No evidence Chorus could become insolvent

COALITION FOR FAIR INTERNET PRICING

MEDIA RELEASE

THURSDAY 10 OCTOBER 2013 

ASX & NZX FIND NO EVIDENCE CHORUS COULD BECOME INSOLVENT

The Australian and New Zealand stock exchanges (ASX and NZX) have reported to the Coalition for Fair Internet Pricing indicating that they have found no evidence to support New Zealand prime minister John Key’s assertion that Chorus Ltd could become insolvent if his government’s proposed copper tax is not introduced.

“We are pleased with the ASX and NZX conclusions because they confirm that there is absolutely no risk of insolvency under any of the copper pricing scenarios put forward by the Commerce Commission as the independent regulator.  This means that the roll-out of the Ultra-Fast broadband can proceed as planned,” a spokeswoman for the coalition, Sue Chetwin, also chief executive of Consumer NZ, said today.

Chorus is part of the NZX15 index, has a market capitalisation of over NZ$1 billion, made a profit of NZ$171 million last year and paid NZ$95 million in dividends to its shareholders.

“Given Chorus’ financial security, we call on the government to withdraw its proposal to over-ride the Commerce Commission and impose a copper tax on Kiwi households and businesses – a tax which will benefit no one except support the profits of the copper lines monopoly,” Ms Chetwin said.

“There is no reason at all for Kiwi households and businesses to pay a dollar more for copper broadband and voice services than the Commerce Commission says is fair.

“There is no threat to Chorus’s solvency and no threat to the roll-out of Ultra-Fast Broadband.  Chorus should simply be told to get on with the job.”

Mr Key made his insolvency claims on national television on Friday 13 September, saying: “If the Commerce Commision ruling stands there's a chance Chorus will go broke, in which case the Ultra Fast Broadband (UFB) won't be rolled out.”  He later advised media and the New Zealand Parliament that he stood by these comments.

Asked whether his view that Chorus could become insolvent was based on information not in the public domain, Mr Key told Parliament it was “based on commercial-in-confidence discussions between Chorus and Ministry of Business, Innovation and Employment (MBIE) officials” and a private telephone conservation he had with the chair of Chorus, Sue Sheldon, in December 2012.

Following the prime minister’s comments, the coalition asked the ASX and the NZX to investigate why Chorus had made no disclosure to the market about any insolvency risk as it would be required to do under both exchange’s listing rules.

On Friday 4 October, the ASX advised the coalition it had reviewed the matter but “has not formed the view … that there is, or is likely to be, a false market in [Chorus]’s securities”.  It advised: “If you do not see a market announcement about the issues you have raised, you should assume either that our investigation has concluded that there was no breach of the Listing Rules or, if there was, it has been dealt with to our satisfaction on a confidential basis.”

Yesterday, Wednesday 9 October, the NZX also advised that it “has no reason to challenge [Chorus]’s view that it remains in compliance with its continuous disclosure obligations under the NZSX Listing Rules”.

The ASX and NZX communications are available to media on request.

The Coalition for Fair Internet Pricing was founded by Consumer NZ, InternetNZ, and the Telecommunication Users Association of New Zealand (TUANZ) and is supported by CallPlus and Slingshot, the Federation of Maori Authorities, Greypower, Hautaki Trust, KiwiBlog, KLR Holdings, National Urban Maori Authorities, New Zealand Union of Students’ Associations, Orcon, Rural Women, Te Huarahi Tika Trust and the Unite Union.

A Covec study for the coalition, which has been peer reviewed by Network Strategies and found to be conservative, concluded that the government’s proposed copper tax would cost Kiwi households and businesses between $390 million and $449 million between 1 January 2015 and 31 December 2019 over the price for copper broadband and voice services that Commerce Commission work indicates is fair.  The latest demands by Chorus would take this cost to Kiwi households and businesses to $979 million.