Reseller News

Revenue and profit slip as competition and COVID-19 bite Chorus

Capital expenditure in 2022 is expected to fall by around $100 million.
  • Rob O'Neill (New Zealand Reseller News)
  • 23 August, 2021 06:40
JB Rousselot (Chorus)

JB Rousselot (Chorus)

Competition and softer market conditions due to COVID-19's impact saw both revenue and profits at network provider Chorus decline in the year to 30 June.

Operating revenue for the period was $947 million, down $12 million from $959 million in 2020, while net profit after tax was $47 million, down from $52 million.

Chorus said that was due to softer market conditions due to the effects of COVID-19 on broadband demand, together with competition from other fibre and wireless networks.

With Chorus' part of the Ultrafast Broadband fibre rollout now 95 per cent complete. however, active connections were well up, from 751,000 to 871,000 year-on year.

EBITDA was marginally up from $648 million to $649 million.

Tight management of costs and the absence of one-off COVID-19 costs in 2020 helped Chorus achieve that "modest" EBITDA increase.

Operating expenses of $298 million were down from $311 million in 2020.

Capital expenditure of $672 million was up from $663 million, however Chorus forecast this to fall markedly in 2022 to between $550 and $590 million.

Chorus CEO JB Rousselot said despite the softer market in the wake of COVID-19, Chorus continued its active wholesaler strategy and were pleased to grow total fibre connections to 871,000. 

"We are well on the way to our target of one million connections next year," he said.

There are about 140,000 homes and businesses that could switch on a fibre service in hours if they chose to and another 280,000 with fibre at their gate.

Over the year, fibre uptake grew from 60 to 65 per cent, with 120,000 new fibre connections across 100 or so broadband retailers. 

Gigabit connections grew from 16 per cent to 19 per cent of Chorus' total fibre connections.

Monthly average household data use over copper and fibre grew from 350GB to 432GB during the year. Fibre customers, however, consumed an average of 500GB in June, up from 436GB the year before. 

"Our UFB2 rollout continues to track ahead of schedule," Rousselot said. "Fibre passed another 69,000 premises during the year."

Customer satisfaction increased from 8.1 to 8.2 for installations and 7.3 to 7.5 for service to homes with an existing fibre socket.

“We’re delighted to see that the vast majority of customers choose to pick fibre when they migrate off the copper network”, said Rousselot.

"We're comfortable with competition, but we believe customers should be given all the information about the characteristics of different broadband services and time to consider their options rather than being told their service is changing and they have to make a quick decision."

Chorus was a "tireless" supporter of the Commerce Commission's measuring broadband New Zealand programme, which helped customers understand the performance they could expect from the various technologies available.

“We believe that New Zealanders should be able to make informed decisions based on facts and unbiased equivalent data, rather than partial information and hype," Rousselot said.

"Saying a service is fast doesn’t cut it if the speed slows significantly at peak times or when you’ve reached a certain data limit.”

Alternative technologies continue to claim a share of the market. In particular, telcos with mobile networks are promoting fixed wireless broadband as an alternative to fibre, a practice that has labelled "inertia selling".

Chorus is currently lobbying the Commerce Commission as it works to finalise a new fibre regulatory model by 1 January 2022.

It is seeking recognition of the full cost of building its UFB network and a fair return on the public-private partnership investment made to build the network.

Two aspects of the recent draft price-quality decision that Chorus was concerned about are proposed capital and operating expenditure cuts, and the obligation of an additional approval process for offering retailer's incentives to promote fibre.

"We feel that the incentives we offer equally to all retailers to promote fibre should not be subject to a drawn-out approval process," Rousselot said. 

"Retailers keen to promote fibre need early certainty around these incentives to plan their offerings and their campaigns and further approval processes would hinder this."

Chorus will pay a final dividend of 14.5 cents per share, fully imputed, on 12 October 2021, bringing total dividends for FY21 to 25 cents per share.

2022 initial dividend guidance was 26 cents per share.