Chorus out to show it is pushing fibre work

Mark Ratcliffe. Photo / Sarah Ivey
Mark Ratcliffe. Photo / Sarah Ivey

Lines and infrastructure company Chorus yesterday broke the mould by issuing guidance for its capital expenditure programmes.

Craigs Investment Partners broker Peter McIntyre said that usually companies issued guidance for profits or revenue.

However, in this case Chorus had given capex guidance, probably to show the market that it was making progress in the roll-out of the Government's ultra-fast broadband programme.

Chorus' gross capex guidance for seven months in the 2012 financial year was $335 million to $355 million. For 2013, guidance was for $560 million to $610 million.

The network operator earmarked between $1.4 billion and $1.6 billion for capex during the UFB build period, of which the Government will pay $929 million, and Chorus would spend between $471 million and $671 million.

Both spending forecasts were ahead of those provided by Craigs, McIntyre said.

"Chorus is receiving some Government funding to deliver on the fibre project and they probably want to show they are getting on with it," he said.

"The company is under some pressure to deliver the project on time and they want the market to know they are spending the money well."

Chorus shares were still trying to regain some of the value lost after the Commerce Commission ruling on unbundled copper local loop (UCLL) charges, he said.

UCLL lets retailers use the copper network between an exchange and an end-customer's premise to offer their own voice and broadband services.

Chorus chief executive Mark Ratcliffe told an institutional investors briefing the company was delivering on its short-term goals, including being on track to lay fibre past about 50,000 schools, homes and businesses by the end of July.

"Our focus now shifts to our longer-term objectives," Ratcliffe said.

"We are working closely with our customers to help them transition to a fibre world, while also building our fibre network and operating our copper network more efficiently."

Chorus chief financial officer Andrew Carroll said the UFB roll-out and the Rural Broadband Initiative were huge programmes of investment in network capability.

Chorus expected fibre-related capex to account for about 80 per cent of gross capex this year and next.

Ratcliffe said the fibre investment by Chorus, alongside that of the Government, was an example of public private partnership aligned to a common vision.

The amount being invested underlined the need for certainty so the industry could deliver "compelling services" to enable users to benefit from fibre.

Chorus was separated out of Telecom in November but its copper lines are still subject to regulatory oversight, and this month the Commerce Commission indicated it wants to cut the price on the averaged price of the UCLL. That announcement saw the share price plunge.

Chorus shares closed yesterday down 1.6 per cent at $3.15.

- Otago Daily Times

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