Chorus withdraws dividend guidance on regulatory uncertainty

New Zealand’s Chorus has withdrawn its full-year dividend guidance, blaming the ongoing regulatory uncertainty over wholesale pricing for its move.

The company – which rents capacity on its broadband network to retail service providers, including Telecom New Zealand (Auckland, New Zealand) – had previously issued dividend guidance of NZD0.25 per share, but its financial plans have recently been thrown into disarray by regulatory proposals to lower the price of it services.

Under those proposals, the price that Chorus (Auckland, New Zealand) can charge retailers for access to its copper network would tumble from a current monthly rate of NZD44.98 ($37.19) a month to just NZD34.44, with changes set to take effect on 1 December 2014.

The operator is hopeful that a government review will recommend a less dramatic reduction in fees, but has already said pricing changes would hit profits and its ability to invest in a new fiber-optic network.

“At this time of unprecedented levels of investment by Chorus, withdrawing dividend guidance is a regrettable but necessary step in light of the ongoing uncertainty Chorus faces,” said Mark Ratcliffe, the chief executive of Chorus.

Chorus claims to be investing NZD3 in the so-called ‘ultra-fast broadband’ initiative for every NZD1 provided by the government, emphasizing the importance it plays in the rollout of infrastructure deemed critical to the competitiveness of New Zealand’s economy.

“We remain hopeful that as the major partner in New Zealand’s largest public private partnership we can work with the government to find a timely solution to the current issues that works for all parties and provides Chorus and its investors with the certainty we need to get on with delivering this once in many generations infrastructure upgrade,” said Ratcliffe.

New Zealand’s government had required Chorus to advise what steps it intended to take in relation to capital management options by a deadline of November 18.

The operator says it is continuing to review its capital management settings as regulatory and other key matters are progressed, and that other capital management changes might be appropriate.

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