Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Chorus debt rating on review for possible cut

Chorus debt rating on review for possible cut following regulator’s draft price controls

Dec. 4 (BusinessDesk) - Chorus's Baa2 credit rating may be cut by Moody’s Investors Service after the Commerce Commission released a draft plan to curb prices the company can charge retailers to access its network.

The review affects US$2 billion of debt. The regulator yesterday released a draft determination that would cut the price of Chorus’s basic service relating to the unbundled local copper loop (UCLL) component of its unbundled bitstream access (UBA) to $8.93 per line a month from December 2014 from $21.46.

Chorus has said this will slash as much as 40 percent, or $160 million a year, from pretax earnings while changes to wholesale pricing for UCLL would have a $20 million earnings impact.

If implemented as proposed, the pricing cut is “likely to have a material impact on Chorus’s credit profile and be inconsistent with a Baa2 profile,” said Maurice O’Connell, a Moody’s analyst. It would “exacerbate Chorus’s negative free cashflow position and lead to materially elevated leverage, putting significant pressure on the company’s key financial metrics.”

The Baa2 rating is the second-lowest investment grade level issued by Moody's Investors Service. If Chorus's credit rating falls below investment grade while debt is still owed Crown Fibre Holdings for the government-sponsored fibre network build, the network company is banned from paying dividends without CFH's approval.

Shares of Chorus tumbled 14 percent to $2.91 after the commission’s announcement yesterday, 3 cents lower than its listing price last year.

The draft determination isn’t a done deal yet. Prime Minister John Key described the move as "very problematic" and Communications Minister Amy Adams has referred it to her officials to assess the pricing impact, saying a pricing methodology appropriate to New Zealand had to be found.

Among Chorus’s concerns is the potential for much lower copper network pricing to deter investment and uptake of ultra-fast broadband, using the government-subsidised fibre network being laid throughout the country.

Chorus was spun-out from Telecom as a separately-listed company last year to free up the telecommunications company from its regulatory burden and allow the network operator to successfully win a billion dollar subsidy to build a nationwide fibre network and rural broadband system.

Some 80 percent of the network company’s revenue is still derived from the ageing copper network, and is subject to the Commerce Commission’s pricing review.

At a media briefing in Wellington, Telecommunications Commissioner Stephen Gale today stressed the UBA pricing regime was a draft decision and would go out to industry for consultation with a view to making a final ruling in June.

The UCLL service lets telecommunication companies use the copper network between an exchange and an end-user’s premises to offer their own voice and broadband services. UBA gives access to Chorus’s electronics, software and transport over the network, meaning telcos don’t have to build their own.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Strike: Lyttelton Port Workers Vote To Escalate Dispute

Members of the Rail and Maritime Transport Union (RMTU) at Lyttelton Port today voted to escalate their industrial action. Around 200 RMTU members have been operating an overtime ban since 17 December and today they endorsed a series of full withdrawals of labour at the port. More>>

ALSO:

Scoop Business: NZ Dollar Falls To 3-Year Low As Investors Favour Greenback

The New Zealand dollar fell to its lowest in more than three years as investors sold euro and bought US dollars, weakening other currencies against the greenback. More>>

ALSO:

Scoop Business: NZ Govt Operating Deficit Smaller Than Expected

The New Zealand’s government’s operating deficit was smaller than expected in the first five months of the financial year as a clampdown on expenditure managed to offset a shortfall in the tax-take from last month’s forecast. More>>

ALSO:

0.8 Percent Annually:
NZ Inflation Falls Below RBNZ's Target

New Zealand's annual pace of inflation slowed to below the Reserve Bank's target band in the final three months of the year, giving governor Graeme Wheeler more room to keep the benchmark interest rate lower for longer.More>>

ALSO:

NASA, NOAA: Find 2014 Warmest Year In Modern Record

Since 1880, Earth’s average surface temperature has warmed by about 1.4 degrees Fahrenheit (0.8 degrees Celsius), a trend that is largely driven by the increase in carbon dioxide and other human emissions into the planet’s atmosphere. The majority of that warming has occurred in the past three decades. More>>

ALSO:

Scoop Business: New Zealand’s Reserve Bank Named Central Bank Of The Year

The Reserve Bank of New Zealand’s efforts to stifle house price inflation by using new policy tools has seen the institution named Central Bank of the year by Central Banking Publications, a publisher specialising in global central banking practice. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news