19 Feb 2016

Chorus profit slashed by price controls

11:44 am on 19 February 2016

Chorus has posted a sharply lower profit, blaming price controls on access to its broadband and copper wire networks, but will resume dividend payments.

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Photo: RNZ

The telecommunications operator made a net profit of $33 million for the six months ended December compared with $64m a year ago.

Chief executive Mark Ratcliffe said the profit slide was largely because of the Commerce Commission's decision to reduce the prices Chorus could charge internet service providers wanting to use its networks.

The commission last December set the final price midway between what Chorus said it needed to cover the cost of building new networks and the sharply lower prices that retailer providers, such as Spark, said New Zealand consumers should be paying.

It took three years of study, draft rulings, and industry wrangling for the prices to be set and Chorus warned it would suffer a $1 billion hit to revenue, which would affect its building of the ultrafast broadband network for the government.

It cut costs and suspended dividends to cope with the interim price cuts.

Mark Ratcliffe.

Mark Ratcliffe Photo: CHORUS

Mr Ratcliffe said there was now some certainty the company would resume dividends, starting with an interim payout of 8 cents per share and a planned full year dividend of 20 cents per share.

He said there also needed to be a better method setting regulations for the sector.

"We look forward to working with industry and government to develop a regulatory framework that builds on recent experiences to better align and deliver on the interests of consumers and investors."

Chorus will concentrate on building the UFB network which it said is nearly half-completed, with connections running close to 500 a day.

It expects full year operating earnings between $580m and $600m.

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