CNU
15/12/2015 08:44
GENERAL
PRICE SENSITIVE
REL: 0844 HRS Chorus Limited (NS)
GENERAL: CNU: Commission's final FPP determination, FY16 EBITDA guidance
STOCK EXCHANGE ANNOUNCEMENT
15 December 2015
Commission's final FPP determination, FY16 EBITDA guidance
The Commerce Commission has today released the final pricing determinations
for a range of regulated products and services.
In keeping with the previous draft determinations, the Commission has
proposed a glide path for all monthly rental prices. The final prices, which
apply from 16 December 2015, are:
o A final UCLL price of $29.75 in year one, reaching $31.68 in year five
(compared to $23.52 currently).
o A final UBA price of $11.44 in year one, reaching $10.67 in year five
(compared to $10.92 currently).
The Commission has also confirmed that it will not backdate the revised
changes.
Chorus CEO Mark Ratcliffe welcomed today's decision.
"We have consistently said that the previous draft prices significantly
underestimated the true value of Chorus' network, so it is pleasing that the
Commission has taken on board the industry's repeated requests and used some
of the real world costs of building a network.
"The entire debate over the last three years has been about how much prices
should reduce, and prices are still below the prices at demerger.
"It is disappointing to note the Commissioners' split decision on backdating
is not in our favour, despite the strong precedent that backdating should
apply.
"This lengthy, volatile process highlights the importance of the post-2020
regulatory review to ensure a more stable and predictable framework to
deliver better broadband for New Zealand."
In aggregate, across both monthly and transaction changes, the annualised
increase in Chorus' EBITDA is around $120 million relative to benchmark
pricing, based on September 2015 volumes. This is made up of:
o An increase of about $130 million, reflecting the annualised impact of the
first year final monthly pricing on Chorus' EBITDA.
o A reduction of about 25% on transaction charges, or about $11 million
annually.
In aggregate, this is still around $50 million per annum below equivalent
demerger pricing.
As a result of today's decisions, Chorus is issuing updated FY16 EBITDA
guidance of $580 - $600 million. This is consistent with guidance provided
in August, adjusted for final FPP pricing and transaction charges and
including the additional cost of activity Chorus is undertaking to improve
the end-to-end fibre connection process for customers.
Chorus will review the Commission's decision in full and the implications for
matters such as dividend payments and the cost-saving initiatives the company
put in place following the benchmarking decision. Chorus expects to provide
a capital management update as part of its interim results in February.
The Commission's decision is available on its website at www.comcom.govt.nz.
ENDS
For further information:
Nathan Beaumont
Stakeholder Communications Manager
Mobile: 021 243 8412
Email: [email protected]
Brett Jackson
Investor Relations Manager
Mobile: +64 (27) 488 7808
Email: [email protected]
End CA:00275126 For:CNU Type:GENERAL Time:2015-12-15 08:44:28
