

NZ Govt: Report Confirms Chorus Short Cash For Broadband Network

       By Lucy Craymer 

    WELLINGTON, New Zealand--Telecommunications infrastructure company Chorus Ltd. (CNU.NZ) will have a funding shortfall of between 200 million New Zealand dollars (US$164 million) and NZ$250 million for the building of a new nationwide broadband network even if it implements cash-flow savings, an independent report commissioned by the government estimates.

    Chorus won the contract to build the bulk of the national broadband network in 2011, which is expected to cost in excess of NZ$3 billion. However, it said in November that steep cuts ordered by the country's regulator which monitors the company due to its monopoly position to what it can charge other operators for use of its existing copper-wire network mean there would be a NZ$1 billion shortfall in funds to complete the new broadband network. Chorus owns the bulk of New Zealand's copper-wire network, which is rented by providers of traditional fixed-line services.

    Amy Adams, the New Zealand government minister responsible for the telecommunications sector, said the report, undertaken by Ernst & Young Australia, confirmed that the changes to copper network pricing would have a significant impact on Chorus's financial position, and even if a wide range of actions was undertaken by the company, this "will not be sufficient to cover the funding shortfall to safeguard" the nationwide broadband build.

    The new New Zealand-wide broadband network is chiefly being paid for by Chorus. The government is expected to contribute about half of the total cost of building the rural and urban networks, or about NZ$1.5 billion. The government also supports the deal through interest-free loans and an equity deal. Funding is staggered and is reliant on Chorus meeting various deadlines.

    Ms. Adams said the government agency Crown Fibre Holdings and Chorus have now begun discussions about possible adjustments to the contract that it has with the telecommunications company to help close the funding gap.

    Write to Lucy Craymer at
