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NBN worth only half its build costs, say analysts

A report prepared for government agency Infrastructure Australia has found that, after it is completed, the NBN network will probably be worth only half as much as it will cost to build. 

But that shouldn’t stop it being privatised, according to the agency’s report. 

Leading consultancy firm Price Waterhouse Coopers (PwC) conducted the valuation exercise for Infrastructure Australia. 

It estimated that the NBN will be worth some $27 billion in 2024-25 – a figure based on earlier modelling of the network’s likely earnings at that time. 

The current estimate for the total cost of the construction is some $56 billion. 

Industry analysts have voiced some doubts about the PwC estimate – but not necessarily on the up side. In fact some recent estimates have suggested that the government might raise as little as $20 billion from a sale.

Full privatisation of the NBN at some point in the future is the policy of both Labor and Coalition parties, which the question of timing being less certain in the case of the latter. But if the PwC estimates are anywhere near correct, the sale is set to crystallise major losses to the public purse, probably in the form of a pre-sale write-down of the value of parts or all of the network. 

Speculation about such a write-down has been circulating in the industry for some time. It is regarded by many not as a matter of if, but when. 

In the end, the timing of any future sale may be determined by estimates of whether nbn’s future revenue targets are achievable or whether they will be progressively undermined by the rise of wireless services – and if so, how quickly. 

The next few years will be interesting, irrespective of which government is faced with this unwelcome challenge.

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