COALITION FOR FAIR INTERNET PRICING

MEDIA RELEASE

18 NOVEMBER 2013

Adams’ No-Nonsense Approach Drives Common Sense From Chorus

Communications and IT Minister Amy Adams’ new no-nonsense approach to copper lines monopolist Chorus Ltd is being credited by the Coalition for Fair Internet Pricing for the company’s common-sense decision to withdraw its guidance that it might pay its shareholders $100 million in 2013/14 dividends.

Chorus paid its shareholders $95 million in 2012/13 dividends despite Prime Minister John Key telling parliament that it had provided him and the Ministry of Business, Innovation and Employment (MBIE) with confidential information indicating it might be at risk of going broke.

At the same time, Chorus has been lobbying the government to legislate to impose higher prices on Kiwi households and businesses for using its copper network for broadband and voice services. These prices would be higher than the Commerce Commission, the independent regulator, says is fair.

The effect of this copper tax, which was suggested in an MBIE discussion document released in August, would be to transfer around $100 million a year from Kiwi households and businesses to Chorus’s shareholders.

“We have always said it was outrageous for Chorus to be paying its shareholders $100 million a year in dividends while demanding Kiwi households and businesses pay about the same in higher prices than the Commerce Commission said is fair,” a spokeswoman for the coalition, Sue Chetwin, also chief executive of Consumer NZ, said today.

“Chorus is building New Zealand’s new ultra-fast broadband (UFB) network, courtesy of an interest-free loan from taxpayers of nearly $1 billion, over the next few years. Under those circumstances, it should clearly have been positioned as a long-term growth stock rather than a short-term yield stock and we have never understood why its board believed it was appropriate to be paying $100 million a year in dividends at the present time.”

Ms Chetwin said Ms Adams deserved the credit for the company’s announcement today, which she said “is long overdue”.

“After the Commerce Commission issued its final determination on the fair price for copper broadband and voice services on 5 November, Chorus made what many observers see as over-the-top claims about its financial position and implied it might walk away from its UFB contract ,” she said.

“Chorus’s claims were clearly designed to pressure the government to take action against the interests of Kiwi households and businesses.

“To her great credit, the minister called Chorus’s bluff when she announced an independent review by Ernst & Young Australia of Chorus’s financial position and capability to deliver on its contractual commitments to Kiwi taxpayers.

“While it remains to be seen how independent and transparent the review will be, today’s announcement is already evidence that the minister’s new no-nonsense approach to Chorus is starting to deliver common-sense outcomes.”

The coalition repeated its call, made on Saturday, for the government to suspend all policy work on MBIE’s proposed copper tax while the independent review was underway.

“It is a waste of taxpayers’ money for officials to be working on a copper tax proposal that is unfair, unnecessary and unacceptable to Kiwis, and which may well be rendered completely irrelevant by the Ernst & Young Australia review,” she said.

ENDS

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