As EBITDA Surges, NBN Pays Down Nearly $6 Billion More Government Debt

NBN Co grew its business to an annualised run rate of $5 billion revenue and $3 billion EBITDA in the last fiscal half. In line with this, it retired nearly half of its outstanding government debt. NBN Co originally has a loan from the government amounting to some $19.5 billion.

CEO Stephen Rue said, “I think there’s an understanding in the global markets of the importance of long-term infrastructure assets and particularly one like NBN, which is clearly so important to the economy and in fact, the fabric of Australia going forward.”

“The financial markets can see the trajectory of the company in terms of growth of revenue, growth of subscribers, the management of our operating and capital expenditure. And I think it’s a vote of confidence in the company and its performance.”

However, an immediate external challenge for NBN Co is to negotiate the Special Access Undertaking process with the Australian Competition and Consumer Commission. This is said to see a raft of changes in the way NBN products are priced.

“All infrastructure companies invest upfront and we had significant upfront costs in terms of capital expenditure to build a network, subscriber costs as well, and clearly operating losses that led to the buildup of the ICRA,” Rue said.

“It was always intended that the ICRA would be recovered over time and our (SAU) proposal again, doesn't change the principle of the ICRA being recovered over time.”

“We do need to be able to service, pay down debt. We do need to invest in the network. We do need to deliver upon our statement of expectations for the government as well but we recognise that there are adjustments that the ACCC would like in some of the regulatory framework and we also recognise that there are requests from the industry to adjust some of our pricing.”

“And that’s why (in our SAU proposal) we’ve gone to access pricing only on 100 [Mbps and above, with no CVC component]. That’s why we’ve positioned the 25/5 as the entry-level product and introduced a voice-only product. So all of these things are balancing what is needed from our business, as well as responding to industry and the ACCC.”

When it comes to monetising investment, another challenge is in expanding the gigabit capability of the network.

“Clearly, the demand from consumers for higher speed tiers will grow over time. There’s no doubt. And equally, I’m sure that the industry from a marketing and a product point of view will also seek to meet the needs of the community,” Rue further added. 

“It’s not long ago when we didn’t have a substantial number of customers on 50Mbps and now you can see that moved over the last three to four years. And so I think that we’ll see a similar move over the next few years, onto 100 megs and above,” he added.