2 Dec 2014

Chorus shares lift on charging news

8:18 pm on 2 December 2014

Chorus shares leapt more than 17 percent in morning trade after a favourable decision on how much it can charge for use of its copper lines.

The company said if the corporate regulator confirmed today's draft decision raising the amount it can charge for use of its copper lines, it could add $90 million a year to its operating earnings.

The Commerce Commission has raised the overall amount Chorus can charge for both the use of its copper lines and broadband services over those lines by $3.95 to $38.39 cents a month.

But from today, Chorus can charge only $34.44 a month for the combined services, down from $44.98 yesterday.

Chorus said if today's decision stood, it would still mean an $80 million a year drop in its operating earnings compared with yesterday's pricing.

Meanwhile, Spark is complaining the Commerce Commission's draft decision could mean its annual costs will rise by about $60 million more than previously expected.

The phone company, previously named Telecom, said it was undertaking an urgent review of all its broadband and fixed voice customer pricing in the wake of today's decision.

Spark managing director Simon Moutter said the draft decision was unexpected and the resulting higher costs would affect all his company's fixed services.

Mr Moutter said intense market competition means the anticipated lower costs, which the commission signalled as far back as December 2012, have already flowed through into retail broadband prices.

He said Spark's basic $75 a month broadband plus home phone plan used to cost $105 three years ago.

Internet New Zealand spokesman Andrew Cushen said the decision disadvantaged companies such as Orcon and Slingshot, which had invested in independent broadband services.

"And that used to be the predominant way in which retail companies innovated in providing better quality services, and it was one of the big drivers in the price changes that we've seen in terms of prices moving downward over the last three years," Mr Cushen said.

Communications Minister Amy Adams aid setting the price of phone and broadband services involved striking a balance between low prices and progress.

"The important thing is is that we have a framework that gets the balance right between low prices for consumers and ensuring that there's enough investment incentive in the market so that we have access to new developing technologies, because actually consumers benefit the most when there's a robust ... network," she said.

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