Chorus Navigates Economic Headwinds, Focuses on Fibre Strategy

Chorus, a key player in New Zealand’s telecommunications sector, is facing economic headwinds that have impacted its financial performance. The company reported results that were “weaker than expected,” according to Craigs analyst Wade Gardiner, who had projected earnings before interest, taxes, depreciation, and amortization (EBITDA) of $403 million. The primary driver of this variance was a 4.5% decline in fibre revenue, attributed to cost-of-living pressures prompting customers to migrate to lower-priced plans. In response to these challenges,Chorus is undertaking a restructuring program,dubbed “Horizon 2.0,” to streamline operations and sharpen its focus on becoming a more efficient,all-fibre network operator.

The New Zealand-based telecommunications giant is implementing strategic changes to address a shifting market landscape.The company’s financial performance has been affected by a combination of economic pressures and evolving consumer behavior,prompting a extensive review of its operations and future direction.

Impact of Economic Pressures on Consumer Choices

The current economic climate in New Zealand is substantially influencing consumer behavior, notably in the broadband market. Chorus noted that “new property advancement revenues were about $2 million lower due to the slowed economy.” Moreover,there has been a notable increase in the adoption of the lower-revenue 50Mbps broadband plan,reflecting the financial strain on households.

Chief Executive Mark Aue addressed this trend during a conference call with analysts, stating, “We are seeing some grade-down from 300[Mbps] to 50[mbps].We’re also not seeing the trade-ups to 1Gbps or hyperfibre… there’s an element of riding through this economy.” This shift highlights the challenges faced by telecommunications companies in maintaining revenue streams amid widespread cost-of-living concerns.

Notably, the 50-megabits-per-second Home Fibre Starter plan experienced considerable growth, increasing from 21,000 wholesale connections to 68,000 in the first half. In response, Chorus announced plans to double the speed of its Starter plan to 100Mbps from June, aiming to enhance usability for low-income households and bolster its competitive position against fixed-wireless broadband offerings.

Cost-Cutting Measures and Restructuring

In addition to adapting to changing consumer preferences, Chorus is actively pursuing cost-cutting measures to improve its financial performance. Chief Financial Officer Drew Davies addressed questions about cost reduction efforts, stating that labor costs were “up slightly” in the first half. However, he emphasized the “Horizon 2.0” restructuring program, which commenced in December, is designed to align the institution with its future as a fibre-only company.

Davies elaborated on the restructuring process: “We started in December our first phase of looking at the organisation and what aligns to our future fibre-only company. We have about 30 roles that will be disestablished in the second half of FY25 – that is, by the end of the financial year on June 30.” This initial phase involves a reduction of approximately 30 corporate staff roles out of around 850, as Chorus primarily utilizes contractors for fieldwork.

The second phase of the review is currently underway, focusing on a thorough assessment of the entire organization. “The second phase is under way right now where we’re looking at the organisation in total to identify what we need to change – and have that done by June this year, so we start the next fiscal year with an ‘Org 2.0’… It’s not just a cost-out or a people-out, it’s a capability assessment and where do we need to invest and look at realignment to drive all all-fibre strategy in the future,” davies explained.

Chorus’s Evolving Role and Future Strategy

Aue emphasized the broader context of the restructuring, highlighting the company’s evolving role in New Zealand’s telecommunications landscape. “In recent weeks – and even as recently as Friday – there’s been some pretty sobering announcements in the market and I think, actually, we’re seeing one of the longest and deepest recessionary periods in New zealand. And as much as we’d all love that to change in the short term, the reality is that we’ve got a more medium-term outlook on that,” Aue stated, acknowledging the challenging economic habitat.

He further elaborated on the company’s strategic shift: “Chorus has got this amazing legacy as the great network builder, but with the [UFB] build finished we need to evolve to being the great network operator.” This transition necessitates a focus on efficiency, competitiveness, and simplification of operations.

“When you start driving a Chorus that sums up as a simpler, more efficient and more competitive operator, we shoudl expect that processes, systems and likely some roles should come out,” Aue added, underscoring the rationale behind the restructuring efforts.

