Business Editor for the NZ Herald

UFB contract changes don't help Chorus: analysts

Chorus has been contracted to lay fibre for the ultra-fast broadband network. Photo / APN
Chorus has been contracted to lay fibre for the ultra-fast broadband network. Photo / APN

Ultra-fast broadband contract changes don't address the fundamental problems Chorus is facing from wholesale broadband price cuts, say analysts.

Chorus and the government body looking after the UFB scheme announced changes yesterday to make the internet initiative more cost-effective and help reduce some of the infrastructure company's $1 billion funding gap for the project.

Chorus will not get any more government funding under the changes nor will the Government remove the network builder's obligations to finish its part of the UFB project by the end of 2019.

Crown Fibre Holdings is responsible for $929 million of taxpayer investment in Chorus' part of the UFB network, under which fibre lines will be rolled out to 75 per cent of the country.

Chorus and CFH have been in talks about possible UFB contract changes since December last year after the former Telecom unit said Commerce Commission broadband price cuts would hit its earnings and lead to a $1 billion funding hole for the project.

The two organisations unveiled a number of changes yesterday including giving Chorus more flexibility around the installation of fibre.

CFH also agreed to a scheme that will better match CFH investment in fibre with Chorus' costs of building the network.

Forsyth Barr analyst Blair Galpin said the changes were sensible but they did not solve the problems that the broadband price cuts cause for Chorus.

"They are nice-to-have improvements ... but they don't really change Chorus' underlying problem, which is getting fundamental costs out of the business somehow or increasing revenues," Galpin said.

IDC analyst Peter Wise said Chorus was doing its best with "short-term pragmatic steps".

- NZ Herald

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