By Jenny Ruth
Sunday 23rd January 2011
|Text too small?|
Vector benefited from two important regulatory decisions made late last year but the government's announcement that Telecom had preferred bidder status to roll out fibre in the Auckland region was a significant blow for Vector's fibre aspirations, says Andrew Harvey-Green, an analyst at Forsyth Barr.
"The regulatory uncertainty facing Vector has eased considerably to the point where we believe the downside risk is manageable," Harvey-Green says.
"This should provide investors with more comfort that its dividend is sustainable and underpin Vector's position as a low-risk defensive play," he says.
There is still some regulatory uncertainty. "Our analysis is still showing that both the electricity and gas businesses are earning very close to the top of the Commerce Commission's allowable band."
On the fibre front, although Vector is still on the short list "we believe Vector's chances of winning the Auckland region are now slim (but) this may not be a bad thing, given where the government is seeking to push broadband prices," Harvey-Green says.
"We still believe there is potential upside for Vector - the cheapest way to string fibre is along existing power poles and hence there is a possibility that Vector leases space to Telecom, thus earning a risk-free return without incurring any capital costs."
No comments yet
Vector ekes out 2.3% gain in FY profit as technology unit bolsters earnings
Vector may beat guidance for FY 2013, suffer 2014 earnings drop
Vector cleared to buy Contact Energy's gas metering business for $63M
Vector to cut gas distribution prices by 18 percent
Vector 1H result up 10.8 percent in flat economy
ComCom takes issue with Vector on regulated rates of return
Vector credit rating may come under scrutiny
Vector profit steady, underpined by revenue growth
Long-running battle over power line prices coming to a head
Vector appoints Beddoe as chief risk officer