Fibre Broadband Shares

[Snoopy]

Unlike Chorus, the 'other' companies (Northpower, Ultrafastfibre and Enable) chosen to roll out fibre broadband in specific areas all over New Zealand had no established telecommunications network from which to earn money. The government funding, at least initially took a slightly different form than that used by Chorus.

From note 14 in the FY2013 'Crown Fibre Holdings Limited' Annual Report

https://www.crowninfrastructure.govt...eport-2013.pdf

Agreements set out the key commercial terms of the relationships between Crown Fibre Holdings (CFH) and the Local Fibre Companies (LFCs) and their partners. This includes CFH having a shareholding in each of the LFCs that reflects the level of CFH’s investment, in conjunction with its partner, in the deployment of the UFB network in the Candidate Area(s).

Under this model, the Crown’s investment funds the communal infrastructure and the partners’ investments fund the build past each premises. CFH recovers the investment in the LFCs either by dividends received after the concession period or through the sale of shares. (In the case of 'Enable' the Crown was bought out of the Christchurch LFC in FY2016.)

The deployment plans drive CFH’s level of investment in the LFCs. As each stage of a plan is completed by the partner, the LFC purchases the UFB network from the installing partner by paying it an agreed 'cost per premises passed' (CPPP) for the number of premises that have successfully completed user acceptance testing (UAT) for the stage.

In turn, that purchase is funded by CFH subscribing to A shares (these shares carry full voting rights, with no dividend rights until 10 years from establishment) in the LFC, the price for which is the agreed CPPP. In respect of Christchurch based ENL, the local partner (ESL) funds a portion of the purchase by also subscribing to A shares.

The local partner is required to fund the cost to connect a premises and the end customer (essentially fibre optic lead-in from the street), the electronics necessary to light the fibre and the lFC operational costs. The partner generally receives B shares for funding these obligations (B shares carry full dividend rights, but no voting rights until year 10), although some prudent level of debt is permitted in each LFC.

All A and B shares in each LFC convert to ordinary voting dividend entitlement shares 10 years from establishment date (wlFC and Ultrafastfibre: December 2010, ENL: May 2011). The partners also provide management and operational services to the LFCs, which are included in the 'management fees to partners' line in surplus/(deficit) in the income statement..

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