The uncertainty facing infrastructure company Chorus meant it had no choice but to withdraw its dividend guidance for the 2014 financial year, Forsyth Barr broker Suzanne Kinnaird said yesterday.
Chorus has been under price pressure, market and Government scrutiny following the Commerce Commission's decision to cut the price of access to the company's copper wire network.
''This is not a case of the company saying there will be no dividend for 2014 but does highlight its dividend policy will be part of any negotiation with the Government. A cut in dividends is more likely than a straight cancellation,'' Ms Kinnaird said.
Longer term, Chorus would rely on a favourable outcome from the cost-based review it had requested.
But until that was completed in 18-24 months, dividends were likely to constrained as one condition of any Government intervention, she said.
Chorus shares hit a new low of $1.88 after the withdrawal of dividend guidance.
Chorus had previously forecast a dividend of 25.5c per share.
Craigs Investment Partners broker Chris Timms said the review of the dividend was likely to see investors looking for income sell out of the company rather than face uncertainty.
Chorus was unlikely to come back into the market with the same dividend recommendation this year.
''The change will be a catalyst for people to move out of the stock.''
Last week, Communications and Information Technology Minister Amy Adams announced Ernst & Young Australia would undertake a Chorus assessment.
The assessment had been commissioned to provide the Government with a detailed analysis of the Chorus to provide the Government with a detailed analysis of the impact on Chorus of the recently announced determinations of the commission and the ability of Chorus to meet its ultra-fast broadband (UFB) obligations and the Rural Broadband Initiative (RBI) contractual obligations.
It would also distinguish between the impact of the commission's pricing decisions and any strategic choices Chorus might have made which could contribute to any financial stress it could face.
The review was expected to be completed before the end of the year, Ms Adams said.
''The immediate concern to the Government is if its UFB and RBI contracts are at risk,'' she said.
Chorus chief executive Mark Ratcliffe said at the time of unprecedented levels of investment by Chorus, withdrawing dividend guidance was a regrettable but necessary step, in light of the ongoing uncertainty the company faced.
''We are proud of our role as the cornerstone partner in the UFB initiative which is being delivered like clockwork.''
Chorus remained hopeful as the major partner in New Zealand's largest public private partnership it could work with the Government to find a timely solution to the issues, he said.
