Prices New Zealanders pay for their internet and landline connections look sure to rise following a decision yesterday by the Commerce Commission to lift Chorus line charges.
Sharebrokers say significant uncertainty was removed from New Zealand's telecommunications industry with the decision.
But the most likely impact is for prices to rise for internet and landline connections as soon as the companies, such as Spark, can work out how much extra to charge and when to start charging more to their customers.
Craigs Investment Partners broker Chris Timms said the decision allowed Craigs to lift its target share price to $3.80 and would allow Chorus to "comfortably'' restart its 2016 dividend payment at 15c per share, with 1c a year growth from then on. Chorus expected to reinstate its dividend with its interim result in February.
Chorus shares rose as as high as $3.75, or 20%, to $3.70 after the Commerce Commission decision, valuing the company at $1.47 billion, compared with $1.23 billion before the decision was released.
"Given copper pricing has ended up broadly in line with fibre, when the pricing mechanisms are reset again in five years time for both inputs - and under a revised Telecommunications Act framework - it looks to us like there is a much lower chance of repeating the same uncertainty that has been generated through the current regulatory process.''
Chorus chief executive Mark Ratcliffe welcomed the decision but was disappointed to note the commission's split decision on backdating was not in the company's favour.
"This lengthy volatile process highlights the importance of the post-2020 regulatory review to ensure a more stable and predictable framework to deliver better broadband to New Zealand.
"We have consistently said the previous draft prices significantly underestimated the true value of Chorus' network.''
Spark managing director Simon Moutter, along with Opposition MPs, said consumers would lose out as the commission hiked copper line charges.
The new charges were almost $8 a month per connection higher than
New Zealand retail broadband providers currently paid and nearly $4 a month higher than the commission proposed in its second draft decision in July.
As the Chorus line charges represented about half the typical retail price for broadband and landline voice services delivered over the Chorus copper network, the decision had a substantial impact on what most New Zealanders would pay for their internet or landline phones, Mr Moutter said.
"We had been hoping the commission decision would allow us to pass on some savings to customers from retail price increases earlier this year.
"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.''
Chorus would be forced to increase its retail voice and broadband pricing to take into account the increased costs now faced from higher regulated Chorus line charges, he said.
The massive swings in successive commission decisions within a matter of months made it hard for any business to invest, plan and price its services effectively.
The decision meant New Zealanders would pay almost double the median regulated line charges in other comparable countries.
It also meant the regulated charges for access to the decades-old Chorus copper network would now significantly exceed access charges for entry-level plans on the new ultra-fast fibre network, Mr Moutter said.
Mr Moutter previously worked for Telecom before it was split into Chorus and Spark.
At a glance
• The Commerce Commission says Chorus can charge more for use of its copper network.
• There will be no backdating of the price increase and Chorus has 20 days to appeal that part of the ruling.
• Prices for internet and landline connections are certain to rise
• Chorus share price rises and brokers upgrade their forecasts
