Chorus credit rating revised to stable from negative by S&P on copper pricing

Thursday 4th December 2014

Chorus's credit rating outlook was revised to 'stable' from 'negative' by Standard & Poor's after the Commerce Commission lifted the proposed price it can charge customers for access to its copper lines.

S&P affirmed the network operator's BBB rating, saying the improved pricing and revisions to Chorus's debt covenants in July had "significantly reduced downward pressure" on the rating.

S&P said while the commission's draft final pricing principle could be revised before being finalised next April, it doesn't expect any change sufficient to threaten the BBB rating.

"Our ratings on Chorus reflect the group's strong market position as owner of the dominant fixed line telecommunications access network in New Zealand and high capital barriers to entry," S&P said. Risks to Chorus included the regulated network pricing, potential for cost escalation with the proposed ultra fast broadband fibre to the home network, and volume risks as some consumers switch to mobile from fixed and other local fibre companies compete for business.

The telecommunications regulator's draft determination this week set a limit of $38.39 monthly rental for access to Chorus's traditional copper lines network for broadband internet services. The rental, which had been $44.98, was cut to $34.44 effective Dec. 1. Chorus said the new pricing would slash annual earnings by $80 million, less than half of the $170 million hit it had projected until current pricing.

Shares of Chorus fell 2.9 percent to $2.66.

BusinessDesk.co.nz

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