Chorus shares dive on regulator's pricing
Market watch top headlines
The shares of telecommunications network operator Chorus have plunged 12 per cent following a Commerce Commission decision that would slash what it can charge for access to electronic switchgear used over its copper lines.
That was despite winning some pushback on pricing for the actual lines.
The shares plunged 40 cents to $3, the lowest since June 21, when the NZX opened on Monday after the competition regulator released a final determination on unbundled copper local loop (UCLL) and a draft regime for unbundled bitstream access (UBA) on Monday.
It conceded ground on the UCLL regime while signalling a sharp cut to UBA pricing.
The regulator set the new UCLL rates at a geographically averaged price of $23.52 per month per line from December 1, 2014, a 3.9 per cent reduction to the prices set in 2007.
Urban UCLL prices have been set at $19.08 and rural at $35.20, effective immediately.
UBA prices will be provisionally set at $32.45 per month, effective from December 1, 2014, from the existing $44.98.
Telecommunications Commissioner Stephen Gale told reporters the UBA decision will go out for consultation with a final decision likely in June.
If telecommunications companies are unhappy with the final benchmark, they can request the regulator use a cost-modelling approach to determine pricing instead, he said.
"This (UBA) price when finally decided in two years may have a significant impact on Chorus' revenue," Mr Gale said.
Telecommunications Minister Amy Adams signalled immediate disquiet, saying the government is reviewing the draft determination, which is "potentially significant for the industry and end users".
"New Zealand is one of the few countries in the world to have structurally separated its main telecommunications company, while at the same time rolling out a fibre network," Ms Adams said.
"This potentially highlights the need for a pricing methodology appropriate for the New Zealand context."
Among concerns is the potential for much lower copper network pricing to deter investment and uptake of ultra-fast broadband, using the government-subsidised fibre network being laid throughout the country.
The UCLL service lets telecommunication companies use the copper network between an exchange and an end-user's premises to offer their own voice and broadband services.
UBA gives access to Chorus's electronics, software and transport over the network, meaning telcos don't have to build their own.