Chorus Ltd., the operator of New Zealand’s telephone network, plunged the most on record after the government lost political support for possible legislation to counter a regulated price cut.
Political parties holding 61 of the 120 seats in parliament yesterday said they would oppose any legislation designed to override a Commerce Commission ruling on pricing of copper-based broadband services. Chorus shares slumped 15 percent or 26 cents to NZ$1.525 at the 5 p.m. market close in Wellington, the biggest drop since they began trading in November 2011.
The stock has dropped 42 percent since the regulator ruled Nov. 5 that Chorus must reduce the monthly price of copper services by about a quarter, prompting the company to withdraw its dividend guidance and warn that earnings would fall. Moody’s Investors Service placed its Baa2 credit rating on review for possible downgrade, and Chorus called for government intervention.
“Since the Commerce Commission’s decision was announced, the government’s approach has been consistently that the first priority is for Chorus to meet the shortfall itself,” Communications Minister Amy Adams said in a statement. “If this is not possible, the government would look at other non-legislative options as a first choice.”
The Labour, Green, Maori, UnitedFuture and New Zealand First parties said yesterday they would oppose any legislation. ACT New Zealand also said the government shouldn’t anticipate its support, Fairfax Media reported.
Chorus has said making existing copper-wire services cheaper will deter consumers from switching to a new ultra-fast broadband network it is building in partnership with the government. Chief Executive Officer Mark Ratcliffe said this month that without government intervention, the company’s ability to fund itself would be compromised.
The government is waiting on an independent assessment of Chorus’s financial position and its ability to deliver on the fast broadband commitments, Adams said.