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2016-08-19

storm clouds

NBN hits roll-out targets...but storm clouds loom

The NBN project is currently on target with both roll-out and revenue numbers according to its most recent report. 

nbn released its 2016 full year results on Tuesday 16 August, reporting a doubling in the number of both premises connected and services activated over the last 12 months. According to CEO Bill Morrow:

  • The number of premises able to order an nbn service more than doubled from 1.2 million to 2.9 million (2016 Corporate Plan target: 2.6 million);
  • The number of homes and businesses with an active nbn service more than doubled from 486,000 to 1.1 million (2016 Corporate Plan target: 955,000);
  • With the increase in end users, revenue more than doubled from $164 million to $421 million (2016 Corporate Plan target: $300 million).

The company achieved a rollout rate of over 40,000 premises ready for service per week in June 2016, as opposed to half that number a year previously. At the same time, costs per premises are down, with average FTTN costs estimated at $2,257 as opposed to $4,401 for FTTP brownfields and $2,608 for FTTP greensfields.

Whatever the arguments about the relative merits of technology choices, there is little doubt that the NBN is now being rolled out faster and more cheaply. But as several commentators have noted, big challenges still lie ahead.

The 2016 corporate plan projects a further doubling of premises ready for service (ie 5.4. million) by June 2017. A little under a million of these are to be connected via HFC  - and HFC skills are in short supply.

Then there is the capital raising that must take place during this financial year. At present it is hard to see how the business will be attractive to investors.

While revenues are currently rising in step with new connections, they are not yet rising exponentially, as required by the nbn business case. This reflects the fact that to date end customers are not moving up the value chain into faster speed tiers. The great majority are taking the lower tier products ie 25Mbps or less.

Meanwhile losses are increasing with a loss this year of $990 million. And at the same time, the threats from alternative providers such as TPG and alternative technologies (5G wireless) continue to grow.

This combination of circumstance will make 2016-17 a particularly critical one for the NBN project.

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