Minister welcomes further progress on UFB contract

Communications and Information Technology Minister Amy Adams has welcomed the agreement by Crown Fibre Holdings and Chorus on the latest amendment to the companies’ Ultra-Fast Broadband contract.

Both parties have agreed to a change which would give Chorus the ability to bring forward funding in the 2015/16 financial year which would have been provided in 2017/18 and 2018/19.

The Government’s UFB initiative has a budget of $1.35 billion and Crown Fibre Holdings is required to act within this fiscal envelope. The change announced today is within this budget and does not increase the overall amount to be paid to Chorus.

“By making adjustments to the timing of when government funding is available, Chorus has more flexibility to manage its cash flow at a time of high capital expenditure,” Ms Adams says.

“At the same time, there are strong safeguards built into the advance funding facility and it will only be provided if strict criteria are met.”

The agreement follows earlier contractual changes agreed by Crown Fibre Holdings and Chorus in March this year.

The agreed changes are intended to partially address the funding gap that was identified in the Government-commissioned independent report by Ernst & Young Australia (EY).

The EY report investigated Chorus’ capability to deliver on its contractual commitments with the Government, in light of the Commerce Commission’s decisions on final wholesale prices for copper-based broadband services.

The report identified a gap of $1 billion and indicated that a significant portion of this could be met from Chorus undertaking cost-savings measures and changes to its dividend and debt policies – leaving a residual gap of $200 million to $250 million.

“The Government has always been clear it expects Chorus to meet the major part of the funding shortfall identified in the EY report. That is still our expectation, and the agreement announced today reflects this.

“The Government’s priority is to ensure the UFB roll out programme stays on track and this agreement helps ensures that the build programme will not be disrupted.

“Importantly for customers, these changes will make no difference to UFB service levels and speeds.

“The overall timeframe for the roll out, the start and completion dates for each candidate area, the coverage area, and the completion date for priority users are all unchanged.”

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