The Govt is the dealer of the cards chorus will be able to play and the Govt has dealt it a few Jokers to date after promising a full house.hmmm
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I suspect the government would like to deal a winning card for chorus and get this game over but they are prevented by not having a majority.
It could take years for courts and cost based pricing to finally settle the matter which is not good for vodaphone or any of the telecommunications companies-what do they charge from december?.If chorus wins there could be clawback.
I would imagine a lot of investment is on hold until a decision is made
All players are losers in the current state of this fiasco, telco,s may like the fact they have won some free money from chorus at the end of this year chorus if it wins court case would likely claw all this back + at the same time smaller telcos will go bust probably cause they spent their winfall, all political parties look silly from what has happened and as you say telecommunications will stall for years while this all gets sorted out so most sensible thing would be for someone to broker a compromise between all players? surely for some sanity to return
The greater levels of insanity are with the CNU shareholders. CNU is a public company selling its wares on the open market to consumers. I am a consumer. What are they offering me? A much faster, more efficient system of sending and receiving data at a greater cost plus heavy installation costs and probably requiring a contract, signed by me to discourage me from changing my mind in the near future. Do I need it? - no. Am I happy with the existing system? - Yes. Down the road there are a collection of car dealers, all keen to sell me a car that I don't need because I am content with the one that I already have. Do you expect the government to intervene there and level the playing field? Sell cnu and buy something that doesn't keep you awake at night. ( and that's on just one rum)
Wrong - they operate an interposed model so they sell to retail telco's who sell to use. If the ComCom didn't get involved, they copper and fibre would cost the same. If you could swap your existing car for a Ferrari, or RS6 (or whatever floats your boat) t no cost and the same operating cost, wouldn't you swap?
They sell you buy whatever spin you like to put on it - this show is about investing in the sharemarket and making a profit from that. No I would not like a Ferrari because it would cost me so much more to get to the same place and I would not like the insurance bills.
I've had 2 radical cars, one a street legal drag racing T bucket with Nos beautiful car used to shake house windows when I started it and set car alarms off all over the place,and you couldn't park it anywhere for long or crowds would gather and start playing with expensive parts etc Young and old loved it and its takes motorbikes out at the lights in a drag if you could control fishtale movement shore needed big balls and a touch of insanity to push it hard
Sold that and still have 572ci big block Chev in jag a bit more user friendly and does 5 k to the liter normal driving,so what'sthis got to do with chorus well fast fancy things are great if you use them often but how much speed and power does the members of an average household need in reality in terms of there broadband maybe most would be happy with a 5 liter v8 commodore and wouldn't need my 9.3 liter jag V8 as you can only use a third of its power and speed anyway
Fibre is totally ingrained in many, many advanced countries, alongside 4G, WiFi and parcel post. I would go as far as to say it is indispensable wherever it has reached critical mass. Take a look at Hong Kong or any number of cities in mainland China, Singapore or Japan, to name just a few; you will see that fast communications reaching into almost every aspect of daily life.
This might sound fanciful if you have not been to a properly first world country recently, but people with youthful mindsets will queue up to get their fibre in NZ; they will eat all they can get and they will not go back once they have taken the red pill.
Agree TTP , most old people in NZ probably dont need Fibre ( they probably dont even know what it is ) but the young and the generations to come will want all the fancy online content thats fed to us from overseas
Most people don't get past a 2l fwd. back to CNU, what happens when sky ditches the satellite and goes to Internet only. Or Netflix comes to NZ, or your kids start playing the latest online games and start complaining that they are getting shot before the baddies get downloaded.
House of Cards will be streamed in 4k to samsung TVs this year. 4k will catch on where 3d didn't.
This old dude took the red pill ...agree no turning back...also..this old dude is on all you can eat for $99/m too...i'm now free from those stupid annoying data caps..the phone is incl with extra functions ...I get an automated email with missed phone calls.... the Smart Phone is paired to my phone so all local calling on the cell phone is free
My video online has automatically switched to HD without me doing anything...watching Games of Thrones etc in full sparkling HD (I cancelled SKY, its miles too expensive compared to other online entertainment providers).
All the gadgets inside my house talk to the home network..PS3, the blue ray PVR (got it to replace the My Sky box) all the cell phones, TV's, PCs, laptop and tablet.
