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ASX & ASIC Asked to Investigate Chorus Insolvency Speculation

COALITION FOR FAIR INTERNET PRICING

MEDIA RELEASE

12.00 PM WEDNESDAY 18 SEPTEMBER 2013 (NZT)

ASX & ASIC Asked to Investigate Chorus Insolvency Speculation

Ongoing speculation of a risk that Chorus Ltd (CNU) may become insolvent has led New Zealand’s Coalition for Fair Internet Pricing to ask the Australian Securities Exchange (ASX) and the regulator, the Australian Securities & Investments Commission (ASIC), to inquire into the company.

The Prime Minister of New Zealand, Rt Hon. John Key, told Parliament yesterday that his government has received information from Chorus and its Chairman, Sue Sheldon, and the country’s Ministry for Business, Innovation and Employment (MBIE), that indicated “there is a chance Chorus will go broke” if a Commerce Commission draft determination on copper broadband pricing stands.

The comments in Parliament follow more than four days of conflicting statements about Chorus’ financial viability by its Chief Executive, Mark Ratcliffe, the Prime Minister and the Minister for Communications & Information Technology, Hon. Amy Adams.

Last Thursday, the coalition launched a campaign against a proposal in a discussion document for the Cabinet to take over the regulatory function for broadband pricing from the Commerce Commission and to align the price of copper and fibre broadband connections to inflate Chorus’ revenues by approximately NZ$600 million over six years above the level deemed fair in the Commerce Commission draft determination.



In response to the campaign launch, the Prime Minister told national television on Friday: “If the Commerce Commission ruling stands there is a chance Chorus will go broke.”

Media were unable last week to establish the information on which the Prime Minister based his comments.

On national television over the weekend, Mr Ratcliffe would not endorse the Prime Minister’s comments but said there were “some really challenging scenarios” if the draft Commerce Commission recommendation was accepted.

While denying his company had lobbied the government, Mr Ratcliffe said it had “present[ed] a range of our views” on copper to ministers and officials.

On Monday, again on national television, the Prime Minister would not repeat his suggestion Chorus could go broke but said the draft Commerce Commission recommendation would put “pressure” on Chorus.

However, in Parliament yesterday, the Prime Minister said: “I stand by my original statement which is basically that the Commerce Commission ruling states there is a chance Chorus will go broke.”

When asked if his concerns about Chorus’ finances were based on any information not already in the public domain, the Prime Minister said: “Advice was provided to Cabinet by officials based on commercial-in-confidence discussions between Chorus and MBIE officials.”

The Prime Minister also confirmed some of the commercial-in-confidence information had been conveyed to him in a phone conversation with Ms Sheldon in December last year, telling Parliament: “The Chairman [Ms Sheldon] gave me an indication of her thinking about the impact that would take place, and that gave me some understanding of the issues that [Chorus] would face.”

Minister Adams was also reported yesterday as backing up the Prime Minister’s concerns saying: “You have to say it's not outside the realms of possibility they could have serious impacts on their viability.”

However, Minister Adams appeared to have no knowledge of any commercial-in-confidence advice from officials, saying: “What we've seen is the stuff that's absolutely in the market already.”

A spokeswoman for the Coalition for Fair Internet Pricing, Sue Chetwin, also Chief Executive of Consumer NZ, said today: “We continue to be concerned that there may be information circulating in Wellington, as the Prime Minister has confirmed, about the financial viability of Chorus Ltd under the Commerce Commission’s draft determination that is not available to its shareholders or to the broader market.

“We have already asked the New Zealand Exchange (NZX) and the New Zealand regulator, the Financial Markets Authority (FMA), to seek clarification from Chorus, including whether Chorus should have disclosed this information to the market.

“Given Chorus is also listed on the ASX, we have also asked that exchange and ASIC to undertake similar inquiries.”

Ms Chetwin said shareholders and the broader market needed the information on which the Prime Minister, Minister Adams and Mr Ratcliffe were basing their comments to be made publicly available for independent analysis.

She noted that Chorus made a net profit of NZ$171 million last year, paid NZ$95 million in dividends to its shareholders and its shares closed at NZ$2.87 yesterday.

“On the face of it, this does not look like a company the market thinks has a chance of going broke, or that is facing challenging scenarios, or that might come under financial pressure,” Ms Chetwin said.

The Coalition for Fair Internet Pricing was founded by Consumer NZ, InternetNZ, and the Telecommunication Users Association of New Zealand (TUANZ) and is supported by CallPlus and Slingshot, the Federation of Maori Authorities, Greypower, Hautaki Trust, KiwiBlog, KLR Holdings, National Urban Maori Authorities, New Zealand Union of Students’ Associations, Orcon, Rural Women, Te Huarahi Tika Trust and the Unite Union.

ENDS

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