Many analysts see Chorus moving into something of a serene period after the main Ultrafast Broadband (UFB) fibre rollout wraps up in December, and the UFB 2 areas are mopped up by the end of 2022.
After years of heavy co-investment with the Crown, the network operator will be able to sit back and watch the cash roll in (albeit with now under a revenue cap as new telecommunications legislation kicks in that regulates it like a utility).
Jarden's Arie Dekker says that is possible.
But in a new research note this morning, the analyst also sees two scenarios where Chorus goes aggressively onto the front foot to counter moves by Spark and Vodafone into fixed wireless broadband. That is, using their 4G (and soon 5G) networks to deliver fast internet into a home, no landline (or Chorus clip of the ticket) required.
Fixed wireless under 5G will be so snappy that, for many, it will be a perfectly good alternative to fibre - hang the billions spent on the UFB rollout.
One of Dekker's scenarios would see Chorus cut its wholesale rates, looking to counter 5G fixed wireless via a price-war mechanism (fixed-wireless has thus far been cheaper than fibre - as well as having the advantage that it can be installed almost instantly).
The other would see Chorus invest in its own mobile network - possibly via a play for 2degrees' assets (which could be bought cheap. 2degrees is profitable but its parent company, Toronto listed Trilogy International partners, whose only other asset is a small Bolivian telco, has a market cap of just C$114 million or $128m, following a prolonged share slump).
"While it would not be without some reasonably high hurdles - regulatory for
Chorus, which is subject to quite strict line-of-business restrictions - we do wonder
whether the conditions are right for Chorus to purchase an existing mobile network," Dekker says.
"The number three players in the broadband and mobile sectors, respectively, Vocus
and 2degrees have sat somewhat in no-man's land over the last five years with limited
2degrees has its own mobile network (Vocus wholesales from Spark). But unlike its larger rivals, it has yet to outline any upgrade timeline for 5G. It has less financial wherewithal than Spark and Vodafone, but as an all-Huawei shop, it is also the most mired in the security controversy (Vodafone's mobile technology partner is Finnish-based Nokia, while Spark - which uses gear from Huawei, Ericsson and Cisco at present - says it can hit its 5G deadlines via a "multi-vendor" strategy).
While Vodafone NZ has been reinvigorated by its new ownership, 2degrees "has seemingly fizzed out," Dekker says.
Sky in the mix
The wildcard in the mix is Sky. At the pay-TV provider's annual meeting last Thursday, new chief executive Martin Stewart said his company was considering a broadband play that would hit Spark on its own turf - possibly through some sort of tie-up with Chorus.
Dekker notes "Sky's ambitions to diversify its revenue streams with, a likely move into telecommunications."
He concedes it's left-field, but say's it's possible they'll be a "big play" that sees 2degrees mobile network got to Chorus, then 2degrees 1 million or so mobile customers and Vocus' 200,000 or so broadband customers being combined with Sky (Vocus NZ is part of the ASX-listed Vocus, which has made on-off efforts to see its NZ arm - although it's latest position is that it's not on the block).
Under this scenario, Chorus - which was structurally separated from Telecom (now Spark) in 2011 in a bid to split wholesale and retail operations - could operate 2degrees' mobile network on a wholesale basis, selling access to Sky, which would include 2degrees mobile customers. Chorus could also wholesale to Vocus.
Fixed wireless gains
Fixed wireless has been an out-and-out hit for Spark over the past couple of years, transferring tens of millions in profit from Chorus's pockets to its own.
At its full-year report in August, Spark said fixed wireless customers jumped 36,000 in the 12 months to June 30 to 166,000, or around 20 per cent of its customer base.
And Vodafone NZ technology director Tony Baird recently said his company had around 46,000 customers on fixed wireless, mostly under the Rural Broadband Initiative. But under its new ownership, it wants to make an aggressive, 5G-fuelled play for fixed wireless.
Baird told the Herald his company was aiming to shift up to 25 per cent of its broadband base (or around 100,000 customers) onto fixed wireless over the next two or three years.
Like Spark, Baird sees much more generous fixed wireless data caps under 5G. And while fixed-wireless will always be geo-fenced (restricted to the immediate area around a home or business), the technology director saw potential for a "take-it-with-you" option that would also cover a second property, such as a bach.
5G to turbo-charged fixed wireless
More, Baird said that as the 5G rollout filled out, and millimetric spectrum became available after 2022, he saw inner city networks of small cellsites, in part via utilising hundreds of cabinets and other infrastructure inherited with Vodafone NZ's TelstraClear acquisition. The upshot: super fast (1 gigabit to 10 gigabit/s) fixed wireless over 5G that could be used by businesses in areas like the Wellington CBD, Auckland CBD, and areas like the Albany and East Tamaki light-industrial bases - not just as a fibre substitute, but eliminating the need for wi-fi too.
In late 2017, (now departing) Chorus boss Kate McKenzie said a single 5G mobile network could be built on the public-private UFB model (she did not say which company would build it, but it was widely assumed she meant her own).
But the idea got a lukewarm political reception, and McKenzie backed off.
And in the interim, Vodafone (from December) and Spark (from June next year) have outlined firm plans for 5G mobile network upgrades.
But now Chorus's mobile network concept could be revisited as a purely commercial model. 2degrees has around 1 million mobile connections (Spark and Vodafone have around 2.5m each), which would give it a base if it acquired 2degrees, or signed it as an anchor customer. Then there would be potential wholesale or mobile virtual network operator business with Vocus, the owner of Orcon and Slingshot.
Dekker says a move into mobile infrastructure could appeal to Chorus because, unlike its UFB fibre and legacy copper line business, it's relatively lightly regulated.
Analysts will be waiting to see how Chorus's incoming chief executive, JB Rousselot (a veteran of Australia's National Broadband Network), sees the lay of the land after he starts on November 20.
But this morning, Chorus spokesman Ian Bonnar reiterated that his company sees an ongoing data explosion of the next few years that will see fibre remain a must. He also saw fibre staying ahead in the bandwidth race against 5G.
"Fibre has physical qualities that can never be matched by mobile, including 5G, simply due to the laws of physics. Fibre is a dedicated connection, rather than shared, meaning you should always get what you pay for in terms of consistent speed and throughput," Bonnar said.
"And fibre is uncongested, meaning it is always reliable at peak times. 5G will be shared amongst all other users on a cellsite, so its performance will vary depending on load, weather conditions, and your proximity to the cellsite."
Yet the Chorus spokesman also left the door open to Dekker's mobile network investment scenarios, adding "Several analysts see some sort of expanded role for Chorus to support the delivery of mobile infrastructure cost-effectively and without duplication.
"We already provide fibre backhaul to lots of mobile sites today so it's not a huge stretch as we're already in that market.
"It's less clear at this point exactly what form that involvement could take, so any suggestions of specifics are purely speculative at this stage - but safe to say we'd be open to things that make sense, deliver value and fit within our regulatory model."