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

 


Chorus cost cuts gives analyst cheer, stock upgraded to buy

Chorus cost clamp-down gives analyst cheer, stock upgraded to ‘buy’

By Paul McBeth

Feb. 26 (BusinessDesk) - Measures by telecommunications network operator Chorus to achieve $400 million in savings over the next six years to mitigate the impact of looming regulated price cuts has been welcomed by one analyst, who has upgraded the stock to a ‘buy’.

Chorus this week announced plans to scale back re-investment in the copper lines, introduce new unregulated revenue streams, and operational cost cutting which will likely include job losses as a means to limit the impact of Commerce Commission-enforced price cuts. The company also suspended payment of an interim dividend.

Craigs Investment Partners research analyst Arie Dekker welcomed the news in a research note, saying the approach being taken seemed measured and sought to achieve realistic savings. He has upgraded the stock to a ‘buy’ rating from a ‘hold’, lifting the 12-month price target to $1.80 from $1.58. The shares were recently down 0.7 percent to $1.48.

“With the company addressing factors within its control and catalysts coming up with regards the outcome of discussions with CFH (Crown Fibre Holdings) we do view the risk return trade off as more balanced, which is an important consideration in our upgrade,” Dekker said.

“The company did not talk to liquidity but sent a clear signal of its priorities and its desire to avoid raising equity and noted a focus on initiatives and management of key leverage metrics,” he said.

Dekker said he doesn’t view the company as having the characteristics of a utility, and that it was “important to stress that its long-term value remains heavily influenced by a number of key factors which will take some time to resolve.”

Last year the Commerce Commission proposed cutting the network operator’s pricing on its copper line services, which Chorus says has left a $1 billion hole in funding the roll out of the government-sponsored ultrafast broadband network.

Chorus is in negotiations with Crown Fibre Holdings over building the network, but Communications Minister Amy Adams has indicated the government expects the company to fill most of the $1 billion funding hole it says has opened because of the impact of price cuts on its cash flow.

The company has discussed a number of potential initiatives with Crown Fibre Holdings, and hopes to announce the end to the first tranche of measures shortly, chief executive Mark Ratcliffe said this week.

Chorus is still mulling other capital management decisions, which it expects to make once there is more certainty around the outcome of the various initiatives and regulatory discussions.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Gordon Campbell: On Tiwai Point (And Saying “No” In Greece)

Its hard to see how Rio Tinto’s one month delay in announcing its intentions about the Tiwai Point aluminium smelter is a good sign for (a) the jobs of the workers affected or (b) for the New Zealand taxpayer. More>>

ALSO:

Half Empty: Dairy Product Prices Extend Slide To Six-Year Low

Dairy product prices continued their slide, paced by whole milk power, in the latest GlobalDairyTrade auction, weakening to the lowest level in six years. More>>

ALSO:

Copper Broadband: Regulator Set To Keep Chorus Pricing Largely Unchanged

The Commerce Commission looks likely to settle on a price close to its original decision on what telecommunications network operator Chorus can charge its customers, though it probably won’t backdate any update. More>>

ALSO:

Lower Levy For Safer Cars: ACC Backtracks On Safety Assessments

Dog and Lemon: “The ACC has based the entire levy system on a set of badly flawed data from Monash University. This Monash data is riddled with errors and false assumptions; that’s the real reason for the multiple mistakes in setting ACC levies.” More>>

ALSO:

Fast Track: TPP Negotiations Set To Accelerate, Groser Says

Negotiations for the Trans-Pacific Partnership will accelerate in July, with New Zealand officials working to stitch up a deal by the month's end, according to Trade Minister Tim Groser. More>>

ALSO:

Floods: Initial Assessment Of Economic Impact

Authorities around the region have compiled an initial impact assessment for the Ministry of Civil Defence, putting the estimated cost of flood recovery at around $120 million... this early estimate includes social, built, and economic costs to business, but doesn’t include costs to the rural sector. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news