When the kids come home they switch to you tube on the TV and find videos via their smart phones..(Smart Phones paired to the Blu Ray PVR)
It seems like every month another cool app appears to add another function to the household network
Got in before that Govt subsidy runs out (its still going I think), so all the cabling/box to the house was free...
CNU must receive future-proofed benefits as a fibre provider once mainstream catches on to all this extra stuff for a lesser price.
Disc: Fibre cable laid by Ultra Fast and lit up on 2nd November 2011......Chorus website still keeps telling me I haven't fibre in my street...
And how long will all this take and how much money will you lose while you wait?. I repeat this - and all the forums on this site is about making money by sharemarket investing.
PS The success of companies in NZ from a profitability point of view is usually in inverse proportion to the number of posts. Have a look WDT, CNU and too many to name.
Too true....Unfortunately its time wasted reading all these posts and doing so shifts ones focus away from good performing stocks....even worse ...wasting time writing these bloody posts...God help me I must get my time management priorities back to where they were...no wonder I'm underperforming on the market at the moment.
But Hoop....you have entered the Sharemarket competition this year yet....a man with all your Charting software and ability should easily win the sharemarket competition each year....
Some stats that show NZ compared to the rest of the OECD with respect to fibre broadband.
"Fast fiber-optic broadband spreads across developed world"
http://news.cnet.com/8301-1035_3-576...veloped-world/
More than $2 Million traded today and the price creeps upwards. Crossing 30 day average ... Is the tide turning?
Part of a very interesting article in NBR:
"..What if Chorus adopted a different business model? Something like this:
- Give the middle finger to the entire UFB project and put it into contract mode. Deliver what they have too, but make it a subsidiary department or business unit and just trickle feed it. It’s a mess, it makes no economic sense to keep investing in a risky project this size. It proves a point and it may force a change in government approach.
- Focus on building end point solutions for fibre backhaul. For example, wireless is already outstripping fibre speed. When you look at the suburbs around Wellington and Christchurch in particular, dropping end point high speed wireless into the middle of a suburb working with local Councils makes huge sense.
- Get rid of the old Telecom ethos that they’ve inherited. The same processes, systems, and potentially people will be leading them to recreate the old Telecom model. Even if they do, they can’t win that fight. Telecom has moved on from it and will dominate them.
- For god’s sake get some innovation going. There are a bunch of technologies out there that could supplement fibre, in fact, fibre is just one of a range of broadband and backbone technologies. Smart grid, wireless, fast copper, and other technologies are already ahead of UFB. Start thinking about how to use and sell them.
- Diversify.
- Smash the company into a group of companies, cells if you like, allow each to succeed or fail on their own merits with their own ethos and their own ideas and innovation. Companies that are successful today are small not monolithic creatures with the inability to change and adapt quickly. Small companies can change overnight, the monoliths need governance structures, project offices, architects, three layers of management, red tape for the sake of it, and can take years to deliver the most simple products.
- Get closer to local Councils. A lot of them are starting to understand that broadband is critical to the community and are ready to work with telcos in a new way.
The point is, that unless Chorus changes its business model completely, it might as well take the nuclear option and shut down because it will never compete with Telecom and Vodafone on their playing field. It needs to get government’s hands off the back of its neck as well, somehow...."
http://www.nbr.co.nz/article/we-need...rong-ck-150651
I stopped reading at wireless is already outstripping fibre speed.
Article made some good points, but yeah fell down on that point casino pointed out. While 4g is doing 100mb/s, fibre the physical medium is MUCH faster, even though our ISP's are only offering 100mbit plans currently. The fibre being rolled out is capable of min 1gb/s (1000mb/s), it just won't be offered initially, and offers the ability to go to 10gb/s if exchange/isp equipment is upgraded
a break of 1.55 makes things interesting
I back horses - sometimes. I always back ones that i think will win their next race. I never back horses that are getting some track time, ready for the Wellington/Hastings or whatever meeting next July. I never back horses that could do well with a better trainer/jockey. Sometimes I am right - sometimes wrong - sometimes I make stupid mistakes. But why, oh why do people insist on backing this horse in this race with a grossly overweight jockey, a committee of trainers and a very muddy track? There are usually eight or more races on every card. Just for the record, I went to the machine at the Club on Saturday to back two horses, one had the same name as my granddaughter, the other picked on form. I put my money in followed by one betting card and got my bet out but accidentally put the same card in again and got the same bet again. I didn't repeat the wrong bet. I won. My grandaughters namesake is still running.
