The actual FY2021 revenue figures have been published. So it is time to update my revenue forecasting table.
Chorus has been locked in a regulatory battle with the Commerce Commission on how much 'maximum allowable revenue' (MAR) their 'regulated asset base' of fibre broadband assets will be allowed to charge their downstream retail customers over FY2022 through to FY2024, otherwise known as the 'Price Quality (PQ) Period - First.' (PQP1)
1/ The initial Commerce Commission proposal on 26-03-2021 was a rising sum starting from $715m (FY2022) rising to $755m (FY2024).
2/ A revised proposal on 27-05-2021 reduced this to a range from $689m to $786m.
3/ A further comment on 19-08-2021 from the Commerce Commission stated.
"The Commission has noted in its draft RAB (Regulated Asset Base) decision today that “If all other aspects of our draft PQ decision remained unchanged, our indicative estimate of the combined impact of these decisions would lead to a 2%-2.5% reduction in allowable revenue over the PQP1 period. This figure also includes the impact of updated WACC values applied in the pre-implementation period.”
The market took this to mean that the revised downwards regulated revenue rates may yet be increased again by the time the final decision in December comes out. The case Chorus made to the Commerce Commission was for a regulated rate range between $720m to $820m. I am doubtful that the Commerce Commission will be that generous in their final regulated outcome figures. So for the purpose of this update I am going to assume that the Commerce Commission raises the allowable revenue figures back to the range of the 26-03-2021 proposal: $715m (FY2022) rising to $755m (FY2024) [Forecast fibre revenue from 26-03-2021 'Initial Asset Value' Presentation, slide 3. (FY2023 values interpolated).]
My table of forecast 'total change of revenue' over the period of interest is as follows.
|
FY2016 |
FY2017 |
FY2018 |
FY2019 |
FY2020 |
FY2021 |
FY2022F |
FY2023F |
FY2024F |
Fibre Revenue |
$133m |
$202m |
$276m |
$368m |
$466m |
$545m |
$715m |
$735m |
$755m |
Fibre Revenue Increment |
|
+$69m |
+$74m |
+$92m |
+$98m |
+$79m |
+$170m |
+$20m |
+$20m |
Fibre Revenue Increment Percentage |
|
+51.9% |
+36.6% |
+33.3% |
+26.6% |
+17.0% |
+31.2% |
+2.8% |
+2.7% |
Non-Fibre Revenue |
$875m |
$838m |
$714m |
$602m |
$493m |
$402m |
$332m |
$272m |
$222m |
Non-Fibre Revenue Decrement |
|
-$37m |
-$124m |
-$112m |
-$109m |
-$91m |
-$70m |
-$60m |
-$50m |
Non-Fibre Revenue Decrement Percentage |
|
-4.3% |
-14.8% |
-15.7% |
-18.1% |
-18.5% |
-17.4% |
-18.1% |
-18.4% |
Total Revenue |
$1,008m |
$1,040m |
$990m |
$970m |
$959m |
$947m |
$1,047m |
$1,007m |
$977m |
Notes
1/ 'Non-fibre revenue' up until and including FY2021 has been calculated by subtracting 'Fibre revenue' from 'Total revenue'.
2/ Chorus have not provided any forecast as to where they expect their non-fibre revenue to go over the next few years. I have inspected the five year revenue trends for:
a/ 'copper connected revenue' and
b/ 'field services, value add network services and infrastructure'
as two groups. The latter group I am forecasting constant revenue of $120m over FY2022 to FY2024 inclusive (Actual figures were $118m over FY2020 and $119m over FY2021). The 'copper connected revenue', comprising 'copper based broadband', 'copper based voice' and 'data services copper' have taken an $91m decline over FY2021. So I am forecasting declining revenue to continue: down $70m over FY2022, $60m over FY2023 and $50m over FY2024. The 'diminishing decline rate' I am modelling to take account of a slowing trend as easy conversions to fibre have happened already.
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So what to make of this? IF you compare the actual fibre revenue over FY2021 of $545m with
a/ the forecast regulated fibre revenue for FY2021 (slide 24 PRHY2021) $620m (interpreted from graph), OR
b/ my linearly interpolated FY2021 fibre revenue of $592m (being the arithmetic average of the previous year's fibre revenue used figure of $468m and the prescribed first year of MAR $715m).
THEN that actual revenue represents $47m to $75m less revenue than forecast just six months ago. That seems to be an astonishing drop in projected annual fibre revenue in just six months, which has to call into question the forecasting ability of Chorus. Have I got that observation right?