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Chorus reports lower profit, asks for regulatory certainty

New Zealand network operator Chorus urged politicians to set the rules that will apply after 2020 as it reported its half-year results.
Written by Rob O'Neill, Contributor

Network operator Chorus has reported a net profit after tax of NZ$64 million for the half year ended December 31, down from NZ$78 million the year before.

Revenue was NZ$527 million, down from NZ$535 million.

The company, which is contracted to build the bulk of New Zealand's government-backed Ultra-Fast Broadband (UFB) network, reported a 55 percent increase in fibre connections during the period to a total of 65,000.

Chorus also told investors that its part of the UFB rollout is now 38 percent complete, somewhat behind the national average of 43 percent announced by Communications Minister Amy Adams in February.

Chorus continued to badger politicians to deliver regulatory certainty for the telecommunications market.

"The current uncertainty for long-term investment makes early clarity of the post-2020 regulatory framework crucial," it told the market.

A November 2014 briefing to the incoming minister for communications said legislation would need to be in place during the current parliament if it is to take effect in 2020.

"Chorus looks forward to a framework that brings together price, quality, and investment conversations if consumer demands for better services are to be realised," Chorus chief executive Mark Ratcliffe said,

"Ongoing investment in open access networks is critical to fostering more of the innovation and competition we're beginning to see in New Zealand."

Regulator the Commerce Commission has been reviewing the price Chorus can charge for the legacy wholesale copper broadband services that still deliver the bulk of the company's revenue.

Initially, the commission flagged deep cuts to those prices, forcing Chorus to negotiate changes in the UFB rollout with the government and to suspend dividends to shareholders until final pricing was determined.

More recent reviews have delivered forecast pricing more favourable to the company, but the process is ongoing.

Chorus said it had lodged its submission on the commission's draft final pricing consultation, including a new report by Analysys Mason.

Chorus said its own submission and models developed by French consultancy TERA for the commission were "broadly aligned". Both supported a significant rebalancing of the wholesale price.

However, Analysys Mason's review identified what Chorus called "omissions and oversights".

"If these alone alone were corrected, Chorus would expect the Total Service Long Run Incremental Cost price to be at or above 2011 levels," the company said. "This is a view that Chorus has consistently communicated over the last two years."

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