No case for taxpayer bailout of Chorus

Labour Leader David Cunliffe says there is no case for a taxpayer bailout of Chorus based on the Ernst & Young report made public yesterday.

The EY report accepts Chorus’ revenue reduction forecast of $1billion over five years, but highlights measures that could reduce it to $200 - $250 million without any government intervention.

“EY indicates that almost half of the gap can be filled with offsetting operating and capital cost reduction and other revenue measures ($400 - $500m), halving the dividend rate to $90 million and increasing debt headroom ($130m).

“That leaves a revenue gap from the initial forecast of only $40 - $50million per year,” David Cunliffe said.

“Crucially Chorus’ dividend pay-out rate could be further reduced. Even at half its current rate it would still be above the average of benchmark New Zealand infrastructure companies.

“Taxpayers should not be asked to subsidise Chorus’ shareholders,” David Cunliffe said.

“Labour rejects a taxpayer subsidy; we reject the Government purchasing Chorus shares; we reject throttling back copper broadband speeds; and we reject renegotiating Chorus’ broadband contract.

“Labour considers further work is needed by EY to independently test Chorus’ revenue forecasts. EY should test further dividend reduction, capital raising and increased debt headroom to meet the remaining shortfall.

“Minister Amy Adams should also investigate the impact of the timing difference between the interim and final pricing policy decisions across both bitstream and access prices.

“What the Ernst & Young report makes plain is that Chorus’ revenue gap can be closed by normal commercial means. No case exists for the taxpayer to subsidise Chorus’ shareholders,” David Cunliffe said.

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