8 Aug 2013

Chorus shares surge on new pricing plan

8:56 am on 8 August 2013

Shares in Chorus surged on Wednesday after the Government issued a new pricing plan for its copper network charges, gazumping the Commerce Commission with its proposal.

Under the plan, Chorus will have to cut charges for access to its copper network by up to $7.50 per connection.

But the lines company says that is significantly better than the Commerce Commission's proposed pricing, which would significantly impact on its earnings.

The new option is part of a Government review of regulations covering the transition from copper to the new fibre telecommunications network.

It suggests the wholesale price Chorus charges providers is between $37.50 and $42.50 per connection. That is $2.50 - $7.50 lower than its current charge, but better than the Commerce Commission's proposal.

Shares in Chorus rose 13 cents to close at $3.03 on Wednesday, while Telecom fell 5 cents to $2.26.

Forsyth Barr telecommunications analyst Blair Galpin says the review gives Chorus some certainty.

He says the review will look at pricing for the copper service between now and 2020 and at what happens to pricing after that period.

Mr Galpin says the Commerce Commission put forward a draft position of just under $9 for Unbundled Bitstream Access (UBA) - the product that drives the broadband service - and the commission was due to come out with a revised position later this month.

"What the Government have now done is they've gazumped that process and they're proposing benchmarking copper off the cost of the fibre network."

Mr Galpin says it gives a firm indication that the Government wants to put more controls around the process in terms of how things are set and how they get a fibre uptake.

He says while Chorus investors were pleased with the more favourable pricing and the certainty, the review is less positive for Telecom because it reduces its ability to be innovative.

Peter Wise, an analyst with research and advisory firm IDC, says the review will make little difference to consumers or the shift to ultrafast broadband.

He says the contract is quite narrow in terms of looking at the supply side contract with Chorus to get the network built but it does not contain a lot about benefits to the consumer and educating the consumer.