Chorus is responsible for telecoms infrastructure in New Zealand, including the country’s ultra-fast broadband initiative. It originated when New Zealand’s core telco provider was split into three entities over a decade ago, and it plays a similar role to that of the National Broadband Network in Australia.
All non-essential activity suspended
This morning, Chorus announced that it has suspended all non-essential field activity. This comes as the New Zealand government raised the nationwide coronavirus alert level to Level 4, placing New Zealand citizens into a virtual lockdown, with all non-essential businesses to be temporarily shut.
Chorus will defer its non-essential capital expenditure for the duration of the lockdown period, which currently stands at one month. However, it appears quite possible that this period could be extended by the government if the crisis worsens in the weeks ahead.
The telecoms infrastructure provider is, therefore, reducing its FY20 gross capital expenditure guidance to a range of NZ$610 million to NZ$650 million, down from a previous range of NZ$660 million to NZ$700 million. However, the company’s FY20 guidance range for earnings before interest, tax, depreciation and amortisation (EBITDA) currently remains unchanged.
The types of operations that Chorus will now suspend include ultra-fast broadband rollout in communal areas, subdivision activities, non-essential pole replacements and non-essential maintenance activity.
Continue to support the wider telecommunications industry
Chorus will continue to work with the wider telecommunications industry to ensure all essential services are maintained. It has also delayed the annual CPI increase due in October of all wholesale fibre products to ease the burden on New Zealand retail telecommunication providers, which in turn will eventually be passed on to consumers. The company added that this reduction will be extended further down the track if required.
Chorus also commented that its fixed line network is in excellent shape and is well prepared to support an increase in bandwidth in the weeks and possibly months ahead, as many New Zealand businesses work from home and children stay home from school.
Chorus shares have proved to be very resilient during the sharp market correction of the S&P/ASX 200 Index (ASX: XJO). In fact, the Chorus share price has actually risen from $6.12 on February 20 to today’s opening price of $6.61 – an increase of 8%.
I believe that investors are currently attracted to Chorus due to its defensive type of business and the essential role it plays in the New Zealand telecommunications market. Also, the time horizons of its projects are very long, so short-term delays are unlikely to have an impact on its bottom line compared to most other companies.
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