 million in total, and an additional 36,000 new broadband connections for a total 1.07 million connections. The company reported 5,000 new fibre connections, up to 15,000.

Ratcliffe flagged to investors that Chorus intends to overhaul its IT in the near future, with the company looking to move away from the legacy Telecom New Zealand systems and support that were in place prior to the split of the wholesale company from its retail arm at the end of 2011. Chorus plans to have separate systems for fibre and copper product offerings.

Capital expenditure and operating expenditure over the next four years, to accommodate the transition of IT systems, will cost between NZ$50 million and NZ$100 million, Chorus told investors.