Agree.
My version the plan is:
- Prioritise areas (lots of business or high income areas)
- Once areas are fully connected, reduce the basic copper speed. (ie. a targeted Nuclear option)
- get RMA concessions from government as part of current negotiations. It is ridiculous what they have to go though to connect to an apartment complex etc.
- Somehow (and I am not sure how) but get content into NZ (netflix etc) so that fibre becomes a necessity.
- They probably should have funded the Hawaiki Cable project to break southern Crosses monopoly but now that the ComCom has destroyed their business, they can no longer afford it.
Perhaps I'm looking at this a bit simplistically, but I can't see why a version of the "nuclear option" doesn't give Chorus a get out of jail free to any pricing Comcom would try & push on them? This option seems to be talked up as being hugely dramatic, but I don't see why it has to be.
For example, Chorus says 'sure thing' to the Comcom pricing - 'we can provide an entry level copper connection for that price' and proceeds to offer perhaps dialup or slightly faster, say 128k or 256k (so it still official qualifies as 'broadband' for PR purposes) - offered at comcom pricing. Then continue to offer 'advanced connection' full speed ADSL over copper at whatever the hell price they want ... say the price it currently is. I for one will continue to pay for decent bandwidth until I cat get UFB - which would now be at a at a very similar price and very compelling.
I don't see this as being all that dramatic an option? Definitely well short of 'nuclear' and means all Comcom has succeed in doing is creating a new cheaper but slower version of the broadband offering (one that I'd imagine half the retailers wouldn't even bother offering). And if Chorus does have a lever offering so much control, surely this leaves them in a position no-so-worse-off than when everything went tits up in Nov? (aside from scaring the hell out of investors at how readily politics can screw with this business)
Am I missing something here? :)
I think this option would be in the too hard basket being an election year with all the bleaters around from last year plus the general public getting up in arms also, if chorus took this option the Govt could tighten contract roll out or even retender entire project,i think there will be much softer options being worked out behind the scenes between CFH and CNU,
I would think the Govt would more likely be happy to try to end up with an outcome that didn't involve them. Especially involve them looking like they were giving a handout to big business. I also can't see the connection between Chorus changing its copper pricing & the Govt suddenly having the rights to retender or alter the UFB arrangement - presumably which are locked down in contracts the size of an encyclopedia britannica?
Also I guess a point I was trying to make is the 'nuclear' option perhaps could be pulled back to say a bit of carpet bombing, by not dropping all the way to 30kbps (which IMO if done would be to make a statement) - instead go somewhere in between - maybe 256 or even 512kbps - enough so 10mbps still looks slick & worth paying what it currently costs, but not so much as to incentivise ISP's to invest heavily in hardware duplication (which as fish pointed out would be going rapidly obsolete) or justify a knee-jerk reaction by the media/public/Govt.
breakout on the charts
Moody's downgrades Chorus from Baa2 to Baa3
Moody's Investors Service has today issued an announcement downgrading
Chorus' issuer and unsecured credit rating from Baa2 to Baa3, with negative
outlook.
Moody's had previously placed Chorus on review for possible downgrade,
following the release of the Commerce Commission's copper broadband (UBA)
pricing decision in November.
Chorus chief financial officer Andrew Carroll said the downgrade was
disappointing given that the Commission's pricing decision does not come into
effect until December 2014 and the range of initiatives Chorus continues to
explore to mitigate the financial impact of the Commission's final UBA
decision. Moody's decision will result in an immediate but modest increase
in the cost of Chorus' borrowing.
"As we explained in December, we are assessing all options available to us,
including cutting all discretionary activity, re-pricing commercial services,
generally managing for cash and assessing capital management options. We
have also commenced constructive discussions with Crown Fibre Holdings. While
this work continues, we cannot finalise our medium term strategy or capital
management settings.
"In addition, Chorus has appealed the Commission's initial UBA decision to
the High Court and requested that the Commission undertake economic cost
modelling of both UBA and UCLL pricing, which differs from its original
benchmarking approach, as allowed for by the legislation," he said.
Chorus is currently rated BBB, creditwatch negative, by Standard & Poor's.
Can't tell you how glad I am to be out of this one.
One word klid CAUTION no one on here knows exactly where this stock will end up just when everyone thought it couldn't get any worse it just did, maybe its worth a quick trade for some or a long term play like Milford but there's a lot better places to put your money at the moment.
