Chorus first half: Copper boosts, wireless bites

Chorus did better than expected during in its first-half. The network operator saw net profit rise to $66 million up from $33 million a year earlier.

Revenues and profits lifted thanks to an increase in the regulated copper price. At the same time fixed wireless broadband made inroads into Chorus’ connection numbers.

Revenue is up 10 percent at $529 million. Earnings before interest, tax, depreciation and amortisation or EBITDA is up 22 percent.

Copper-bottomed

Chorus says the improvements are down to increases in the regulated copper price, a changed capitalisation approach and managing expenses.

Things started looking up for Chorus when the Commerce Commission revisited the price telcos pay to use its copper network.

The copper price increase has been a mixed blessing for Chorus. While it has boosted profits, it caused friction with retail telcos.

Spark discontent

Spark has been the most vocal. The company has made statements criticising the copper network. Among other things it had described it as unreliable. Spark has also moved to find alternatives.

Early in 2016 Spark’s Skinny subsidary launched a low-cost fixed wireless service.

Spark now pushes fixed wireless as an alternative to the UFB fibre network Chorus is building .

Fibre by any other name

Vodafone is confrontational. Yet it also offers fixed wireless services along with its own network now known as FibreX. FibreX has a limited geographic reach. A large slice is in the Enable Networks fibre area in Christchurch.

Fixed wireless broadband and rival fibre companies winning Chorus copper network customers meant a 2.8 percent drop in fixed line connections. Chorus now has 1.68 million. The company also saw a one percent fall in broadband connections to 1.21 million.

Meanwhile fibre broadband connections climbed 38 percent to 231,000.

Wireless works… for some

Outgoing chief executive Mark Ratcliffe says wireless works for some customers with low data usage and poor fixed-line broadband coverage.

He defended the copper network. “We’re confident that our fixed line network offers the rock solid reliability and consistent performance needed for both broadband and voice services.

“We continue to invest in our copper network and, on average, a customer with a copper broadband connection is likely to only experience a fault on our part of the network roughly once every five years. Even then the downtime is typically less than a day”, he says.

Chorus is now close to two-thirds of the way through its initial UFB fibre network build. It also won a big slice of business for the next wave of the government-supported fibre network. This will push fibre into smaller regional towns.

Challenge for new Chorus boss

With copper prices resolved, fixed wireless is a challenge for incoming CEO Kate McKenzie.

Spark says it can serve 100,000 customers on its 4G wireless network. Yet there are signs it is near capacity in some areas.

If it had gone ahead, the Vodafone-Sky merger could have helped Chorus. High-definition television chews huge amounts of bandwidth.

Many houses view more than one video streams at a time. This kind of data-hungry use needs a fibre network. Vodafone’s FibreX footprint is small. A surge in online HD TV viewing would pull customers to the Chorus fibre network.

The irony is that there is talk of Spark cutting a deal with Netflix. That could trigger a similar Chorus-pleasing uptick in data use. And in turn, pull connections from wireless back to fibre.