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Chorus profits from soaring fibre adoption

Chorus profits from soaring fibre adoption

Efforts by retailer Spark to shift its broadband user base onto its own wireless network have had an impact.

Chorus CEO Kate McKenzie reports increased profit depite an attack by retailer Spark.

Chorus CEO Kate McKenzie reports increased profit depite an attack by retailer Spark.

Network operator and wholesaler Chorus has reported increased profits on the back of soaring adoption of fibre.

Chorus reported its Ultrafast Broadband rollout was 70 per cent complete and uptake was at 35 per cent.

778,000 Chorus customers are now able to connect to fibre at speeds of up to one gigabit per second. and 275,000 had done so by the end of 2017. 

"That’s a big jump from 156,000 connections or 24% uptake last year," CEO Kate McKenzie said.

Net profit after tax for the year ended 30 June was $113 million compared with $91 million in 2016. Operating revenue of $1.04 billion was similarly up on $1.01 billion the year before.

However, Chorus shares had fallen over 5 per cent by 4pm after the morning announcement, after it told investors it expected to lose connections and a lower operating profit in 2018.

Efforts by Spark to shift its  broadband base onto its own wireless network have already had an impact.

Chorus’ 2017 EBITDA of $652 million declined relative to adjusted EBITDA for 2016 of $677 million, reflecting a reduction in revenue as other fibre companies gained connections in their fibre rollout areas and large vertically integrated retailers, most prominently Spark, encouraged their customers on to their own wireless broadband networks.

Total fixed line connections fell 7 per cent and broadband connections were down 3 per cent.

“In response to this change in market dynamics, we launched an advertising campaign in May to promote the benefits and availability of better fixed line broadband and early indications are that this has had positive results,” said McKenzie.

Earlier this month, retailer Spark reported wireless broadband connections grew to 84,000 (up 72,000), and fibre connections grew to 172,000 (up 73,000) – meaning around 37 per cent of Spark’s broadband base was off Chorus's legacy copper network.

Most of Chorus' revenue still comes from legacy copper connections, however. $698 million of sales came from basic and enhanced copper while $198 million was generated from fibre.

McKenzie recently reshuffled Chorus' executive ranks to bring a better focus on the customer experience.

Chorus’ fibre installation workforce grew to 615 field crews by the end of FY17, up from 524 at the start of the year. They completed 129,000 new fibre connections nationwide, up on the 93,000 connections in 2016.

Productivity improved significantly after a reorganisation in October, McKenzie said.

“Perhaps the best measure of our improvement is customer satisfaction with fibre installations. Pleasingly, we’ve seen customer satisfaction scores increase from 6.9 out of 10 last year to 7.4 at the end of June.

“But there remains some way to go before we achieve our goal of offering a frictionless fibre install experience."

Chorus declared a final dividend 12.5 cents per share, fully imputed.

In 2018, Chorus said it would focus on improving current rollout activity, leveraging its network further for backhaul and third party datacentre support and on identifying "open access" business opportunities, including the use of fibre in non-broadband access points to support applications such as CCTV and the Internet of Things.


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