Chorus Faces Regulatory Pressure Despite Strong Fiber Network Demand in New Zealand
Chorus Ltd, a significant provider of fixed-line and fiber infrastructure in New Zealand, continues to play a crucial role in the country's digital network. Despite its importance, the company has experienced a challenging year, with shares dropping 17% due to rising interest rates and stricter regulations. Investors, however, still view it as a reliable source of income thanks to its strong dividend yield.
Chorus maintains its position as a backbone of New Zealand's broadband services, driven by high demand for fast, reliable internet. The company generates consistent cash flow from its fiber network, which remains essential for homes and businesses.
Over the past five years, regulatory pressure has intensified. The Commerce Commission has steadily reduced Chorus's revenue caps, starting with a 10-year pricing plan in 2022 that cut returns by 2–4% annually. By 2025, even tighter limits were imposed, prioritising affordability over investment—especially with urban fiber usage exceeding 60%. This approach is stricter than similar policies in Australia and the UK, where regulators have balanced pricing with network expansion.
Analysts describe Chorus as a dependable income stock, but with limited growth potential. Its appeal lies in dividends rather than share price gains. Yet, ongoing regulatory changes—including possible adjustments to capital returns and pricing—could further squeeze earnings.
For income-focused investors, Chorus remains an option worth considering, given its solid dividend yield and stable cash flow. However, the company's future performance will hinge on regulatory decisions and broader economic conditions. Those holding shares will need to watch for shifts in policy that could affect profitability.
