Shareholders brace for price ruling

TOM PULLAR-STRECKER
Last updated 09:28 20/11/2012

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Internet providers should find out early next month whether regulators are likely to cut the wholesale cost of copper-based broadband plans by as much as $5 a month.

Wholesale price cuts could be beneficial for consumers, at least in the short term, if they are passed on by internet providers.

But they threaten to take a big bite out of Chorus' profits and, Chorus argues, delay the take-up of ultrafast broadband by making fibre-based services less attractive in comparison.

The stakes are high for Chorus shareholders. The company has not been able to forecast its future dividends because of the uncertainty.

The Commerce Commission yesterday announced it would postpone the date for its final ruling on the price Chorus can charge for unbundled phone lines from Friday until December 3.

It now intends to release the ruling at the same time as issuing a draft decision on the price of unbundled bitstream access (UBA) - a wholesale product that is a much bigger earner for Chorus and a key component in the cost of most broadband plans.

The commission made it explicit yesterday that there was a direct link between the local loop price and the UBA price.

Chorus' share price plunged 13.6 per cent during two days' trading in May after the commission published a draft report that proposed reducing the average price of unbundled phone lines by about $5 a month, to $19.75 a month.

Chief executive Mark Ratcliffe said at the company's annual meeting in August that the report was causing "huge uncertainty" for the company.

Chairwoman Sue Sheldon told BusinessDay she and other directors had been lobbying hard to prevent the commission slashing the price of its copper-based services. She said the regulatory uncertainty was likely to hang over Chorus for another six months.

Sheldon went on to say she had not detected any change in the commission's stance since Stephen Gale replaced Ross Patterson as Telecommunications Commissioner in July.

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- BusinessDay.co.nz

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