So Peter Dunne back as a minister today
Watch out for the quid pro quo
Will be interesting to see if S&P downgrade chorus to BBB minus putting it below investment grade quality?
This downgrade wasnt unforseen - it just happened sooner than Chorus was expecting. I guess MOST of the bad news is out now but I'm waiting to hear whats happening around their dividends and results from discussions with CFH etc before putting money in.
Considering the John Key "Could go Broke" quote, completely foreseen. It was just a matter of timing.
CNU Treasury would have been working overtime trying to get any change delayed until they had put out their plan on how they will deal with ComCom recommendation and also talking up their change of success in the court action with the ComCom.
Who trusts rating agencies anyway.
I am a US based individual investor who many years ago bought a small position in Telecom New Zealand. I sold a chunk of my Chorus shares on November 5th on the news, and the remainder at significantly lower prices to take a tax loss.
I just discovered this board, and will share my perspective on Chorus and hope you can provide me with some insights, as I will continue to follow Chorus should an investment opportunity arise.
Given the pricing decision, Chorus will have a substantial cash shortfall. As a result, Chorus must eliminate the dividend and make cost and service cuts. Even then Chorus will have a substantial cash shortfall. Unless the fibre rollout is to be stopped or delayed significantly (and nobody is talking about that), Chorus will have to come up with cash somewhere.
Politics appear to prevent overriding the pricing decision, absent a two year long review. Therefore, Chorus has to get the needed cash from: the government, increased debt, or issuing new shares.
From what I have read, the government is not willing to provide additional funding (politics, again). Crown Fibre Holdings has to live within its budget, and (I am not positive on this point) it does not appear they have the budget to just fund the Chorus shortfall. Chorus cannot issue debt to fund the shortfall because they will be too highly leveraged (debt was downgraded today and a negative outlook remains). That leaves only a new share issuance.
The problem with issuing shares is that 1) the stock has no dividend, making it less attractive. 2) if a dividend is maintained at a reasonable level (say 1/3 of the previous dividend), then the cash shortfall is that much greater and the issue must be larger. 3) The cash needed is large relative to Chorus’ market capitalization.
A stock issuance is unlikely without a dividend, and even with a dividend would be so large that the funds could only be raised at prices well below what Chorus has been trading at.
Why does Chorus not talk about delaying or stopping the fiber rollout to live within funds available, at least until the pricing review is done?
How are the politics likely to play out? Is one political party likely to cross over and agree to override the pricing decision, and if so, when would that likely be, given New Zealand’s election cycle?
I have seen a few folks post that all the bad news is out, or priced in or such. This is not just news - it is a serious cash shortfall that must be met, or plans changed a lot. Figuring out how the cash shortfall will be resolved is (to me) key to understanding where Chorus will trade, and when.
Do I have a good understanding of the situation Chorus is in?
Thanks for any help, and feel free to ask me any questions.
Hi there, you have stated many of the issues that surround this share. There is so much uncertainty with this situation that trying to come to grips with what could /may happen is akin to arm wrestling an octopus in my opinion. Its a unique and unbelievably complex environment and I think a lot of investors have either abandoned ship or shoved their shares in the drawer (me for one). All will be revealed in time and until then its only fit for pirates and steel testicled traders. The long term premise is sound its just what will it look like when all the political and financial BS has been disclosed. Could be a year or longer...who knows.
YOu have got most of it right. A couple of points.
You say the government is not willing to help. I think National would help but it does not have enough support to do so. Fibre is one of its big policies from the last election so it will be unhappy to see how it has turned out. There is an election this year - probably November - so that will be interesting.
Re the ComCom (the commerce commission - the regulator) decision - this has been appealed and unusually, this means that the price now gets re-calculated under a completely different method. This is likely to be beneficial, but to what extent is unknown and will not be known for 2 years.
My veiw is they will struggle on without a capital raising hoping for a positive outcome from the Government or the ComCom appeal. A capital raising would not be good for teh reasons you state. A possible short term solution is for the Government to guarantee some debt, making the credit downgrade irrelevant.
Overall good summary of the situation. What you however don't mention is the so called "nuclear option" - it is my understanding that CNU is not required to offer the current service level (up and download speeds) for clients who just want to pay the budget (regulated / comcom) prices. They well could split their offer into a budget package (reduced up and down load speed and maybe reduced service courtesy to the consumer board) and into a premium package (high speed up / download as is) for clients who value speed and service and are prepared to pay a premium for that. This would significantly reduce the financial hit for CNU - and I would be surprised if they couldn't solve the remaining shortfall with paying slightly lower dividends for some years.
