Crown Fibre Holdings Limited (CFH) has been established to manage the Government’s $1.5 billion investment in Ultra-Fast Broadband infrastructure. The Government’s objective is to accelerate the roll-out of Ultra-Fast Broadband to 75 percent of New Zealanders over ten years, concentrating in the first six years on priority broadband users such as businesses, schools and health services, plus green field developments and certain tranches of residential areas (the UFB Objective). The Government’s objective will be supported by investment in partnership with the private sector, and be directed to open-access infrastructure.
Crown Fibre Holdings (CFH) will:
- deliver on the UFB Objective as above;
- operate in a financially sustainable manner;
- begin investing without providing a commercial return to the Crown; and
- eventually provide a commercial return on the Crown’s investment, and operate as a successful business, when directed by its shareholding Ministers and the Minister for Communications and Information Technology.
Crown Fibre Holdings was formed as a Crown-owned company under the Companies Act 1993. It is of the type listed on the 4th schedule of the Public Finance Act 1989, where joint ownership is necessary or desirable as the Crown intends to reduce its shareholding at some stage to somewhere between over 50% and under 100%. Other Crown organisations operating under the same structure include the Research and Education Advanced Network (REANZ) and Health Benefits Ltd.
Crown Fibre Holdings has contracted with four parties to deploy Ultra-Fast Broadband to 75% of New Zealanders. Three Local Fibre Companies or LFCs have been created as a result and the fourth partnership has resulted in a newly formed company called Chorus Limited, which has separated from its former parent, Telecom New Zealand Limited. A list of CFH’s UFB partners and the candidate areas they’ve been contracted to build is shown below:
- Northpower Limited (Northpower): 1.6% of UFB total coverage comprising Whangarei, the LFC Northpower Fibre has been created;
- Waikato Networks Limited (WNL), owned by WEL Networks Limited and Waipa Networks Limited: 13.7% of UFB total coverage comprising Hamilton (including Cambridge and Te Awamutu), Tauranga, Tokoroa, New Plymouth, Hawera and Wanganui, the LFC Ultrafast Fibre has been created;
- Enable Services Limited (ESL) owned by Christchurch City Holdings Limited: 15.3% of UFB total coverage comprising Christchurch (including Rolleston) and Rangiora, the LFC Enable Networks Limited (ENL) has been created; and
- Chorus Limited, formerly the network arm of Telecom Corporation of New Zealand Limited (Telecom): 69.4% of UFB total coverage comprising 24 Candidate Areas : Auckland, Waiheke Island, Pukekohe, Waiuku, Rotorua, Taupo, Whakatane, Gisborne, Napier-Hastings, Palmerston North, Feilding, Masterton, Kapiti, Levin, Wellington, Nelson, Blenheim, Greymouth, Ashburton, Timaru, Oamaru, Dunedin, Queenstown and Invercargill (being all areas except those covered by ENL, WEL and Northpower).
Agreements with UFB Partners
Structures underpinning the Ultrafast Fibre (WEL Networks) and Northpower Fibre contracts are as explained as the “preferred commercial model” in the Invitation to Participate (ITP). The partners make payments to Crown Fibre Holdings as individual premises are connected to the network. In addition the Crown, through CFH, shares ownership of the local fibre companies (LFCs) it has formed with its partners. This equity can be realised, subject to certain caveats, upon IPO or a buyout by the partner.
The Enable and Chorus contracts use alternative financial models, as allowed by the ITP. These feature a lower initial CFH outlay per premise but no recycling of CFH’s investment during the deployment period as premises are connected.
In the case of Enable, CFH also has direct ownership of the new LFC which, although it is not bought back as premises are connected, can be realised by selling its stake or being bought out by Enable.
In the case of Chorus, the Crown’s equity is made up of non-voting preference shares (which convert to ordinary shares at preset dates) and debt securities with zero coupon (i.e. no interest payable). These operate such that Chorus may return funds to CFH from 2025, with all funds likely to be returned to CFH by 2036. For more information on the Crown Fibre Holdings partnerships, see the agreements with UFB partners.