Chorus warns of ongoing uncertainty

UPDATE - Annual report reveals estimated number of Chorus staff who will earn over 100,000 in a year, ComCom decision on pricing for copper services due in May

Chorus chairwoman Sue Sheldon has warned investors at its annual meeting in Wellington that uncertainty over its future profits could linger for a further six months until May while the Commerce Commission reviews the price it can charge for its copper-based services.

Sheldon says the company spent $274 million last year - more than 80 per cent of its total capital expenditure - rolling out fibre-optic cable under the Government's Ultra Fast Broadband scheme and says that will increase to $450-$480m this year.

But she says the majority of Chorus' revenues will continue to come from regulated copper-based services for at least the next eight years.

"The simple fact is that these revenues provide the wherewithal for our investment in fibre," she says. "There is nowhere for a revenue shortfall to be absorbed, if the Commerce Commission price reviews mean that Chorus does not recover its costs.

"A reduction in copper pricing must also slow migration to our new fibre network, undermining New Zealand's evolution to a more productive technology and also damaging our long term viability."

Sheldon says there appears to be a "disconnect" between government policy to encourage Ultra Fast Broadband and the regulatory environment.

Chief executive Mark Ratcliffe says Chorus is now moving from the start-up phase of the UFB rollout to a phase where the emphasis was on delivering a faster and more efficient deployment.

"This is critical given our 'year one' deployment costs and our target of reducing costs per premises passed to between $2500 and $2700 for this financial year. By the end of the deployment programme our aim is to have that cost even closer to the $1118 that the Crown is financing for each premise passed."

Ratcliffe says Chorus hopes to provide more certainty to retail providers over the cost of connecting "non-standard" premises with difficult access to the UFB network "in the very near future".

The proportion of Chorus shares owned by New Zealanders has grown to 45 per cent, Sheldon says. Chorus shares are currently trading unchanged at $3.36.

Annual report reveals salaries

Meanwhile, the Chorus annual report reveals that the estimated number of Chorus employees that will receive an annual salary of over $100,000 is 270, around 39 percent of the workforce, according to the company’s annual report.

Chorus, which demerged from Telecom last year, now employs 690 staff.

It owns and operates the copper network, and has been awarded around 70 percent of the $1.35 billion government-backed Ultra Fast Broadband contract, as well as the $300 million Rural Broadband Initiative in partnership with Vodafone.

According to the annual report Chorus CEO Mark Ratcliffe earned $1.09 million in the past year, which includes his time with Telecom before the demerger. His counterpart in Telecom, Simon Moutter, has an annual salary of $1.35 million, but incentives could see Moutter earn up to $5.4 million a year.

Additional reporting by Computerworld staff

1 Comment

Malcolm Dick

1

This announcement is clearly aimed at putting pressure on the Commerce Commissioner.

I would hope he sticks to his brief, which is "providing long term benefits to New Zealanders".
Providing fibre connections to a privileged few over the next decade (at the expense of the vast majority on copper networks) does not fit into this brief, as wondeful a concept as it may be.

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