Chorus chief executive Mark Aue.
Chorus has swung back into the black with a $4 million net profit for the year to June 30 versus its prior-year net loss of $9m.
Shares were up 3.8% to 9.77 in midday trading. The stock is up 23.4% for the year.
The bottom-line result represented a comeback after a first-half net loss of $5m, blamed on the tight economy. The company, which has thinned its corporate ranks, cited “strong cost management”.
Ebitda (earnings before interest, tax, depreciation and amortisation) improved by $5m to $705m, a whisker ahead of market expectations.
Total revenue increased $4m to $1.014 billion, driven by a 7% increase in fibre revenues.
The full-year dividend was confirmed at 57.5 cents per share (from 35cps last year) as the company continues its strategy shift “from network builder to network operator” with the capital-intensive UFB build behind it.
The results were in line with Chorus’ half-year update, when it said it was tracking to the lower end of its full-year operating earnings guidance of $700-$720m.
The analyst consensus expectation was a net profit of $12m and ebitda of $705m on revenue of $1.018 billion.
Chorus guided to $710-$730m ebitda for FY2026.
It said its dividend would increase to 60cps, based on a payout of 70% to 90% of free cash flow – a nose ahead of the analyst consensus 59.4cps.
On a conference call with analysts, Chorus chief executive Mark Aue said he saw a possible pickup in the economy but not until early 2026.
Jarden’s Arie Dekker said “the business is behaving as expected”.
The mid-point guidance of $720m was in line with his pre-earnings pick of $719m.
The forecast for another dividend increase was underpinned by tracking-down capex.
The mid-single digit increases for wholesale products (below) would help close a gap of around $100m with Chorus’ regulared maximum allowable revenue.
Dekker maintained his “underweight” rating in a post-earning note, but lifted his 12-month target price from $8.17 to $8.44.
Earlier this year, Chorus put pressure on One NZ, Spark and 2degrees fixed-wireless broadband plans as it doubled the speed of its cheapest fibre plan, Home Fibre Starter ($38 per month wholesale, with a retail cap of $65) to 100 megabits per second download.
In its investor presentation released this morning, Chorus says it is consulting on a “new low-speed plan” that would wholesale for $28 a month with a retail price cap of $55 a month.
Aue said on the conference call that the low-speed plan had drawn “mixed reviews from retailers, to be frank .. There are some retailers who like the idea of having that as an option”.
Later, Aue told the Herald that “I think some of the larger operators probably don’t see the need [for the low-speed $28 a month plan], but they could quite happily leave the 100 megabit plan as their entry level.
“Others actually see it favourably and could see an opportunity to bundle it with their core products. The gentailers, for example.”
At the same time, prices of other plans would drift upward, including Home Start, which would rise to $40.50, with the cap on its retail price lifting by $5 to $70 per month.
The company said inflation pressure continues “across numerous expense lines”.
Aue noted that, contractually, Chorus can only increase core fibre prices once a year. For its regulated fibre products, the rise is indexed to the CPI
Last week, the Commerce Commission recommended that Media and Communications Minister Paul Goldsmith deregulate rural copper networks – which would enable Chorus to start to withdraw expensive-to-maintain copper lines.
The market watchdog, which has noted the rise of Starlink in rural areas, said copper was no longer a natural monopoly.
Aue noted the Commerce Commission had called Starlink a “game-changer” for rural broadband. “Starlink has actually helped move the argument forward on copper deregulation”. (There is the proviso that Chorus sees Starlink as an option for remote rural properties, while its founder Elon Musk has wider ambitions.).
The copper deregulation decision now sits with Goldsmith.
Chorus has been promoting a $1.5b public-private partnership to expand fibre into rural areas. The company sees the total cost of the 10-year project at $2.7b, with the Crown’s contribution potentially coming from an increase in the snnusl Telecommunications Development Levy on telcos.
In June, the Infrastructure Commission named Chorus’ rural fibre build one of 17 “priority projects” (from 48 submissions) endorsed in its draft National Infrastructure plan for potential funding.
The draft is part of the commission’s Infrastructure Priorities Programme - a system meant to give decision-makers a “menu” of priority problems and projects that align with strategic criteria, are buildable and represent value for money.
“The great thing is we’re not testing a hypothesis,” Aue said. “The UFB rollouts have already shown significant economic benefits.”
He also noted that Chorus’s rural fibre rollout, which would extend fibre to 13% of homes not within reach of the urban UFB, was the only private company-initiated proposal.
The Infrastructure Commission will field submissions on its recommendations between now and November and present its final plan to the Government in December.
Forsyth Barr says rural copper withdrawal would lower Chorus’ costs.
An expansion of fibre into rural areas would be a vehicle to lift its regulated maximum allowable revenue.
Asked for his message to people in rural areas who were worried about the withdrawal of copper lines, Aue said: “There are already three alternative services that are all better than copper.” Those were mobile network operators, “wisps” or regional wireless service providers and satellite services.
“And it’s an urban myth - or you could call it a rural myth, in this case - that copper is resilient or reliable. It runs at eight to 10 times the fault rate of fibre,” Aue said. Systems to control copper networks were no longer being manufactured.
Chorus has set a 2030 “aspiration date” to get out of copper “So that we have some certainty can all work together so people aren’t left behind.
In December, Chorus signed a memorandum of understanding with Datagrid (which plans a hyperscale data centre in Southland) to cooperate on a 6000km transtasman subsea fibre cable that would include Invercargill-to-Melbourne and Sydney-to-Auckland links in its circular design.
It would go live in 2028,
Today, Chorus said the project did not meet its investment criteria and had been put on the back burner.
Aue told the Herald that “Pre-sales commitment was not stacking up” against a backdrop of a shortage in cable-laying ships that would have pushed out the capital-intensive project to “Beyond 2030 ... The timeline kept moving to the right.”
The Chorus boss said there still domestic infrastructure opportunities including mobile infil and data centre connectivity. “There’s a lot of opportunities when previously the focus has been primarily on residential access.”
Dekker said the Tasman Ring decision had shown “discipline.”
NZX-listed Vector has put its fibre network in Auckland up for sale.
On the conference call, Aue indicated Chorus had no interest in placing a bid, given the overlap with his own company’s fibre.
UBS’ Phil Campbell asked Aue if he saw increased competition if one of the three regional LFCs (local fibre companies) bought Vector Fibre. Aue said Chorus already competed against the network under its current owner, Vector.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.