Spark to hike broadband, phone prices over copper decision
By Paul McBeth
Dec. 10 (BusinessDesk) - Spark New Zealand, formerly Telecom Corp, will hike retail prices for its home phone and
broadband plans from February, blaming the smaller reduction in regulated wholesale prices on Chorus's copper network.
The Auckland-based company will raise prices on homephone-only, and 40 gigabyte and 80GB broadband plans by between
$2.50 and $4.25 a month from Feb. 1 after the Commerce Commission this month indicated plans to cut wholesale
telecommunications prices by a smaller amount than previously flagged, it said in a statement. While the price increases
are on Spark's lower-end plans, the retail service provider is making its unlimited broadband plan more attractive,
trimming $10 a month from the package and dropping its 150GB and 500GB plans.
"Market competition has brought great value for customers and the expected wholesale cost reduction for Spark and other
ISPs (internet service providers) has been built into current broadband prices," said Chris Quin, Spark home, mobile and
business chief executive. "Given this negative uncertainty, Spark has no choice but to change its prices now."
Last week Spark warned it was reviewing its prices after Telecommunications Commissioner Stephen Gale's draft decision
to set the monthly total charge allowable for the unbundled copper local loop (UCLL) and for unbundled bitstream access
(UBA) at $38.39, up from the $34.44 monthly regulated price that came into effect on Dec. 1. That's still lower than the
$44.98 monthly rental that had applied until December. Spark accounts for almost three-quarters of Chorus's annual
revenue.
Spark estimates the draft pricing will increase its input costs by $60 million and if the decision stands, will
materially lift the company's costs and have a negative impact on its 2015 earnings. The company has previously said
it's too early to adjust guidance for low single digit growth in adjusted earnings before interest tax, depreciation and
amortisation from $936 million in the 2014 year, and didn't update the forecast today.
The company said it's still unclear as to whether the regulator will backdate the new pricing, and if it decides to do
so, Spark's higher prices won't fully cover the increased wholesale costs.
"Once we have a clearer view on the final decision on wholesale charges and whether these charges will be backdated we
will review the situation and we will do the right thing by our customers," Quin said.
Spark dropped its prices as part of its transformation into a digital services business under the stewardship of Simon
Moutter, who wanted the company to compete more aggressively in broadband to stop customers from leaving simply on
price.
That competition has seen prices drop for customers, and since Chorus was carved out of Spark, then Telecom, in late
2011, consumer prices for telecommunications services have dropped 10 percent, according to government figures.
In August, Quin told analysts retail service providers had already cut prices in anticipation of a lower regulated price
on the copper lines, and that there wouldn't be any further reductions for consumers.
Shares of Spark last traded at $3.03, and have gained 31 percent this year. The stock is rated an average 'hold' based
on 10 analyst recommendations compiled by Reuters, with a median price target of $2.83.
(BusinessDesk)