16 Dec 2013

Chorus says report findings confirm funding gap estimate

7:17 am on 16 December 2013

Chorus says the findings of an independent report confirm its own assessment of a $1 billion funding gap by 2020 if it has to adhere to a Commerce Commission ruling on its broadband prices.

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Photo: RNZ

The Government on Saturday released the final report from Ernst & Young Australia on the company's financial position, after initial findings were made public last week.

The Government was told last week Chorus may not be able to fulfil its ultra-fast broadband (UFB) contract on time after the commission halved what it could charge users of its copper network.

In its final report Ernst & Young said the telecommunications firm could reduce its predicted shortfall to between $200 million and $250 million by implementing cash flow savings initiatives.

Chorus chief executive Mark Ratcliffe said these initiatives must be weighed up very carefully.

He says they may save money that can then be invested in ultra-fast broadband, but also have the potential to negatively affect service levels and broadband services for people throughout the country.

The Ernst & Young report said that under the commission's pricing the number of businesses or consumers that cannot connect to the network may increase as Chorus agrees to new connections only on a full cost recovery basis.

Crown Fibre Holdings and Chorus have now begun discussions about possible adjustments to Chorus' UFB contracts to help close the funding gap.

Communications and Information Technology Minister Amy Adams said the Government expects Chorus to meet a significant part of the shortfall.

Labour Party leader David Cunliffe said Chorus is a mess of the Government's own making, and one it is now trying to sweep under the carpet in the run-up to Christmas.

Mr Cunliffe says the Government was adamant on Thursday the report would not be released until later this week, yet went on to do it on Saturday.

Communications and Information Technology Minister Amy Adams says the Government received the report on Friday and had to release it outside market hours.

Ms Adams said she wanted to release the report as soon as possible, and as it didn't need any reactions, she was able to release it sooner than expected.