Chorus submits 2025 fibre regulatory report with $6.0b RAB growth and $76.3m wash-up balance

About Chorus Ltd

Chorus Limited (ASX: CNU) is New Zealand’s largest wholesale fibre network operator, owning and managing the core infrastructure that enables fixed-line broadband services across the country. The company does not retail services directly to consumers but provides regulated access to telecommunications retailers who rely on its fibre and copper networks to deliver broadband services.

The business operates under a regulated framework set by the Commerce Commission, which determines allowable revenue, asset valuation methodology and performance requirements. This framework is designed to ensure long-term cost recovery for infrastructure investment while maintaining price stability and service quality for end users.

Regulated asset base continues steady growth

The regulated asset base increased to approximately $6.0 billion in 2025, reflecting ongoing fibre investment, asset commissioning and inflation-linked revaluations applied under the regulatory regime. The core regulated asset base rose to $5.1 billion, representing growth of around $0.2 billion compared with 2024.

This increase was driven primarily by continued network expansion and capital investment in fibre infrastructure, offset by depreciation charges and regulatory adjustments. During the year, $343 million of new assets were commissioned into the network, reflecting ongoing build activity and upgrades across Chorus’ fibre footprint.

Depreciation reduced the asset base by $464 million, reflecting the consumption of existing infrastructure assets over time. Revaluations contributed an additional $183 million, largely driven by higher inflation assumptions compared with the prior year. The company noted that inflation increased to 3.11% in 2025 compared with 2.22% in 2024, resulting in higher regulatory asset valuations.

The Financial Loss Asset declined to $0.9 billion, continuing its gradual reduction as historical regulatory balances are amortised under the pricing framework.

Revenue under-recovery and regulatory wash-up

A key feature of the 2025 disclosure is Chorus’ under-recovery of revenue relative to its regulated allowance. The maximum allowable revenue for the year was $963.9 million, while actual revenue from FFLAS activities totalled $863.2 million. This resulted in an initial under-earn of $100.7 million.

After adjustments for cost allocators, pass-through items, CPI timing differences and regulatory true-ups, the final wash-up balance was calculated at $76.3 million. This amount will be carried forward into PQP3, where it will be recovered through future allowable revenue settings.

The wash-up mechanism is a core component of New Zealand’s fibre regulatory system. It ensures that differences between forecast assumptions and actual outcomes are not permanently lost or gained, but instead adjusted over time to maintain long-term revenue neutrality. While annual earnings may fluctuate, the framework is designed to stabilise returns across regulatory periods.

Regulatory framework and pricing dynamics

The company operates under the fibre price-quality path regime, which sets both allowable revenue and service quality requirements for regulated fibre services. This framework balances investment recovery with affordability for end users, while incentivising efficiency in network operations.

Revenue outcomes are influenced by multiple factors including demand assumptions, inflation indices, cost allocation methodologies and capital investment timing. Differences between forecast and actual outcomes are reconciled through periodic regulatory adjustments and wash-up calculations, such as the one recorded in 2025.

The PQP2 period, which covers the current regulatory cycle, has included updated cost allocators and inflation assumptions that have influenced both revenue and operating expenditure outcomes.

Operating expenditure and cost structure

Operating expenditure remained broadly stable in 2025, with costs allocated across network operations, maintenance, corporate support functions and technology systems. Variations in opex reflect regulatory allocation methodologies rather than significant shifts in underlying operational activity.

Shared cost allocations increased under PQP2 settings, reflecting updated regulatory methodologies that distribute corporate and support costs across regulated and non-regulated activities. Pass-through costs and regulated adjustments also contributed to the overall cost profile.

While operating costs remain a key area of regulatory scrutiny, they continue to reflect the ongoing requirements of maintaining a national fibre network, including fault resolution, maintenance, customer provisioning support and system operations.

Capital expenditure and network investment

Capital expenditure in 2025 continued to support network expansion, customer connections and infrastructure resilience. Investment activity included fibre augmentation, installation of new customer connections, property developments and ongoing sustainment of existing assets.

The company’s capex profile remains closely aligned with regulatory expectations, which balance network investment needs with efficient capital deployment. While expenditure levels remained broadly consistent with prior years, the composition of capex continues to reflect a shift toward sustaining and optimising the existing fibre footprint rather than large-scale greenfield expansion.

Earnings structure and regulated performance

The regulated fibre business continues to dominate Chorus’ earnings profile, with revenue and EBITDA driven primarily by regulatory determinations under the fibre pricing framework. Indicative financial disclosures show relatively stable EBITDA across the year, supported by steady revenue flows and controlled operating expenditure.

Non-regulated activities contribute a smaller portion of earnings but provide additional diversification. Overall performance remains highly sensitive to regulatory settings, particularly allowable revenue determinations and cost allocation methodologies.

The structure of earnings reflects the long-term nature of fibre infrastructure investment, where returns are largely determined by regulatory asset base growth and approved return parameters rather than market-driven pricing.

Strategic and operational outlook

The 2025 disclosure reinforces the long-term regulated infrastructure model underpinning Chorus Limited. The business continues to focus on maintaining and expanding its fibre network while operating within a tightly defined regulatory environment.

The key near-term focus will be the transition into PQP3, where the $76.3 million wash-up balance will be recovered through future revenue allowances. This is expected to provide a modest uplift to future regulatory revenues, although the timing and profile of recovery will depend on final Commerce Commission determinations.

Ongoing investment in fibre infrastructure remains central to the company’s strategy, particularly in supporting network reliability, customer demand growth and service quality improvements. At the same time, regulatory oversight continues to shape capital allocation decisions and return outcomes.

Conclusion

The 2025 Information Disclosure from Chorus Limited reflects a year of steady regulated asset growth, disciplined infrastructure investment and a timing-driven revenue shortfall that will be recovered in future periods.

While the $76.3 million wash-up balance highlights the variability of annual regulatory outcomes, the broader framework ensures long-term revenue stability through structured recovery mechanisms. The combination of steady RAB growth, ongoing capex investment and predictable regulatory returns continues to define Chorus’ operating model within New Zealand’s fibre infrastructure sector.