Bad news for Labor, the NBN is on track

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    The national broadband network is on track, both in terms of the rollout of the network and its financials. That will really complicate matters for Labor if it wants to change either.

    With more than 4.6 million premises activated and another 8.1 million ready to connect, NBN Co has only three million more premises to go to complete the rollout and says it is on schedule to achieve that by June next year.

    December-half revenue rose 46 per cent, to $1.3 billion, from the same half last year and average revenue per user has edged up from $44 to $45. Chief executive Stephen Rue said NBN Co was on track to meet its projected $5 billion of revenue by 2021-22.

    Rue was at pains to stress the relationship between NBN Co’s cash flows and its ability to deliver the community and economic benefits expected from the NBN, as well as to invest in and adapt the network as technology evolves. He was also keen to talk down the relationship between "average revenue per user’’ (ARPU) and wholesale prices.

    The latter was clearly an NBN Co push-back against the lobbying by retailers, spearheaded by Telstra’s chief executive, Andy Penn, for a reduction in wholesale prices.The retailers are screaming that there is no margin for them in reselling NBN capacity and have used NBN Co’s projection of an ARPU of $51 by 2022 to suggest they face rising wholesale costs.NBN Co has previously reduced its wholesale prices while leaving its ARPU target untouched. As Rue said, ARPU and wholesale pricing aren’t the same thing.The company expects to generate higher ARPU as business usage increases – it expects half the increase in ARPU by 2022 to come from business, which will generate about $1 billion of revenue by 2022 –but there is also an expectation that households will move up the speed tiers and there will be growth in data usage over time.The emphasis on the need for NBN Co to generate cash flows could be interpreted as a reminder that there isn’t much flexibility in the company’s current financials, which are based on a finite amount of equity ($29.5 billion) and debt ($19.5 billion) to complete the $51 billion rollout and achieve a cashflow-positive position.As discussed last week, that poses challenges for Labor if it wishes to change the nature of the multi-technology network and/or lower wholesale costs.NBN Co’s December half accounts confirm that, after another loss of $2.2 billion in the half took accumulated losses to $19.44 billion, it has total equity of only $10.06 billion. It has also drawn down $9.2 billion of its $19.5 billion government-guaranteed debt facility.
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