3 Dec 2014

Decision adds $332m to Chorus value

7:11 am on 3 December 2014

A few strokes of a regulator's pen led to investors adding nearly $332 million to Chorus' value while wiping more than $174 million off Spark's value yesterday, even though it is just a draft decision.

Spark's headquarters in Auckland

Spark says the decision means its annual costs will rise by about $60 million. Photo: RNZ / Kim Baker Wilson

The Commerce Commission revised upwards the price the phone lines company, Chorus, can charge telecommunications retailers such as Spark for using its copper lines by $4.70 a month.

The corporate regulator also revised down further the amount Chorus can charge for using its broadband services over those copper lines by 75 cents to $10.17.

Spark said the decision meant its annual costs would rise by about $60 million, while Chorus said it could add $90 million a year to its operating earnings.

Spark's regulatory affairs general manager John Wesley-Smith said the commission's decision was a bolt from the blue and added considerable uncertainty to the industry.

Spark, formerly named Telecom, is now reviewing all its broadband and fixed voice customer pricing.

Mr Wesley-Smith said intense competition meant prices in the industry had already dropped as a result of previous commission decisions.

Chorus chief executive Mark Ratcliffe said it was the first regulatory decision to go his company's way but a key decision the commission had not made yet was whether to backdate the lines pricing decision.

He said the Commission had indicated it would put out a consultation document next week which impacted the time the price would apply from.

Mr Ratcliffe said backdating the increase for a couple of years could be quite a substantial amount of money.

Another phone retailer, CallPlus, which owns Orcon and Slingshot, said the decision "grabs a few extra bucks a month from every New Zealand household and transfers it to Chorus' shareholders".

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