Ann: GENERAL: SPK: Commerce Commission releases updated draft...

• Release Date: 02/07/15 09:08
• Summary: GENERAL: SPK: Commerce Commission releases updated draft FPP charges
• Price Sensitive: No
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					SPK
02/07/2015 09:08
GENERAL
NOT PRICE SENSITIVE
REL: 0908 HRS Spark New Zealand Limited

GENERAL: SPK: Commerce Commission releases updated draft FPP charges

Market Release

2 July 2015

Commerce Commission releases updated draft FPP regulated input charges

The Commerce Commission has announced today further draft 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 2 December 2014 draft FPP determination.  A final FPP
determination is expected in December 2015.  These determinations are
available on the Commerce Commission's website at www.comcom.govt.nz

Under the revised draft FPP, it is proposed that the UCLL wholesale charge
initially increase from $23.52 to $26.74 per customer connection, per month.
It is proposed that the UBA wholesale charge under the FPP initially increase
to $11.15, compared with the IPP charge of $10.92 which took effect from 1
December 2014.

Based on this draft, the final FPP prices will replace the IPP prices
effective from 1 December 2015 and will not be backdated.

The proposed changes to these charges are set out below:

UCLL / Baseband
IPP effective 1 Dec 2014
$23.52
Draft FPP 2 Dec 2014
$28.22
Draft FPP 2 July 2015
$26.74

UBA
IPP effective 1 Dec 2014
$10.92
Draft FPP 2 Dec 2014
$10.17
Draft FPP 2 July 2015
$11.15

Total
IPP effective 1 Dec 2014
$34.44
Draft FPP 2 Dec 2014
$38.39
Draft FPP 2 July 2015
$37.89

It is proposed that total charges increase over time.

Based on year 1 draft FPP charges Spark New Zealand's copper input costs
would increase by approximately $40 million on an annualised basis and
increase UBA input costs by approximately $2 million on an annualised basis,
relative to the IPP charges.

FY15 Financial Guidance

Spark New Zealand's FY15 financial guidance is based off the IPP charges and
remains unchanged.

Spark New Zealand Comments on Draft FPP

Spark New Zealand said today it was encouraged the Commerce Commission has
taken on board consumer feedback, but disappointed the Commission is still
proposing a significant increase in wholesale line charges to access the
Chorus copper network.

In its latest draft decision, the Commission proposed today that broadband
line charges be increased from December this year by $3.97 per month (incl.
GST) per line above current charges, with further increases totalling $1.37
in annual increments over the following four years. This compares with its
earlier proposal for a flat-rate increase of $4.54 per month.

"While the Commission has slightly reduced first-year charges from its
earlier draft position, this decision (if finalised) would still mean
wholesale line charges in New Zealand are around 70% higher than comparable
countries," commented Spark New Zealand managing director Simon Moutter.

"More than 52,000 New Zealand consumers sent a strong message to the
Commission about the cost of broadband as part of our 'Be Counted' campaign.
We're encouraged that the Commission has noted the campaign in its decision
and has said that it welcomes greater consumer participation in its
regulatory process."

Mr Moutter said Spark New Zealand was pleased the Commerce Commission is now
looking to take backdating of the higher broadband line charges off the
table. In its earlier draft decision, the Commission had foreshadowed
backdating to December 2014 which has created major industry uncertainty.
This uncertainty caused Spark New Zealand to reluctantly increase prices on
most of its broadband and landline plans from February 2015 to partially
offset the impact of backdated charges.

If the Commission confirms backdating is ruled out in its final decision, and
that decision is not subject to appeal, Spark New Zealand will honour its
commitment to pass the value of these related retail price increases back to
customers in a fair and transparent way. However, if the Commission reverses
its decision on backdating, that will create more upward pressure on retail
prices as there has only been partial recovery of increased line charges to
date.

"We think New Zealanders deserve good value broadband. Around half the
monthly cost for broadband goes to line charges, so the Commerce Commission's
decision has a big impact on what consumers and businesses pay for their
broadband," said Mr Moutter. "We will continue to advocate on behalf of our
customers as the Commerce Commission moves towards a final decision at the
end of the year."

He said Spark New Zealand wanted to be more upfront with its customers about
what makes up the retail price of a broadband or landline plan. It was
looking to change the way it presents pricing on customer bills to give a
clearer breakdown of regulated lines charges and government taxes and levies.

-ENDS-

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

For investor relations queries, please contact:
Mark Laing
General Manager Corporate Finance +64 (0) 27 227 5890
End CA:00266517 For:SPK    Type:GENERAL    Time:2015-07-02 09:08:46