Broadband rollout on schedule - Chorus

Chorus says it had connected 51,000 new premises by December 31. Photo / NZME.

Chorus says the rollout of ultra-fast broadband and rural broadband initiatives are on schedule, but growth in fibre connections is putting pressure on its capital expenditure.

Chorus yesterday reported an 18 per cent drop in first-half profit as the telecommunications network operator contended with regulated price cuts for access to its copper line network, and narrowed the forecast cost of building its nationwide fibre network.

Net profit fell to $64 million in the six months ended December 31 from $78 million the previous year.

Chorus said it had connected 51,000 new premises by December 31 last year and was on track to reach its full-year target of 106,000.

Despite the positive ultra-fast broadband (UFB) uptake, Chorus warned that traffic projections indicated demand for services would continue to grow, requiring ongoing investment in new technology to support high-bandwidth services.

It also noted that reduced cash flows meant it was cash constrained which it warned could affect capital expenditure, resulting in the sacrifice of value and network investment for its users.

"Increased fibre uptake is driving additional capital expenditure demands, with FY15 gross capital expenditure now expected to be $625 [million] to $650 million, based on updated connection capital expenditure estimates," the company said.

Despite this, it said fibre connections for the period had increased by 55 per cent to 65,000, with three of the 24 UFB areas completed, representing around 38 per cent of the total rollout.

Chief executive Mark Ratcliffe said UFB was tracking well and the rural broadband initiative (RBI) had enabled better broadband for more than 81,000 rural fixed lines.

"Chorus has invested more than $1.7 billion in fibre networks and capability since it was established in 2011, with about half a million end-users now within reach of better broadband through our UFB and RBI rollouts."

Ratcliffe said uptake of UFB varied widely between areas, but internet providers offering more services had boosted growth in fibre connections.

Chorus said the increased uptake had driven capital expenditure demands, with the full year fibre capital expenditure now expected to be $530 million to $550 million.

UFB rollout has been completed in Ashburton, Oamaru and Blenheim, with a number of smaller towns also near completion. In comparison, Auckland was 25 per cent completed at the end of December with 372,200 premises connected in total.

The company has agreed to fixed-price deployment contracts with Visionstream and Downer, covering about 90 per cent of the rollout areas, which has enabled it to narrow its $1.7 to $1.9 billion guidance range for UFB communal costs to a new range of $1.75 billion to $1.80 billion.

The company said it was focusing on UFB, and narrowing costs.

"For now, Chorus' focus is on delivering on its existing commitments. UFB uptake is expected to continue to grow in line with the rollout footprint and the growing accessibility of online entertainment content services," it said.

Chorus' gross capital expenditure for the period was $338 million with about 88 per cent of this fibre related, mostly for the contracted UFB and RBI projects.

Shares closed up 3c at $2.86.