27 Aug 2013

Chorus predicts fall in sales

7:35 am on 27 August 2013

Chorus is expecting sales to fall in the 2014 financial year, with regulatory uncertainty remaining and the fibre build likely to continue being a significant demand on capital spending.

The listed company made $171 million in the 12 months to the end of June, with annual operating profit of $663 million. The company was split from Telecom in December 2011, so there are no comparable results from the previous year.

Chorus is responsible for much of the ultra-fast broadband and rural broadband build, and says that investment accounted for 85% of its $681 million gross capital spending in the period.

It faces a challenging year, with any changes to regulated prices influencing its future revenue and the transition of the public to fibre.

The network provider says there is also greater focus from retail service providers on cutting costs, and the retailers are looking at driving fixed-to-mobile substitution.

As well, other network providers may start to gain greater market share as their infrastructure footprints get bigger, it says.

Mobile network operators have begun offering mobile broadband capability which may be more competitive against the company's fixed-line pricing.

Chorus chief executive Mark Ratcliffe says 2014 has many of the challenges it faced last year, including construction activity, regulatory process participation and the completion of an IT system transition.

"Other than that, the business is in good heart," Mr Ratcliffe says.

The IT system is a one-off cost over two to three years.

"What it gives us is we're in control of our own destiny and we're not having to be reliant on Telecom systems anymore," he says.

"We're a completely separate company and it's about time we had our own systems to use.

"So we've got plenty on. We're pleased with where last year ended up and excited about the challenges in front of us."

Chorus will pay a fully-imputed final dividend of 15.5 cents per share.