12 Dec 2013

Chorus may be able to increase copper pricing - analyst

6:58 am on 12 December 2013

An analyst says Chorus may well be able to charge higher prices for its copper wire services after the current regulatory review.

In a letter to shareholders, Chorus chairman Sue Sheldon says it's likely the Commerce Commission's review of the actual costs of delivering Chorus' copper wire services could mean Chorus will be able to charge current or even higher prices.

The review could take more than two years.

In the meantime, from next December, the commission has set the wholesale price of access to Chorus' copper network at $23.52 per month and the price of broadband access at $10.92.

The latter is about half what Chorus is currently charging.

Ms Sheldon says her company is currently over-delivering and providing significantly greater value to customers than is strictly required.

She says the company will cut all discretionary spending and downgrade the quality of its services.

Devon Funds Management analyst Phill Anderson says there's some support for Ms Sheldon's view.

He says there are two key pieces of information from an investor's perspective - one is her reference to how Chorus sees the final pricing review playing out and Ms Sheldon has indicated that the review could charge current or even higher prices.

Mr Anderson says he has sympathy for this view because when the costs of building a replacement network are considered it's tough to achieve a number as low as the Commerce Commission suggested.

He says the second reference which would benefit shareholders is Ms Sheldon's suggestion that a potential capital raising may not be necessary if the company can cut costs and perhaps get some contract changes from Capital Fibre Holdings.

Mr Anderson says the expectation is low that there will be a dividend from Chorus in the next couple of years.