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Chorus risks not meeting UFB and RBI committments: Ernst & Young finding

Randal Jackson | Dec. 5, 2013
NZ's Communications and Information Technology Minister Amy Adams says the next step will be for Chorus to approach Crown Fibre Holdings (CFH) to discuss specific provisions within the UFB contract.

Chorus is at risk of not meeting its UFB and RBI contractual commitments because the proposed copper price changes will have a significant impact on its financial position, Ernst & Young (E&Y) says.

The Government has received a verbal briefing from E&Y Australia on its high-level findings into whether Chorus can deliver on the contracts. The Minister of Business, Innovation and Technology had commissioned E&Y to investigate Chorus' capability to deliver in light of the Commerce Commission's decisions on final wholesale prices for copper-based broadband services.

Communications and Information Technology Minister Amy Adams says the preliminary conclusion is that copper price changes will have a significant impact on Chorus' financial position and that, without further action, Chorus is at risk of not meeting its UFB and RBI contractual commitments, after taking into account a wide range of efforts Chorus can take itself.

"While the quantum of the shortfall is still being finalised and will be outlined in its final report, Ernst & Young has indicated it is unlikely to alter the high-level findings and that the Government can act with confidence on the information they has supplied," she says.

"As a result of this information, and because the Government remains strongly committed to the UFB roll-out, the Government expects that the next step will be for Chorus to approach Crown Fibre Holdings (CFH) to discuss specific provisions within the UFB contract.

"The Government supports CFH entering into discussions with Chorus to help manage this issue.

"The Government's UFB initiative has a budget of $1.35 billion and CFH is required to act within this fiscal envelope. The Government expects Chorus to meet a significant part of the shortfall."

Adams says the Government expects to know the outcome of the discussions between CFH and Chorus in a few months' time.

Ernst & Young's final report is due on December 12.

 

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