A draft Commerce Commission decision on the value of Chorus’s regulated assets has come in at $5.427 billion, a level likely to be acceptable to both the telecommunications network owner and the competitive parts of the sector that it services.
The draft determination on the regulated asset base (RAB) is some $80 million lower than Chorus had argued it should be, and the commission said it will reduce Chorus’s future revenues by between 2% and 2.5% over the three years starting from Jan 1, 2022.
“Two percent under business plan, is that the end of the world? No it’s not,” Chorus’s chief financial officer, David Collins, told BusinessDesk.
“But it’s enough for us to continue to push and debate with the commission” ahead of a final decision, due in December. “It’s important, but not catastrophic is how I’d put it.”
A much lower RAB had been sufficiently feared by Chorus that its chair, Patrick Strange, wrote to the commission in June warning of the potential for “regulatory failure” if Chorus was not permitted to earn what it regarded as a fair return on the ultra-fast fibre network that it has spent most of the last decade building.
That programme saw the rollout of nationwide fast broadband at a cost and speed under a public-private partnership arrangement that is regarded as having been unusually well-executed, particularly by comparison with Australia’s botched and costly National Broadband Network rollout.
The first three years of pricing under the new RAB valuation is a milestone in the nine years since the structural separation of then Telecom NZ’s retail and monopoly network elements into Spark and Chorus respectively.
Industry observers told BusinessDesk the draft RAB was likely to be viewed as reasonable by the sector as a whole and that the sources of friction between Chorus and the retail providers would now move to the price and promotion of fixed wireless broadband, which competes in some settings with the fibre-enabled broadband provided by Chorus.
Chorus shares had risen 11 cents within 90 minutes of NZX trading opening this morning, at $6.81.
