Article – BusinessDesk
Feb 8 (BusinessDesk) – Shares in telecommunications network operator Chorus jumped 12 percent after Communications Minister Amy Adams shunted out threatened price controls until the end of 2015 in a reprieve for the taxpayer-subsidised investors in the …
Chorus shares jump 12% after Adams delays price controls until 2015
By Paul McBeth
Feb 8 (BusinessDesk) – Shares in telecommunications network operator Chorus jumped 12 percent after Communications Minister Amy Adams shunted out threatened price controls until the end of 2015 in a reprieve for the taxpayer-subsidised investors in the national fibre network.
The stock climbed to $3.20 in early trading on the NZX on turnover of $3.2 million from $2.86, recovering much of their decline in December when Telecommunications Commissioner Stephen Gale surprised the Beehive by flagging plans to cut the monthly regulated price of unbundled bitstream access services on Chorus’ copper lines to $32.45 from $44.98 at present.
Adams’ decision to embark on a review of law governing the sector means the Commerce Commission won’t be able to implement cost-based prices on UBA until Nov. 30, 2015.
“Clearly there were going to be issues around the relative pricing of copper versus fibre given the draft findings,” said Matthew Goodson, portfolio manager at BT Funds Management. “This allows a proper overall look at pricing. Chorus is highly leveraged to whatever is the outcome as it funds what is a massive capex project. It is a very sensible decision to bring this review forward.”
The new reviews will focus on long-term interests of consumers, while taking into account market structure, technology developments, competition and network investment, Adam said. Any legislative changes will be ushered through by the end of this year.
Chorus slammed the regulator’s draft decision, saying in a submission this week that it highlighted an “incoherent policy environment” and had the potential to shave its annual earnings by 40 percent.
“From an investor’s perspective it’s a good outcome,” said Shane Solly, portfolio manager at Mint Asset Management. “It’s appropriate to take some time to review policy implementation, to slow down and take a holistic approach.”
While the delay is good news for investors, it means consumers won’t receive cheaper services on the ageing copper network, which some feared would undermine the fibre network build.
The announcement comes after submissions on the regulator’s draft report showed a divide between those investing in the network, including Chorus, and those purchasing services from the company and group’s representing end-consumers.
Telecom, Chorus’ biggest customer, said in a submission it had seen no evidence that lower UBA prices would threaten fibre uptake. The phone company’s shares rose 0.2 percent to $2.31 today.
Wholesale prices for access to the copper lines were averaged as a result of legislation enabling Telecom to carve out its Chorus unit last year, something that annoyed rival telecommunications companies who said it would lift their costs.
At the time of the enabling legislation, Ministry of Economic Development officials downplayed concerns about the impact on copper-line prices, saying it wasn’t “deemed significant” and that any increase in unbundled copper local loop pricing may “have the positive impact of encouraging more investment and innovation on fibre.”