Chorus shareholders are being advised to sell as uncertainty about how much the company can charge retailers for broadband over the copper network continues.
The Government has brought foward a review of the Telecommunications Act with a specific look at the charges, overriding the Commerce Commission's own proposed charges.
This has been met with outrage from businesses, community groups and across the political spectrum, from which a Coalition opposing Government intervention has been formed.
A research analyst at Craigs Investment Partners, Arie Dekker, says Chorus' outlook is dominated by the question of copper pricing and the cost of the fibre build - both key drivers of profitability for Chorus.
And the issue of copper pricing had become politically-charged, which increased uncertainty.
""We're recommending that investors wait for greater certainty on those key drivers," says Mr Dekker.
The income stream from retailers paying for access over the copper network completely dominates the Chorus balance sheet, he says. The company at present earns relatively little from fibre-optic links.
The impact of any revenue cuts stemming from reduced prices for copper access could range between $20 million and $100 million off pre-tax earnings.
If the cuts turned out to be of this order, Chorus could have to reduce dividends and possibly take another look at its capital structure.
Submissions on the Government's review closed last week, and some were made public yesterday including Vodafone's.
That submission which called the review an ill-conceived intervention, saying it was quite simply a "stealth tax" on all consumers with no justification, and Chorus is the sole beneficiary.
Vodafone called for the review to be rejected, saying it's right for Chorus to be regulated and that it's no different from other network monopolies.
Vodafone says there is no justification for providing Chorus with relief from what it describes as the predictable and expected regulation from the watchdog which is prescribed in the very legislation that enabled Chorus' participation in the fibre build.
And the former Telecommunications Commissioner says the Government got that legislation wrong in it's 2011 review of the Act.
In an independent report on behalf of Chorus, Ross Patterson, says the legislation in its current form is not fit for purpose, and is causing regulatory uncertainty.
Dr Patterson prepared an independent report as part of Chorus' submission on the Government's review of the Telecommunications Act 2001, which closed last week.
The Government brought the review forward after the Commerce Commission proposed slashing the prices Chorus could charge retailers for access to broadband over the copper network.
Chorus said that would eat into its revenue and delay take-up of the fibre network. Chorus is building 70% of the network.
Last week Prime Minister John Key said Chorus could go broke if the watchdog's proposal goes ahead, and a coalition is challenging the Government's intervention.
Chorus released Dr Patterson's report on Tuesday and he says there needs to be a process to encourage migration from the old network to the new one.
He says it would be a complete waste of money to roll out a brand new network if noone used it.
"Where policies are introduced to roll out a fibre network you also have to ensure that the policy will encourage uptake of the network and pricing's an essential part of that," he says.
