Telstra expects hit to FY19 income from fewer people shifting to NBN

Telstra has made “modest” reductions to its guidance for FY19 in the wake of NBN Co’s latest corporate plan, which revised forecasts relating to the NBN rollout and migration process.

NBN Co last week released its 2019-2022 corporate plan, which revealed a range of updated forecasts for the company. Among them are that the government-owned company now anticipates that peak funding for the rollout of the NBN will be $2 billion more than previously expected and that revenue in FY20 will be $3.9 billion, down $1 billion on what it previously anticipated.

NBN Co also revised down the number of premises expected to be connected to the new network in FY19. This financial year the company expects to make 9.7 million premises ready to connect – down from the 11.05 million forecast in the previous edition of its corporate plan.

The company expects to close the gap in the following year, with 11.6 million premises ready to connect.

NBN Co also significantly cut its estimates of how many active services there will be on its network, after missing its FY18 target by 400,000. In FY19 it expects 5.5 million services, down from a previous forecast of 6.9 million. In FY20 it anticipates 7.5 million, down from 8.1 million.

The changes follow NBN Co’s decision last year to pause the sale of hybrid fibre coaxial (HFC) services while it worked to address problems with the technology. Sine ending the freeze on HFC sales, the company has been taking a conservative approach to releasing additional premises.

In a statement released to the market Telstra said NBN Co’s new corporate plan “includes lower than previously estimated premises declared Ready for Service (RFS) and premises activated for FY19.”

“This has the effect of deferring Per Subscriber Address Amount (PSAA) receipts from nbn in FY19” – the payments Telstra receives for migrating customers off its copper network -- “into future periods”. The telco said that the impact would be partly offset in FY19 by the natural hedge including benefits from lower payments to connect customers to the NBN, lower network payments to NBN Co, and revenue from continuing wholesale services on the copper network.

“While the lower volumes impact Telstra’s outlook for FY19, it is anticipated these changes will be financially positive to Telstra over the full rollout due to the effects of the natural hedge,” Telstra said.

Telstra said that it anticipated a $300 million impact on income, reducing FY19 guidance to a range of $26.2 billion to $28.1 billion (down from $26.5 billion to $28.4 billion).

EBITDA, excluding costs from Telstra's restructuring program, is expected to be in the range of $8.7 billion to $9.4 billion (down $100 million). Telstra’s restructuring is in part a response to its expectation that the NBN will have a negative $3 billion impact on the telco’s ongoing EBITDA.

Copyright © 2018 IDG Communications, Inc.

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