Ernst & Young Australia’s report into Chorus’s ability to deliver on its broadband contracts says the company could reduce the funding gap to $250 million or less with “cash flow savings initiatives”.
The report was commissioned by Communications Minister Amy Adams to investigate whether Chorus was able to meet its obligations building two government supported broadband projects.
Chorus won contracts to build the lion’s share of the Ultrafast Broadband network and parts of the Rural Broadband Initiative project.
A Commerce Commission decision, following government dictated guidelines, called for a reduction in the cost Chorus could charge telcos to deliver copper-based services to customers. At the time Chorus said the price reduction could punch a billion dollar hole in its finances.
The independent report confirms this.
Adams says: “Copper price changes will have a significant impact on Chorus’ financial position, and the wide range of actions that Chorus can consider taking itself will not be sufficient to cover the funding shortfall to safeguard the UFB and RBI build commitments”.
She says the report contracts claims by lobbyists and campaigners elsewhere in the industry that these figures were overstated.
The report goes on to say Chorus could reduce the estimated funding gap from $1 billion to between $200 million and $250 million by implementing a number of cash flow savings initiatives.
A statement from the minister’s office says Crown Fibre Holdings and Chorus have begun discussions about possible contract adjustments to help close the funding gap.
@billbennettnz and the rest can be easily dealt with. Short story: no crisis.
— Jordan Carter (@jordantcarter) December 14, 2013