WELLINGTON Dec 5 New Zealand telecommunications
network operator Chorus Ltd faces a significant
earnings hit from proposed price controls, which might threaten
its ability to build a government sponsored national ultrafast
broadband network, a government minister said on Thursday.
A regulator has said Chorus should cut the price to connect
to its copper fixed line broadband network by about 50 percent
from the end of next year, which the company has said would
knock a NZ$1 billion ($818.25 million) hole in its earnings by
It said the price cut would also jeopardise its building of
most of the ultrafast fibre broadband network (UFB) (RBI),
prompting the government to order an independent look into
"The preliminary conclusion from Ernst & Young is that
copper price changes will have a significant impact on Chorus'
financial position and that absent further action, Chorus is at
risk of not meeting its UFB and RBI contractual commitments,
after taking into account a wide range of actions Chorus can
take itself," Communications Minister Amy Adams said in a
Chorus shares, which last traded up 1 percent at NZ$1.455,
have fallen 44 percent since the regulator's decision was
confirmed in early November. The company is going to court to
try to overturn the decision.
Adams said there was no figure on how much Chorus's earnings
would suffer, but the company was expected to meet a
"significant part of the shortfall."
Chorus has withdrawn guidance on future dividend payouts in
the current uncertainty.
Adams said the government agency handling the UFB network
rollout is expected to discuss with Chorus on how to "manage the
issue", which would likely take several months.
($1 = 1.2221 New Zealand dollars)