Any idea whether National could end up with a majority? Would that be a more likely route than one of the smaller parties agreeing with National?
The cash shortfall peaks in 2015, so even a favorable decision would be too late. Now, unless Chorus has been cooking the books and spending lavishly, a favorable decision is likely. However, I cannot handicap whether a favorable decision would repeal 100%, 75%, 50%, 25%... of the reduction. If the price reduction was passed on to end users, I am not sure how it could be retroactively applied so Chorus could recover the 2014 and 2015 shortfall. Is a quicker process possible? I have seen nothing to suggest it is, but we get limited news here!
A guarantee is an interesting thought. Would that require political cooperation (more than just National) or can it be done without a vote? While it might get Chorus the cash, it would leave the shareholders at the bottom of an overleveraged company - and the guarantee only matters if the company fails. Incremental debt would diminish equity value, all else being equal.
EY contemplated a 2 year dividend hiatus followed by half of the prior dividend. I guess a govt guarantee, followed by a late 2015 capital raise where if the raise is successful the dividend is reinstated - might work to attract investors, but not above the present price. Given the size, I would guess such an offering would have to be at a substantial discount even in the presence of a dividend and favorable ruling.
I think struggle on for now is correct. In the states, the company would probably start winding down the spending and rollout to pressure the government to find a resolution more quickly.
I think there are massive penalties if Chorus delay or stop the rollout. So that would be even worse for them.
Wouldn't that have been an obvious potential solution addressed in the EY report? (Maybe it was, it has been weeks since I read it). Has this been discussed seriously by anyone of credibility? I have a hard time seeing this being consistent with the intent of the pricing decision. If it is, then the stock fell in half for nothing!
I have picked out a few questions:
1. The polls say it is 50:50 on whether National (right wing) gets reelected. It is unclear what Labour (left wing) would do if they were elected as IMO, letting CNU fall over is not an option for any party. They may take the opportunity to renationalise??? which would be very unfavaourable.
2. For this reason, I dont see the decrease being passed on to consumers.
3. I dont think so. why do your self out of a job by doing it quicker. My experience with Regulation is nothing is ever made easy by the ComCom.
4. I think a guarantee could be done by Cabinet, not requiring a vote in the house.
5. Being overleveraged in a regulated business is not actually a bad thing as the regulated price should ensure that you make a higher return that the cost of debt.
I won't be buying CNU until such a time that National looks set to win this year's election. Don't be surprised if Chorus mgmt are also pinning their hopes on a National-led Govt bailout.
John Key is lining up his ducks - he has Peter Dunne and United Future on board, has opened wide the door for Winston Peters and NZ First, and will soon turn his attention to the more numerous voting block associated with Colin Craig and his up and coming Conservative party. Once that Coalition is all in place well enough, CNU will again get my intention, and not until then.
National put the UFB ball into the political arena but never really kicked it much to my surprise. Well there goes a major NAT policy.
Key has also supported Boscawen for ACT leadership. Since when you you support the leader of another party? When you plan on gifting them a seat and want their support for a new government.
http://www.sharetrader.co.nz/attachm...4&d=1390356934
Here is the new minister Dunne saying his appointment back to cabinet won't bring his support for RMA or employment contracts
http://www.stuff.co.nz/national/poli...-on-RMA-reform
What he doesn't say is that he won't support government on over ruling ComCom on Chorus.
Sounds like he is signed up to collective cabinet responsibility on everything except RMA and Employment legislation.
So if the govt does want to over rule com com then it seems that they now have the numbers to do it.
I'm tempted to buy on this basis (but I already have a truckload bought at $2.86)
Here is a link for you to start - I am sure Mr Google can find more for you:
http://www.nbr.co.nz/nuclear
Tempted to test my luck on this one...but every time I think about doing so I sleep on it and I wake up to find it has dropped.
Ola amigos
Am I thinking Chorus need NZGovt agreements for prices before result Feb 24? yes?
