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Chorus withdraws dividend guidance

UPDATE: Chorus shares [NZX:CNU] fell 5.74% to $1.89 in early trading. The stock, which traded at $3.02 on August 8, has already been hit hard by the latest round of regulatory controversy.

EARLIER: Chorus has withdrawn its dividend guidance of 25.5c per share for the 2014 financial year, blaming regulatory uncertainty and the outcome of the government’s independent review.

“At this time of unprecedented levels of investment by Chorus, withdrawing dividend guidance is a regrettable but necessary step in light of the ongoing uncertainty Chorus faces,” says Chorus chief executive Mark Ratcliffe.

Chorus’ earnings path hangs on the government's response to plans by the commerce commission to cut its prices.

In a statement to the NZX, Chorus says it is investing roughly three dollars in the Ultra-fast Broadband initiative for every dollar of financing provided by the Crown to support the delivery of the upgraded infrastructure.

“We are proud of our role as the cornerstone partner in the Ultra-fast Broadband initiative, which is being delivered like clockwork.”

“We remain hopeful that as the major partner in New Zealand’s largest public private partnership we can work with the Government to find a timely solution to the current issues that works for all parties and provides Chorus and its investors with the certainty we need to get on with delivering this once in many generations infrastructure upgrade.”

Last week Communications Minister Amy Adams announced plans for an independent appraisal of Chorus' books. Since the Commerce Commission decision the previous Tuesday, Chorus’ share price has plunged 25%, wiping $270 million from the company’s market capitalisation.

MORE: Analysts sharply split after latest Chorus developments

More by Duncan Bridgeman and NBR staff

Comments and questions

Its almost as if they expect to be bailed out by the tax payer

To be fair, it's the taxpayer's representatives who've put them in this mess.

The regulatory environment in NZ is a complete mess. The National Party has utterly failed to provide certainty. The problems with Chorus, Vector, Sky and more is going to haunt them spectacularly in 2014 when they approach businesses for support in what will be a very tightly contested election.

Not so.

Commerce Commission has ruled so now it's up to the government to respond.

Or are you suggesting a dictatorship here where the government can and will override rulings it does not like or agree with?

We had that with Muldoon, remember? And what a fine mess he left NZ in.

Proved to the world that he was an economic clown but he sure knew how to manipulate the levers of power.

I think that's what he means by uncertainty, the fact that National has been waffling about overriding the Commerce Commission. At least I hope so. The govt certainly shouldn't be overriding the Commerce Commission.

If Chorus stuffed up their tender when it was plainly obvious (and written into legislation) that the Commerce Commission was going to be reviewing the Copper price, most likely lowering it, then that's their problem.

Oh poor public companies that cant continue to rip off the taxpayer with monopolistic policies

The regulatory environment for telecommunications companies was working exceedingly well prior to the government's intervention.

Yes, there are problems that need to be resolved, but the framework isn't one of them.

Having a commissioner dedicated to the sector has helped hugely over the past six or seven years and the change that has been brought to the industry has allowed competition to begin to flourish. It's got a long way to go but we risk throwing the baby out with the bath water by changing the regime at this point.

You only have to compare the 0867 numbering scheme debacle with the Telecom "loyalty" offer to see how the regulator dealt with a problem in a timely fashion and to the betterment of the whole industry.

This uncertainty is not a result of the regulatory process, it's a result of intervention in the regulatory process.

Another example of Govts complete business incompetence, not setting parrameters that fit the market from the outset. Hard luck Chorus you effectively gambled on profits from a taxpayer bailout through either inflated prices which the Commerce commission quite rightly took you to task on or now a direct operational taxpayers bailout. Welcome to the real world dividends come from good management and a market where your wares are seen to have value and non reliance on an incompetent business partner, being the Govt. If a reduced dividend is all you see as your main problem, you really do have big problems.

"If a thing can go on for ever, then it will. Otherwise it will come to an end".

After structural and operational separation, if Chorus had shown itself able to be lean, efficient and willing to work with all parties effectively, they would not be in this situation.

This is the leopard. These are the spots.

The government should never have stepped in and just let the Commerce Commission do its job. How much Tax Payer money is dealt out to the ComCom and now the government doesn't want to heed the advice that everyone has paid for??? Because they know better??? Seriously???

Let the Govt buy Chorus in receivership if that is applicable
Much cheaper than taxpayer subsidy
Better the 98.5% ownership than the 1.5% of people in NZ that own shares

Just a bunch of fat cats