Spineless investors forget Chorus line

IF YOU believe what you read about Chorus’s latest stoush with the Commerce Commission, you’d have to think offshore investors are both stupid and spineless.

The Commerce Commission has released a draft ruling that, if implemented as it stands, would have a serious impact on Chorus’s revenues.

The Government looks as if it won’t stand for that and may legislate to make us all pay more for copper-based broadband and to make its fibre rollout look more attractive in comparison. A lot of water is to go under that bridge yet but, according to reports, offshore investors have got the jitters over regulation.

One is tempted to ask, what did they think they were investing in?

Chorus is a regulated industry and therefore there is permanent regulatory risk. Did they not understand this? On the upside, of course, is the fact that Chorus is what is called a ‘‘moat’’ investment. Other businesses would have a very hard job knocking Chorus off because it has natural – and regulatory – protections against competition.

It therefore can be expected to deliver better-than-average returns, and to do so reasonably consistently, provided the regulator doesn’t intervene.

I suspect the offshore investors knew about this and sought the company out as a safe haven for their funds offering a good return at a time of record low interest rates.

It’s a great combination, little competition risk and relatively high returns – as long as the regulator doesn’t intervene.

Maybe these offshore investors come from some fantasyland where regulators have not yet been invented or a land of perfect competition in all industries where they aren’t needed.

No wonder they chose not to invest at home; competitive markets are even more dangerous for investors than regulated ones.

These risk-averse, ignorant and spineless foreign investors may, apparently, choose to invest elsewhere in future, somewhere with ‘‘regulatory consistency’’ like, er, Russia for instance, or maybe China.

Good luck to them, we all say. Maybe they’ll harden up.

Meanwhile, things are brewing on the regulatory front at home. As you can see from page 3, the Government is pushing forward with plans that may indeed deliver regulatory consistency to longsuffering builders in the form of a new national consents system that, in due course, can be extended to embrace applications under the Resource Management Act.

Assuming this project works a bit better than Novopay has for teachers, it’s a great initiative.

We all look forward to large reductions in the fees councils charge for these services as well.