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

 


S&P downplays regulation impact on Chorus credit rating

Standard & Poor’s downplays draft regulation impact on Chorus credit rating

Dec. 4 (BusinessDesk) - Standard & Poor's has downplayed the threat of looming price regulation to access Chorus's switchgear on its ageing copper lines, saying the final ruling will probably be amended given the highly political nature of the fibre network.

The regulator yesterday released a draft determination that would cut what Chorus can charge internet service providers for accessing its unbundled copper network without having to build their own electronics and software 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.

S&P credit analysts Paul Draffin and Anthony Flintoff said the draft pricing decision was based on a very narrow benchmark and will probably be challenged. They said the government's plans to build a national fibre network will also play into the final ruling, with politicians likely to influence it.

"Accordingly, in our view, it is likely that the draft UBA decision will be subject to amendment before it becomes final," the report said.

Chorus has "significant capacity" to accommodate regulated price cuts for its services to keep its investment grade BBB credit rating, and expects the company's funds to debt will be well within the rating agency's tolerance.

Rival rating agency Moody's Investors Service put Chorus's rating on notice over the draft decision, saying 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."

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.

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 yesterday 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

 

Hager Raid: Westpac Wrong To Release Bank Records To Police

The Privacy Commissioner has censured Westpac Banking Corp for releasing without a court order more than 10 months of bank records belonging to the political activist and journalist Nicky Hager during a police investigation into leaked information published in Hager's 2014 pre-election book, 'Dirty Politics'. More>>

ALSO:

EARLIER:

Crown Accounts: Government Ekes Out Six-Month Surplus Of $9M

The New Zealand government eked out a tiny surplus in the first six months of the fiscal year as growth in domestic consumption lifted the goods and services tax take, while uncertainties over the Kaikoura earthquake costs meant expenses were less than expected. More>>

ALSO:

Almost 400 Jobs: Shock At Cadbury's Dunedin Factory Closure

Workers at Cadbury in Dunedin are reeling after learning this morning that the iconic Cadbury factory is to close, with the loss of almost 400 jobs... “The company had reported it was doing well and this has come out of the blue,” says Chas. More>>

ALSO:

Transport: Boards Of Inquiry For Auckland Roading Projects

Boards of Inquiry have been appointed to decide on two significant Auckland roading projects in a move which will get a decision by the end of the year, Environment Minister Dr Nick Smith and Conservation Minister Maggie Barry announced today. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news