My thoughts exactly. If the nuclear option is genuinely an option (and if it's not there are some clued up people who have been talking a load of bullocks) it's definitely where I would be focusing my discussions with the Govt & seriously considering rolling it out. IMO with sufficient thought & PR spin it could even come out as a relatively understandable & palatable outcome for the public ... although the usual Labour/Greens brigade will be railing away as they do about anybody in business or right-ish politics doing anything.
My thoughts exactly as well. EY may well have thought of it but weren't obliged to mention it, but how come Hooton and his mob didn't think of it.
As you say the PR spin would be easy given that it has emerged that main beneficiaries of the Comcom decision has been Vodaphone etc rather than the consumers.
I saw some discussion that the telecom companies might not pass the reduced pricing along to consumers. Is that now a fact, or just a point of discussion? It seems to me that lower pricing that does not get passed along also is not consistent with the pricing decision. Why mandate a reduction, if it does not reach consumers - unless the intent is just to distribute profits to a different corporation?
My understanding as to the politics is that the minority parties oppose govt overriding the pricing decision as they do not want to be seen keeping consumer prices high. I think it would be hard to spin a nuclear option as a positive. Consumer: so now to get the same performance we have to pay more?
There are a couple other topics I have not touched upon. First, after this govt fiasco, I decided to sell my Telecom New Zealand, and will certainly have some hesitation should I consider investing in New Zealand stocks (it is a big world, plenty of other places to look). Second, I have experienced fiber in the US, living in one of the first communities to get fiber to the house. This second point has lots of areas to discuss - the uptake, the deployment, consumer behavior, corporate pricing behavior, bundling services, customer support on older/lower speeds, etc. If folks are interested I can share what I observed.
Retailers dont have to pass on the price reduction. And the fact that it could be recouped means most probably want. However, as their is competition in retail (where there isn't in network), the free market will decide if the price is passed on - a few of the small have said they will which may see them grow market share.
Politically it is difficult as you point out and we are in an election year which is going to be close. Unfortunately, politicians who live in 3 year windows, are unable to look at the big picture.
How has your internet use changed since you got fibre. What speed were you getting before compared to now. One issue in NZ is that we cant (legally) get services like netfix etc. iTunesNZ has a very limited catalog (no TV programs) so I, in breach of the contract, have a US iTunes account (you can do a similar breach with netflix buy you also have to get around the Geoblock, which isn't that hard).
I think my internet usage has changed very little since getting fibre. That said, we only watch the occasional movie streamed via Netflix or Amazon.
People generally had a few choices: 1) dial up 2) DSL 3) Cable and then 4) fiber
I long had DSL service, and cannot tell you what the speed was, though generally believed to be less than cable. The initial fiber internet speed I got was 5mbps/2mbps (one is upload, one is download). Not too long ago, they had a promotion and I upgraded to 50mbps/25mbps. In day to day use I cannot tell any difference! If I download a large file - such as a software update - it is very noticeable, but for daily internet use it made no difference.
I generally use a desktop, hardwired to my router. However we also use iPads and iPhones and wireless notebook computers. The speed of those depends upon your wi-fi standard, and are usually well less than the theoretical maximum. I would look at the speeds you realize using wireless today and where you see bottlenecks. Can you stream video? We have as many streaming glitches at high speeds as we did at low speeds.
My fiber experience is more about the provider. Verizon was going to do a huge, fast rollout of fiber to the home. Then they discovered it was extremely costly, and while they got decent uptake, not everybody went all in for fiber. So the rollout got delayed because Verizon simply could not fund it. If folks were happy with their cable service, they generally did not switch. I regretted switching within days for tv, though the interest was improved. Verizon was selling bundled phone, internet and tv/cable. At first they had reasonable prices (and horrible tv menus, etc, but they fixed all that in time). Increasingly people have dropped home phone lines, just relying on cellphones or using a voip service (mine costs $3 per month for phone service). As this trend accelerated, Verizon began raising prices. In fact, you can drop your phone service now, and not save much money at all because they pretty much throw in phone to complete the bundle. The less you take, the higher the price for each individual service. $30 per month internet service (from memory) became $35 became $45, became $55. In not too many years.
They aggressively push you to higher services/faster speeds/etc. I have an early package they no longer offer. As a result, they will not fix things for me unless I switch to a higher priced package that they currently offer. I experienced a problem, due to the router being out-of-date. Since I would not update, they would only send me the exact same router. We had a fun game of them sending me a new out-of-date router every other day, and me returning it. All on their nickel, took just a few minutes of my time. After this went on several times, they sent me an updated router, which everyone on the higher data plans uses.
