'Promise got broken' Quin on Chorus pricing

UPDATE: Spark chief executive home, business and mobile Chris Quin clarifies: "Just to be clear I wasn't suggesting any individual (or the Commission) had made a promise, or broken one. I was trying to point out that the benchmarked Chorus costs set over the past two years did set a marker for a $10 reduction in wholesale broadband costs, which we acted on, and now we are having to deal with the reality that that reduction hasn't materialised. And yes, the retail market absolutely took that marker and reflected it in our pricing and some - our price for a 40Gb broadband bundle is $30 lower today than it was three years ago."

EARLIER: Spark had a lot to celebrate as it gathered media and various partners for some Christmas drinks last night, including a successful name change after 30 years as Telecom.

But with emotions running high after a certain pricing decision on Tuesday, Spark chief executive home, business and mobile Chris Quin also took a moment during his speech for a jab at the Commerce Commission.

Spark has been working on "a certain basis for the past couple of years," Mr Quin said.

The exec was picking up on chief executive Simon Moutter's earlier statement that for the past two years Spark has been operating on the basis of a promised $10 reduction in broadband costs, which is already baked into its current customer pricing.

"That promise got broken this week and we have to work out what we do about it now without passing too much on to our customers but also being fair to our shareholders in what we do from here," Mr Quin said.

"Every business in this room would like a well-regulated environment where you know the rules that you're playing with. And we just need to get back there as fast as we can."

But while everyone would like certainty, it's not over yet.

On Tuesday, following a review that involved French consultancy Tera, the commission overturned its own earlier decision to slash Chorus' copper line wholesale pricing from $44.00 a month to $34.44 a month. Instead it proposed a price of $38.39. 

After a two-process, the $34.44 pricing finally kicked in on Monday. Despite being overturned just 24 hours later as the regulator released the draft of its Final Pricing Principles review, it will stand until April, when the Commission finalises the Final process.

Known unknowns include whether the commission could again change its mind with its actual final decision in April, whether Spark and other retailers will raise prices (either out of commercial necessity or political brinkmanship) and, if Tuesday's price stands when everything's done-and-dusted in April, whether the "increase" from $34.44 to $38.39 will be backdated.

Every small change in monthly line cost makes a big difference. Chorus told shareholders Tuesday the ebitda hit it would take over the new regulated pricing had been reduced from $170 million to $80 million a year. Its shares surged. Spark said the new pricing would add $60 million a year to its costs. Its stock sagged.

In the audience last night, a Chorus staffer told NBR he had a degree of sympathy for Spark. His company knew what it was like when the boot was on the other foot. But while he could empathise, he seemed pretty chipper.

I have no idea where Chorus shares will head in 2015, but I do know one thing: the final stage of the two-years-plus copper pricing stoush in April does not mean the end of the age of uncertainty for the company. More regulatory and political challenges lie ahead. Read about them in today's print edition of NBR.

chris@chriskeall.com

Follow @ChrisKeall

Chorus [NZX:CNU] 24-month share price history (NZX.com). While the stock has bounced back, it's still off the $3.70 it hit in 2012, and investors are still waiting on the return of the company's once-fat payouts. First NZ Capital is picking dividends could resume in the first half of 2016.

Spark [NZX:SPK] 24-month share price history (NZX.com).