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Chorus warns of UFB network cost blowout

TOM PULLAR-STRECKER
Last updated 09:03 25/02/2013

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Chorus says it will cost about $300 million more than expected to build its share of the ultrafast broadband network.

The company this morning reported a "pleasing" $84 million interim net profit but warned it was incurring unexpected and "extreme" civil engineering costs building its 70 per cent share of the ultrafast broadband (UFB) network in some areas.

Those costs have led Chorus to revise up its estimate of the capital cost of laying its share of the UFB network as far as the street from $1.4 billion to $1.6b, to between $1.7b and $1.9b. That estimate does not include the cost of connecting homes and businesses to the communal network.

The interim profit, for the six months to December 31, was achieved on a 2 per cent rise in revenue to $525m and earnings before interest, tax, depreciation and amortisation (Ebitda) of $331m.

It announced a fully-imputed interim dividend of 10 cents and forecast a total dividend of 25.5c for the full financial year.

Chief executive Mark Ratcliffe said while Chorus had reduced UFB deployment costs in about 90 per cent of the areas in which it was building ultrafast broadband, it did "not anticipate the extreme costs in the remaining 10 per cent of areas".

"This is specifically because of the significant variability in regional compliance requirements and civil work that is driving up the cost per premises passed," he said.

As a result, the average cost of laying UFB passed premises this year would rise from its previous estimate of between $2500 to $2700 per premises to between $2900 and $3200.

Ratcliffe confirmed that Chorus was looking at "alternative deployment approaches" in some areas to keep a lid on costs.

These are understood to include laying more fibre overhead on power poles, rather than burying it in underground ducts.

The company's top engineer, Chris Dyhrberg resigned earlier this month.

Communications Minister Amy Adams reported yesterday that 134,000 homes, businesses and other entities - about 10 per cent of the total due to be covered by the scheme - were now able to connect to the government-backed UFB network and that 3800 had so far done so.

The Government said when it approved its $1.35b investment that connecting schools, hospitals and businesses would be the priority until the end of next year.

Chorus said the number of buildings to which it was providing fibre connections - in and outside of the UFB scheme - had risen by 50 per cent to 15,000. Its total number of broadband connections increased 3.3 per cent to 1,076,000.

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- BusinessDay.co.nz

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