The prospects of the future sale of the NBN has dropped from the radar. Possibly something that could quietly slip through and reappear post election as a fate accompli post election. One way or another?
The no sale deal
There is relative silence on any other outcome, hence one might assume the alternative will be a sale asap post electoral victory if it goes the other way. Easily deniable in the absence of any recent announcements.
A professional financial assessment (full of numbers and financial jargon) has provided a marker in the sand.
We expect FFO net leverage will fall to 8.1x by FY24 (FY20: 31.4x) as its subscriber base and earnings improve. We are likely to assess NBN Co’s SCP at investment grade once we can foresee FFO net leverage falling sustainably below 6.0x.
Without making it too complex it’s about the level of income (funds from operations) relative to debt. Fir those kern enough to read the AFR article ignore the jargon and take on board the simple statements about encouraging customers into more expensive plans, take up of higher speed plans and more customers joining the NBN. The analysis will be effectively more than 12 months old by the time the next Government is formed.
Note the FFO does not need to achieve 6.0x. The reasonable prospect may be sufficient to encourage progress to a sell off. Something that may become more difficult to bargain if the cost of finance (interest rates) begin to climb.
The NBN has continued to accumulate loses. More than 38 billion reasons why it was not put up for sale by the departing government. No longer for sale!
A new challenge is a prospect of the cost of remaining connected increasing faster than inflation. The latest from the NBN is a strategy that could push the cost to RSPs of lower tier plans towards those with higher speeds. Note also the NBN is permitted to increase in the near term the 100Mbps tier charges by CPI + 3%.
ACCC modelling suggests the cost for the 50Mbps plan would equal the 100Mbps plan by 2027, and the 25Mbps plan would reach the same price by 2034.
The drive for the change, the ACCC said, was NBN Co had accumulated “significant losses” since the network construction began in 2009 – $38bn in real terms or $44.5bn in nominal terms.
There is also another appropriate topic where I added the Guardian link
Yes, sometimes decisions made or content provided relate to more than one topic.
The NBN is struggling to deliver a commercial return. Evident from the desire to increase earnings and evident from the accumulated debt. Both weigh on what would make it saleable. Also the financing plan per the original and full fat fibre design plus the vision for the revised less capable mixed mode product to keep it off the budget bottom line.
With some anticipation of a change the direction is still to be confirmed. Would a decision to add the value of the investment and loses to the budget bottom line ensure a future lower cost customer experience? The question for any new government might be that if putting the full cost of the NBN to the budget bottom line, it will remain available for a future one to cash it out to the private sector. A prospective claim to the savings at the expense of a the predecessor.
Of note the national highway network remains in public hands, why not the NBN? Keeping the NBN in public hands the drive for profit can be offset against the investment in the broader public need and to share the benefit at equal cost to all consumers. Something profit making enterprise is not bound by. The challenge of retaining the NBN for greater public benefit is legislation can always be changed according to numbers. If the NBN is to be given national status, perhaps it needs constitutional support to ensure that only the public on the day can allow it’s disposal?
Following the change in Government in 2022 a change in the prospects of any sale of the NBNCo.
“The government has stated that it will retain NBN Co in public ownership for the foreseeable future, expand full-fibre access to more homes and businesses and to ensure the NBN delivers for consumers and facilitates productivity,” Ms Rowland wrote.
Privatisation off the table as government resets NBN policy
Looking at the financial position, if one has a head for figures.
‘https://www.fitchratings.com/research/corporate-finance/fitch-affirms-nbn-co-at-aa-outlook-stable-07-10-2022
It’s possible this topic will offer little new for some time. Other topics in the community provide scope to discuss how the NBN services are going for most consumers. Personal opinion only is the approx 10% of households connected on Satellite or Fixed Wireless appear to have been overlooked in the latest upgrades, (with a few exceptions).
Edit - added link.
A point of reference for the future.
