One slightly unusual holding in our domestic funds is Chorus Limited (CNU), New Zealand’s largest owner of telecommunications networks. CNU has had a bumpy ride this last year, but we think the market has marked it down too far due to regulatory uncertainty. If we are right, then the company should re-rate.
One investment that has served us well over the past year is a holding in Chorus Limited (ASX: CNU) – the owner of New Zealand’s copper telecommunications network, and a major player in the construction of New Zealand’s Ultrafast Broadband Project – New Zealand’s equivalent of the NBN.
Chorus Limited (CNU) was created in 2001 when Telecom NZ split into two parts – Chorus, which owns the fixed network, and Spark, which owns the retail business and the mobile network. Telecom NZ was the first incumbent telco in the world to volunteer for such a structural separation, and in doing so positioned Chorus to participate in the build of the ultrafast broadband project (UFB) – NZ’s version of the NBN.
Chorus, a telecoms operator split off from Telecom NZ in 2011, is a regulated monopoly that owns and operates copper cables in New Zealand. It generates revenue by leasing the copper cables to phone and broadband providers at prices determined by regulators. At a price-to-earnings ratio of just four and an implied yield of over 10%, the numbers suggest Chorus is cheap. As ever, there is more to the story.