The slump in the share price of line network owner Chorus has been put down to misinterpretation and miscommunication of a Commerce Commission decision released last week.
Investors understood there had been a change, but not what the change was.
There was a feeling of: "Here we go again", with more regulation for the company, driving down the share price.
Chorus, which was structurally separated from Telecom to be part of the Government's ultrafast broadband project, opened on Thursday morning at $3.57 a share.
After the commission released a draft ruling on the pricing for competitors to use its copper line network, the shares fell to $3.25. The next day, the shares were down to $3.04, falling 43c in two days.
By Monday, the shares had recovered to $3.17.
Craigs Investment Partners broker Chris Timms said people adopted a "shoot first" mentality.
"They bailed out and when they worked it all out, they started buying back in."
The commission indicated the average UCLL (unbundled copper local loop) price would reduce from $24.46 to $19.75 over a three-year period.
The urban UCLL price was already $19.84 and the reduction to $19.75 was immaterial to Chorus.
The rural UCLL price was currently $36.63 and the commission proposed that rural prices step down in December 2012, 2013 and 2014 until equalling the urban price, which fell at only 3c a year.
The major issue for the company was the pricing of the UCLFS (unconditioned ultralow frequency service), a Chorus product consumed only by Telecom to operate a "plain old telephone service" or a POTS.
Mr Timms said part of the issue for the telecommunications industry was the widespread use of acronyms.
"If you ask someone on the street what a UCLL is, not many will know. It is not an easy industry to understand.
"The telecommunications industry is like a bowl of 'alphabet soup'.
"We need to demystify things.
"Telecommunications is a good industry for a lot of investors. It pays healthy dividends and should be robust."
For overseas investors, selling out on perceived bad news was often the first response, Mr Timms said.
Forsyth Barr broker Tom Bliss agreed the UCLFS price was more significant to Chorus, especially if the price for Telecom voice and broadband lines, based off the UCLL price, was to be based off the ultralow frequency service, as he believed should be the case.
"The recent Chorus share price fall looks overdone to us and, notwithstanding the regulatory uncertainty, we are upgrading our recommendation to 'buy'."
