Big victory for Chorus investors

Chorus shares touched a record high at $3.71 today. Photo / NZME

Regulator’s decision for higher copper pricing boosts prospect of dividends as stock soars to a record.

Dividends could soon be back on the table for Chorus investors, a broker says, following the Commerce Commission's final determination on copper pricing, which sent the company's share price soaring to a new record.

Shares in the telecommunications network operator closed up 24 per cent at $3.84 - increasing its market capitalisation by $293 million to $1.5 billion - after the announcement that the wholesale price of copper would be raised to $41.69 per month.

The regulator came to the final figure, $3 higher than expected, after it conducted a more rigorous process to find the price than the initial pricing principle review, which relied on international benchmarks.

"The announcement has come as quite a surprise to many market participants - we see pretty significant upside here," said Grant Williamson, of sharebrokers Hamilton Hindin Greene. "It also removes some uncertainty from the stock so investors feel more comfortable buying it now and I suppose dividends are probably on the horizon again."

Chorus said the determination would boost annualised earnings before interest, tax, depreciation and amortisation (ebitda) by $120 million.

It raised its forecast for ebitda in the year to June 30 to between $580 million and $600 million, upgrading guidance from a previous forecast for a "modest decline" from the $546 million in 2015.

Williamson said Chorus investors received their last dividend in September 2013.

"Investors might have something to look forward to next year."

Chorus said it would review the commission's decision and the implications it had for matters such as dividend payments.

The company expected to provide a capital management update when it reported its interim results in February.

Chorus chief executive Mark Ratcliffe welcomed the regulator's decision.

"We have consistently said that the previous draft prices significantly underestimated the true value of Chorus' network, so it is pleasing that the Commission has taken on board the industry's repeated requests and used some of the real world costs of building a network."

As Chorus' biggest customer, Spark will bear the brunt of the charges, and it said customers would lose out as a result of the decision.

Spark managing director Simon Moutter said the new charges were almost $8 per month (including GST) per connection higher than what all New Zealand retail broadband providers currently pay.

Spark customers should expect an increase to their monthly bill, Moutter said.

The Auckland-based company expects the higher copper wholesale price will increase its costs by $21 million in 2016 and $36 million on an annualised basis, while the unbundled bitstream access price will rise by $1 million in 2016 and $2 million on an annual basis.

Spark shares closed down 2.5 per cent at $3.075.

- Additional reporting BusinessDesk