NBN Co operating expenses, capex drop as rollout nears finish line

Fibre cost declines, cost of other connection technologies rises

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NBN Co

Although NBN Co’s losses deepened in the first half of its financial year, if the payments to Telstra and Optus for migrating their customers to the National Broadband Network are discounted the company’s earnings soared 264 per cent to $775 million.

The company made a net loss of $2.82 billion, compared to $2.15 billion for the last same period in 2018. Earnings before interest, taxes, depreciation, and amortisation were negative $2.14 billion for the six months to 31 December, compared to $1.71 billion for the same period in the prior year.

Total revenue grew 39 per cent to $1.81 billion.

Notably the company saw a decrease both in operating expenses — from $1.09 billion to $1.04 billion — and capex (from $2.91 billion to $2.52 billion).

NBN Co is due to complete the rollout of its network by July this year, with the exception of 100,000 premises that are considered “complex connections,” which includes culturally significant, heritage areas, or premises where deploying a connection is more complex than usual.

The company said that during the last six months of 2019 more than 907,000 premises were activated on its network, and more than 667,000 premises were declared ready to connect.

NBN Co revealed that its revenue from the business segment grew from $214 million to $319 million, while the average revenue per residential user grew from $43 to $45.

The cost per premises of deploying fibre to the premises in both brownfields and greenfields areas dropped in the second half (from $4403 at the end of December 2018 to $4397, and from $2209 to $2164, respectively). The cost of fibre the node rose from $2259 to $2331, as did the cost of fibre to the curb (FTTC) ($3058 to $3249) and hybrid fibre coaxial ($2466 to $2744).

Chief financial officer Philip Knox said that the increase in cost per premises was generally being driven by the company dealing with more complex connections as the end of the rollout approach.

The CFO said CPP increase for FTTC and HFC is above the expectations contained in the current NBN Co corporate plan, due to greater civil and pit works being required in the later stages of the build, a higher proportion of premises requiring new lead-ins to be installed and higher connection costs for activations. The FTTN CPP increase was driven by a greater proportion of FTTB premises being hooked up, he said.

The cost per premises of fixed wireless rose sharply from $3800 to $4294, which NBN Co said included the impact of shifting 90,000 away from the technology. “This premises dilution has been applied following a full analysis of available premises data for these areas,” NBN Co said.

“The progress of the rollout during the half was particularly pleasing, given we are now at the most challenging stage of the build, which takes in more complex sites,” NBN Co CEO Stephen Rue said in a statement provided by the company.

“In the six months to 31 December 2019, we undertook one of the biggest ever phases of deployment and activations of residential and business premises on the network, with more than 907,000 premises activated and more than 667,000 premises declared ready to connect.”

The NBN Co chief executive said he expected the network rollout in urban areas to accelerate in the second half, particularly FTTC.

“We are very pleased to say that the NBN is now available in most areas of Australia, and customers continue to sign up to NBN services at a rapid rate,” Rue said.

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