Ann: GENERAL: SPK: Commerce Commission releases final pricing determinations

• Release Date: 15/12/15 09:41
• Summary: GENERAL: SPK: Commerce Commission releases final pricing determinations
• Price Sensitive: No
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					SPK
15/12/2015 09:41
GENERAL
PRICE SENSITIVE
REL: 0941 HRS Spark New Zealand Limited

GENERAL: SPK: Commerce Commission releases final pricing determinations

Market Release

15 December 2015

Commerce Commission releases final pricing determinations for regulated
copper input charges

The Commerce Commission has announced today the Final Pricing Principle (FPP)
determinations in relation to two regulated input products that Retail
Service Providers (RSPs) purchase from Chorus, the Unbundled Copper Local
Loop (UCLL) product and the Unbundled Bitstream Access (UBA) product. Spark
New Zealand purchases UBA and a Baseband product which is priced equivalent
to UCLL.

The FPP determinations supersede earlier Initial Pricing Principle (IPP)
determinations and the draft FPP determinations.  A copy of the determination
is available at
http://www.comcom.govt.nz/regulated-industries/telecommunications/regulated-s
ervices/standard-terms-determinations/unbundled-copper-local-loop-and-unbundl
ed-bitstream-access-services-final-pricing-principle/.

Under the FPP, the UCLL wholesale charge will initially increase from $23.52
to $29.75 per customer connection, per month.  The UBA wholesale charge
initially increases from $10.92 to $11.44 per customer connection, per month.

The FPP prices will replace the IPP prices effective from 16 December 2015
and will not be backdated.

The FPP charges will increase Spark New Zealand's copper input costs by
approximately $21m in FY16 and $36 million on an annualised basis and
increase UBA input costs by approximately $1m in FY16 and $2 million on an
annualised basis, relative to the 2 July draft FPP charges.

Previous price increases do not reflect this additional cost increase which
means we will be raising our prices further to reflect the higher charges.

While the Commission has confirmed no backdating, given the significant cost
increase we will have to assess the impact of this decision on our ability to
return savings to our customers as previously indicated.

FY16 Financial Guidance

Spark New Zealand's FY16 financial guidance is based off the 2 July Draft FPP
charges.  Following today's announcement input costs will increase by $22m in
FY16, however Spark NZ intends to mitigate this impact through price
increases, and as a result our guidance range is maintained.

Spark New Zealand Comments on FPP

Consumers lose out as Commerce Commission hikes Chorus copper line charges

Today's decision by the Commerce Commission to significantly hike regulated
Chorus line charges for copper broadband and landline services is the worst
possible Christmas present for New Zealand consumers and businesses, Spark
New Zealand said today.

The new charges are almost $8 per month (including GST) per connection higher
than what all New Zealand retail broadband providers currently pay, and
almost $4 a month higher than the Commerce Commission proposed in its second
draft decision just a few months ago in July.

As the Chorus line charges represent about half the typical retail price for
broadband and landline voice services delivered over the Chorus copper
network, this decision has a substantial impact on what most New Zealanders
will pay for their internet or landline phones.

Spark New Zealand Managing Director, Simon Moutter, said, "We had been hoping
that the Commerce Commission decision would allow us to pass on some savings
to customers from retail price increases earlier this year, if the Commission
had stuck to its decision not to backdate when the new higher charges would
take effect. However, while the Commission has confirmed no backdating, given
the significant and unexpected cost increase we will have to assess the
impact of this decision on our ability to return savings to customers as
previously indicated.

"We are now also forced to increase our retail voice and broadband pricing to
take into account the significantly increased costs now faced from higher
regulated Chorus line charges. While the Commerce Commission decision is
effective from tomorrow, it will take months before the higher charges flow
through completely into pricing for our customers. We will be advising
customers of pricing impacts as soon as possible.

"The massive swings in successive Commerce Commission decisions within a
matter of months makes it extremely hard for any business to invest, plan and
price its services effectively. We have now had two years of market disarray,
with significant fluctuations at every stage of the process. The losers out
of this are New Zealand consumers and businesses."

The Commerce Commission decision means that New Zealanders will pay almost
double the median regulated lines charges in other comparable countries. It
also means that the regulated charges for access to the aging, decades old
Chorus copper network will now significantly exceed access charges for
entry-level plans on the new state-of-the-art UFB fibre network.

This decision is doubly frustrating given the efforts taken with customers to
help keep broadband and landline prices down. This decision is a slap in the
face for the 50,000 customers who joined Spark earlier this year to send
submissions to the Commerce Commission asking it to keep Chorus charges down,
as part of Spark's Be Counted campaign.

-ENDS-

For media queries, please contact:
Richard Llewellyn
Head of Corporate Communications +64 (0) 27 523 2362

For investor relations queries, please contact:
Stefan Knight
General Manager Finance & Business Performance +64 (0) 27 252 9438
End CA:00275131 For:SPK    Type:GENERAL    Time:2015-12-15 09:41:03