A Commerce Commission decision handed down today is set to cost Chorus upwards of $10 million, pushing its earnings into decline.
The Commerce Commission (Commission) has determined that unbundled copper low frequency service (UCLFS) connection charges should be re-set so that they are the same as benchmarked unbundled copper local loop (UCLL) that were set in a determination made on December, 3, 2012.
This means that the UCLFS connection charges will change to align to the benchmarked UCLL connection charges. Chorus estimates that this decision would have an annualised EBITDA impact of around $6 million, according to a company statement.
"The Commission also requires that the new UCLFS connection charges be backdated to 3 December 2012, including interest," it said.
"The net effect of backdating and interest charges is estimated to reduce Chorus' FY14 EBITDA by an indicative $9-$10 million. "Chorus' FY14 EBITDA guidance range is unchanged but the consequence of today's decision is that Chorus now expects to track to the middle of the range of flat to low single digit percentage decline in EBITDA, relative to underlying FY13 EBITDA of $654 million." RSPs currently pay UCLFS connection charges to connect end users to Chorus' UCLFS, in addition to ongoing monthly rentals for accessing these services. According to a company statement, Chorus' view is that connection charges for UCLL are part of the UCLL final pricing principle (FPP) process that is due to be completed by 1 December 2014. "Those processes use a cost modelling rather than a benchmarking approach," it said
"Chorus proposed that the Commission consider the review of the UCLFS connection charges with the benefit of cost modelling analysis."