Exploring New Revenue Streams and Social Initiatives

Beyond cost-cutting and operational improvements, Chorus is actively exploring new revenue streams and initiatives to drive future growth. The company has proposed potential expansions of the Ultrafast Broadband (

Chorus’s Strategic Pivot: Navigating Economic Headwinds in New Zealand’s Telecom Sector

Is New Zealand’s telecommunications landscape facing a perfect storm,forcing major players like Chorus to drastically rethink their strategies?

Senior Editor (SE): Dr. Anya Sharma, welcome.Your expertise in telecommunications economics adn New Zealand’s market dynamics is invaluable. Chorus’s recent financial report reveals a significant decline in fibre revenue, attributed to cost-of-living pressures. Can you elaborate on the interplay between macroeconomic factors and consumer behavior in this context?

Dr. Sharma (DS): Absolutely. The situation Chorus faces reflects a broader trend across many developed economies. Cost-of-living pressures directly impact consumer discretionary spending, including telecommunications services. When household budgets are squeezed, consumers often prioritize essential services, leading to a “trade-down” effect. In Chorus’s case, this translates to customers opting for lower-priced broadband plans, a phenomenon amplified by the increasing availability of competitive fixed-wireless options. This isn’t simply about price sensitivity; it’s about a essential shift in consumer priorities in response to economic uncertainty. Understanding this shift is crucial for strategic planning in the telecom sector.

SE: Chorus’s “Horizon 2.0” restructuring program aims to create a more efficient, all-fibre network operator. What are the key challenges and opportunities inherent in this restructuring effort? What can other telecommunications companies learn from Chorus’s approach?

DS: The challenges for chorus are multifaceted. Restructuring involves streamlining operations, reducing redundancies, and potentially impacting workforce morale. However, the prospect lies in creating a leaner, more agile association that’s better positioned to compete in a dynamic market. Focusing on becoming a highly efficient all-fibre network operator is a smart move, capitalizing on the existing infrastructure while adapting to evolving customer needs. Other telecom companies can learn from Chorus’s approach by:

Proactively analyzing market trends: understanding shifts in consumer behavior is paramount.

Embracing technological advancements: Investing in infrastructure and technology is key for long-term competitiveness.

Prioritizing operational efficiency: Streamlining operations and reducing costs are vital for profitability.

Developing a future-proof strategy: adapting to changing market conditions and emerging technologies is a must.

SE: The shift towards lower-priced broadband plans seems significant. How can Chorus counter this trend while ensuring accessibility for low-income households? What role does the company’s proposed speed upgrade for the Starter plan play in this strategy?

DS: The increasing popularity of lower-priced broadband plans signals a clear need for telecommunication providers to offer flexible, affordable options without compromising essential service quality. The speed upgrade for the Starter plan is a positive step in this direction. It addresses the needs of low-income households, enhancing their connectivity experience while remaining competitive against fixed wireless alternatives that may present a more budget-friendly option in this low-consumption range.Beyond this, Chorus should consider:

Bundled services: Offering packages that combine broadband, telephony, and other services at discounted rates.

Targeted marketing: Focusing marketing efforts on specific demographic segments with tailored plans.

Data optimization: Implementing systems to manage data usage and provide suitable data caps, thus generating cost savings.

Continue the investment in high-speed fibre infrastructure. This is a core strength providing a foundation for future growth.

Invest in strategic partnerships and potentially explore synergistic mergers.

Invest further in customer service and experience. Retaining existing customers and attracting new ones is crucial in this competitive market.

* Embrace a data-driven approach to decision-making. This will ensure agility and effective resource allocation.

In short, Chorus needs to evolve from a network builder to a dynamic, customer-focused network operator. By focusing on operational efficiency, customer satisfaction, and strategic diversification, Chorus can successfully navigate the challenges and secure its position in the New Zealand telecommunications market. Let’s hear your thoughts below! Share your predictions for Chorus’s future, or perhaps suggestions for other telecom companies working through similar economic challenges.