Earnings guidance kept despite charges for copper line network will remain remain mostly unchanged.
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See also: ComCom proposes to let telco retailers keep $57 million and ComCom copper pricing decision a win for Chorus
Spark New Zealand [NZX: SPK], the country's biggest telecommunications provider, has affirmed annual guidance after the Commerce Commission announced regulated pricing on Chorus' [NZX: CNU] copper line network will largely be unchanged.
The Auckland-based company, which is Chorus' biggest customer, says 2015 financial guidance for low single digit growth in earnings before interest, tax, depreciation and amortisation and for a low single digit decline in revenue is unchanged. The company welcomes the regulator's split decision not to backdate the new pricing, but warned any subsequent changes by the commission will "create more upward pressure on retail prices." Spark is scheduled to report annual earnings on August 21.
The regulator is planning on setting the total price Chorus can charge for wholesale broadband services at an average $38.43 per month over the next five years, largely in line with the $38.39 price established in the benchmarking process, which came into effect on Dec. 1.
"While the commission has slightly reduced first-year charges from its earlier draft position, this decision (if finalised) will still mean wholesale line charges in New Zealand are about 70% higher than comparable countries," chief executive Simon Moutter says. "Around half the monthly cost for broadband goes into line charges, so the Commerce Commission's decision has a big impact on what consumers and businesses pay for their broadband."
Spark hiked retail prices earlier this year in response to the commission's ruling to set Chorus' prices using international benchmarks, having previously said it had already cut prices in anticipation of lower wholesale costs.
The company says it estimates copper input costs will increase by about $42 million on an annualised basis from the regulator's earlier ruling.
The Commerce Commission embarked on a more fulsome review of Chorus' pricing, known as a final pricing principle, after the network operator disputed the findings of the initial pricing principle, which used international benchmarks to set the price.
Telecommunications commissioner Stephen Gale says while the modelled price is similar to that found using international benchmarks, "New Zealand's local loop network is unique" and it is "clear our dispersed population is a significant cost factor."
Spark has been rallying its customers to lobby the commission for cheaper wholesale prices, something the regulator welcomes, while noting it reiterated the company's submission over the "apparent disparity between charges in New Zealand and Europe."
The company's shares last traded at $2.785, and have dropped 11 percent this year.
(BusinessDesk)
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