ComCom publishes reports on rate of return for UCLL and UBA

The two reports were commissioned by ComCom to assist in reaching a view on the allowed rate of return, also known as the weighted average cost of capital (WACC). This needs to be determined as part of the final pricing principle (FPP) process for UCLL and UBA.

The Commerce Commission (ComCom) has published two expert reports about the rate of return on capital for the unbundled copper local loop (UCLL) network and the unbundled bitstream access (UBA) service.

The two reports were commissioned by ComCom to assist in reaching a view on the allowed rate of return, also known as the weighted average cost of capital (WACC). This needs to be determined as part of the final pricing principle (FPP) process for UCLL and UBA.

The first report is by Associate Professor Martin Lally of Victoria University of Wellington and addresses the tax-adjusted market risk premium (TAMRP) and the methodology for estimating the cost of debt.

The second report, by Oxera Consulting, covers asset beta, leverage and an appropriate long-term credit rating.

Interested parties can submit comments on the papers before 21 July 2014. There will then be two weeks for cross submissions, which will end on 4 August.

According to ComCom, there will be a further opportunity to submit on WACC, including the specific parameter values that the organisation decides to adopt, in response to the draft UCLL and UBA price review determinations to be released on 1 December 2014.

You can find the expert reports here.

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