Chorus plans budget cuts

TOM PULLAR-STRECKER
Last updated 10:01 11/12/2013

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Chorus will probably "cut all discretionary activity", including growth-related capital investment, and re-price most of its commercial services.

Chorus' share price has plummeted since the Government admitted last month it did not have the numbers in Parliament to override a Commerce Commission-ordered $10.54 price cut for access to its copper network from next December.

Chorus chairwoman Sue Sheldon has written to shareholders to say Chorus' board believed a "full-price principle" review the company had demanded the commission undertake, could see the price go back up to "around or even above current levels".

But she said that in the meantime Chorus could not finalise its medium term strategy and was assessing its "capital management options".

Chorus chief executive Mark Ratcliffe told Fairfax Media yesterday that the company would be up for industry discussions on the "fine mess" of copper pricing and it was not a time to take extreme positions.

The Government is understood to have sounded out some industry players on whether they would be willing to facilitate talks.

However, one of the parties that had been approached said Chorus might be painting itself into a corner by advising shareholders the commission's price cut could be completely reversed.

In another negative development for Chorus, the commission issued a draft ruling on the price Chorus could charge for connections to its unbundled copper low frequency service.

Chorus said the ruling, if finalised, would cut the prices by between 5.8 per cent and 31.1 per cent, knocking between $5 million and $6m off its annual earnings before interest, tax, depreciation and amortisation.

Ratcliffe responded angrily, saying the draft ruling was "yet another example of the regulatory framework delivering prices that are disconnected from real costs".

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- Fairfax Media

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