Christmas comes early for Chorus Ltd as shares soar 27%

The share price of Chorus Ltd (ASX: CNU) shot 27% higher to $3.61 today after a New Zealand commerce regulator bestowed an early Christmas present in the form of higher-than-expected rises for a range of regulated telecommunication services Chorus provides over its copper infrastructure networks.

The company said the agreed price rises would add about NZ$120 million to EBITDA relative to the benchmark pricing based on September 2015 volumes. The telco also issued updated FY16 guidance for EBITDA now expected to come in between NZ$580 million to NZ$600 million.

This news appears specific to charges payable for connectivity on old-style copper networks Chorus operates, as it is also investing heavily in building the required high-speed fibre optic networks of the future required across New Zealand.

Today’s news is likely a concession by the regulator in supporting Chorus in running the old copper networks, while the country transitions to fibre networks much like what is happening in Australia with Telstra Corporation Ltd (ASX: TLS) and the National Broadband Network (NBN).

In fact it has been reported that the New Zealand regulatory commission acknowledged in today’s judgement that it had previously underestimated the true cost of running the copper networks.

This news would appear to have limited implications for another fibre-optic specialist operating in New Zealand named Vocus Communications Limited (ASX: VOC). Its shares traded flat today although in 2014 it invested NZ$118.5 million acquiring its own fibre optic business across the Tasman named FX Networks. This as it attempts to replicate its huge Australian success in the small but fast-growing Kiwi economy.

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Motley Fool contributor Tom Richardson owns shares of Vocus Communications Limited.

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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