Chorus posts profit amid fibre network, VDSL rollout

New Zealand wholesale network operator Chorus has posted a NZ$171 million profit, despite the big capital outlay for rolling out the country's Ultra-Fast Broadband fibre network and the migration to new IT systems.
Written by Josh Taylor, Contributor

New Zealand's wholesale fixed-line network operator Chorus has posted a full-year net profit of NZ$171 million as the company advances the rollout of its fibre network as part of the country's Ultra-Fast Broadband (UFB) project, and transitions to new IT systems.

Chorus, which split from Telecom New Zealand at the end of 2011, operates the legacy copper line network in New Zealand and is one of several construction contractors building the new government-subsidised UFB fibre network.

The company today reported NZ$171 million in net profit, up 67.7 percent on the first seven months of operation in the 2011-12 financial year.

The net profit was offset by a shift over to a new IT system separate from the legacy IT system that is still shared with Telecom New Zealand. This amounted to NZ$52 million for the year, in costs paid to third-party vendors as the migration over to new systems began.

Profit was also offset by the high cost of construction of the UFB network, which amounted to NZ$579 million for the 12 months to June 30.

The UFB rollout was at 18 percent completion as of June 30, with Chorus ahead of schedule in passing 153,000 premises, 4,000 more than had been planned. As of the end of June, a total of 205,500 New Zealand premises can connect to Chorus' portion of the UFB network. It now passes around 300,000 premises in total.

The cost per premises to pass by fibre currently stands at NZ$2,935. Chorus noted that this was higher than the NZ$900 to NZ$1,100 per premises cost it had estimated, but said that the current cost reflects that the project is still in its start-up phase, and that the rollout has yet to reach high volume that would lead to efficiencies.

The take-up of fibre services on Chorus' UFB network is still very low, at 6,300 on the UFB network compared to 19,000 in total with fibre services through Chorus.

Chorus still has 1.5 million active services on the copper network, down by 64,000 for the year. In June, Chorus also began offering a VDSL product, after a soft 18-month trial. Chorus said that the VDSL product — which would be similar to the product NBN Co would sell if the Coalition wins the September federal election — is an important transition product for customers waiting for fibre.

"The new VDSL product is expected to provide more New Zealanders with the opportunity to enjoy higher-speed connections, and also make New Zealand a more attractive market for the development and deployment of high-bandwidth applications," Chorus said.

"Faster copper-based technology forms an important stepping stone to fibre. Like any technology upgrade, the move to fibre will be a long-term transition, and VDSL has an important roll to play in the interim."

The total number of VDSL connections at the end of June stood at 4,000, with the company stating that download speeds were between 20Mbps and 50Mbps, while upload speeds were up to 20Mbps, but have currently been capped at 10Mbps in commercial products.

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