There are still a good number of folks using cable that have access to fiber. There are still a good number using DSL. Gamers require high speeds, but my 5/2 was more than adequate.
My experience then, is that the cost of fiber deployment is so high that the provider has to have significantly higher prices than were experienced in the market before. This creates an umbrella for legacy service prices to be raised. Which then results in more folks dropping their landline, etc. In the states we are experiencing folks dropping cable for the first time every (in total). It does not help that Verizon makes me click off an ad before I can watch tv - they are hungry for revenues anyway they can get it.
Looks like a silver bullet choice.
I can't find the material now but I think from the get go Chorus (Ratcliffe?) indicated they pretty much just weren't going to go down that path. I think they want to achieve things in a different way, they must have confidence in what is and will transpire.
Regarding fibre/fibre uptake... by the time it's readily available around these parts (residential) I think it will become a necessity, with the performance of current DSL even if you wack an A or a V before it (ADSL/VDSL), will be thought of as dial-up is compared to DSL now.
The way I see it is that the ComCom mandated a price reduction (for which Chorus has requested a full review) for the contract of supply from Chorus. This contract includes the "nuclear option". Chorus would be fully within in its rights and contractual obligations to reduce the bandwidth supplied down to the minimums it is contractually obliged to supply. In my opinion the ComCom itself has already released the nuclear option and Chorus' self-preservation defence of reducing speeds would be contractually sanctioned. If the TelCos wanted more bandwidth they would have to enter into a new contract at possibly the old prices as opposed to the reduced price - in other words the consumer would be paying the same price as they are paying at the moment.
If return on capital is unreasonable then NZ will never get anyone willing to invest in infrastructure unless it is guaranteed or financed by the taxpayer. Of course, I imagine the Greens would be in favour of that and a large state involvement.
So what, then, is the minimum bandwidth under the contract, and how does that compare to what customers currently get? If they are similar, then the nuclear option is anything but nuclear.
Situations like this tend to get worked out, in time. Usually both parties make some concessions and a middle ground is achieved. While stock prices are irrelevant to corporate operations, the fact that Chorus stock has already declined so far means in any resolution, the dividend will be half or less of the prior dividend - simply because the stock price already anticipates that so why should any compromise agree to more?
Simply put, it is politically damaging to the minority parties if their support for ComCom meant that customers got less, or paid more. I still have a hard time seeing the nuclear option as being consistent with the decision and the politics.
Minimum is about 2x dial up so 100kb I think. Adsl and vdsl can be over 2 and 5mb I think so significantly different. Vdsl, if you are close enough to the exchange is comparable to the entry level fibre.
I agree with CNU, don't threaten nuclear, keep it up your sleeve for the ambush. And ideally, only in areas where fibre is an option.
Thanks, Harvey Specter. I agree about not threatening. Nothing good comes from that. It should only be a last resort.
Now, how widespread is DSL in use? If most have 100kb, then nuclear is not even an option. If most have DSL, then it is. This is why this nuclear option confuses me: if most folks have 100kb, the price cut hurts Chorus. If most people have DSL service, then there was no need for Chorus to make grim statements about cash flow declines as they could simply lower the price of 100kb (serving few) and maintain DSL pricing (serving most) at present levels. Why be Chicken Little and cry the sky is falling if in fact it is not?
That logic suggest to me that most use the 100kb option, and hence the nuclear option is not what it is cracked up to be. Am I missing something?
(It has been awhile, I had completely forgotten that DSL also varied based on your distance from the Central Office.)
I'd say most of the country is on broadband, not dial up which means they are getting speeds of 1Mb/s+ depending on how close to the exchange they are. As such, dropping back down to near dial up speeds would not be an option as even basic sites like facebook would become slow.
I am not close enough to the exchange to get VDSL so will never get near fibre speads using copper. Luckily I should have access to fibre by end of the year
One thing to remember is that high speed broadband over copper is really only highspeed download, upload is normal about 10% of that speed, so fine for youtube etc but not perfect for online backups, HD video conferencing etc.
Rather than making numbers up, here is actual speeds:https://www.truenet.co.nz/sites/defa...erf%20Dec2.png
Source: https://www.truenet.co.nz/articles/d...oadband-report
Note that only Wellington and Chch have access cable so less than 1/2 the population and it will surely be decommissioned once fiber is available.
Encouraging signs from the ComCom today, about their intention to come to a relatively quick conclusion on the FPP:
"The Amendment Act requires us to make reasonable efforts to complete the price review determination by 1 December 2014. Our proposed process is designed to complete the UBA price review determination before this date."
Even if they come up with a price unfavourable to Chorus, at least we might learn what it is by the end of the year.
Agree - the timetable is promising. It would be good to see some actual broker comment on this. I note:
Is this good/bad/indifferent? I wonder why they aren't using the fiber rollout in the model, even if they use the other providers costs, not CNU, for independence purposes. I would have though rolling out fibre was more akin to cooper than a wireless method.Quote:
Its initial view is that it will use Chorus's copper network and potentially the rural broadband initiative's fixed wireless in its modelling to determine the price.
http://www.sharechat.co.nz/article/f861de94/comcom-kicks-off-uba-final-pricing-principle-process.html
http://www.stuff.co.nz/business/indu...ped-for-Chorus
Rights issue and cut in dividend on the way according to J P Morgan.
no surprise, this was mooted on here as the only way through, months ago.Quote:
Rights issue and cut in dividend on the way according to J P Morgan
This is the only option available, to avert S&P downgrade to junk status within 3 months, and bank covenant breaches
they don't want that!
Snrs.
Timed complete after election - yes? Clever yes?
The date is based on the date the new rate takes effect - 1/12/2014.
Given they originally thought it would take them two years, this is a very tight timeframe so bringing in any conspiracy theories seems a bit over the top. We should actually be questioning whether it is a realistic timeframe or in the true spirit of a government organisation, will it run over time and over budget (actually the same could be said about CNU fiber roll out).
I'm sure this has been covered before but I can't find it - something I don't get, they're unsure of what model to use to determine the fair cost of fibre and therefore the price they can charge, whether it be an international pricing model etc, but why don't they just use the actual cost incurred as they lay it as we speak - making sure it's done in a fair manner.
The regulated pricking is all about the pricing of the existing cooper, laid decades ago, not the current fibre which is being rolled out now.The proposed timeline will give more certainty from the date of the change rather than a big unknown for an unknown period of time.
I was wondering the same...all I can think of is that the FPP review may be realeased earlier than anticipated, removing a little uncertainty sooner. Such a rise in CNU price is surprising as JP Morgan are forecasting a more stringent dividend cut than the 50% cut anticipated earlier.
One thing remains the same for CNU is that it will be a regulatory, political and financial football for some considerable time to come!
1. the CC timeline is about 12 months sooner than required - positive in that most think they will provide a much higher copper price than that which they have decreed will take effect from December 2014. If thats the case, then smooth sailing......
2. the threat of a ratings downgrade is removed. The Agencies will probably put them back to stable from negative
2a. They get the banks off their case as well
3. new buyers will now want in, to take advantage of the perceived discount that seems to be on the cards in the rights issue
4. If all of the above is correct, then the pall of gloom might be lifted, and CNU can get on with the job at hand
5. Do you think dividend cut and dilution weren't already well priced in?
A dividend cut of 50% had been mooted earlier. JP Morgan are now forecasting a dividend "holiday" followed by 5c dividend therafter. I think 5c pa equates to a dividend at 25% of the current level. Obviously this is just a forecast by one outfit.
However in light of the ComCom announcement maybe JP Morgan may adjust its dividend forecast, provided the result of the FPP is favourable to CNU.
I appreciate they're trying to work out what price they can charge for copper - my question wasn't very clear. Why do they need to build a model for pricing - can't they base it on the fibre rollout which probably provides the best approx replacement cost?
My opinion - the price was irrationally hammered given a monopolistic asset that eventually was going to get sorted out. People were expecting dilution and two years of no dividend followed by something more like 5%.... The outcome is now appearing not so bleak so it's a correction for the oversell.
I raised the same question in post2218, especially since they want to make reference to the rural wifi rollout.
CNU must also have actual costs, at least for parts of its network as it will still be rolling out copper to new subdivisions etc.
I am sure CNU will raise all these types of points and knowning that a judicial review is likely, the CC will need to cover each one off with a high degree of robustness.
Snr. Harvey specter
correcto
#2234
Wouldn't they just put Fibre into new subdivisions, all services would be underground in any case, allthough there maybe copper in parts leading to the subdivision - depending on how far away an "exchange" is ??