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NBN Co not going to ‘jeopardise’ taxpayer funds for Telstra: CEO

Telstra CEO Andy Penn announcing the full year resultsPhoto Pat Scala , Melbourne , AFRThursday the 17th of August 2017 .NBN Co’s boss says it could not agree to Telstra’s securitisation program because it would not bring any value to NBN but would potentially introduce more risk.
Nanjing Night Net

Telstra revealed on Wednesday that NBN Co had rejected its proposal to securitise about $5.5 billion in infrastructure payments it expects to receive from NBN Co in coming years.

Telstra shares, trading without rights to the company’s 15.5?? a share interim dividend, fell as much as 8 per cent on Wednesday. They were up 3.5?? at $3.635 on Thursday afternoon, but still down from $3.91 at the start of the week. Telstra shares have not been this low since mid-2012.

Under Telstra’s proposal, investors would have paid the telco today for bond-like access to the money it would receive from NBN Co in coming years. This would have given Telstra access to billions of dollars straight away, but would make NBN Co directly responsible for repaying the investors.

“This is really something Telstra should be dealing with,” NBN chief executive Bill Morrow said on Thursday at the release of NBN Co’s latest corporate plan.

“I can assure you there is no difference in the capital payments that we intend to make with Telstra.”

Telstra’s proposal reduced the flexibility NBN had in its deal with Telstra, introduced uncertainties and made decisions more complex, Mr Morrow added.

“If we see something that is neutral or potentially negative then we will consider it, but if it turns out that we cannot be convinced there is value or if it has some risk to it, then we are not going to do it.”

“We see an uncertain amount of risk and we are not going to jeopardise the taxpayer investment because of that.”

The latest corporate plan reaffirmed NBN Co’s goal of completing the network by 2020 for $49 billion. By mid-2018, NBN Co will have used $29.5 billion of taxpayer funding. It will then start drawing down on a $19.5 billion loan from the government that must be repaid at commercial rates.

Communications Minister Mitch Fifield said NBN Co had hit key targets and its completion was in sight.

“As Australia’s largest and most complex infrastructure project, the NBN has been a risky undertaking,” Senator Fifield said.

“Two years ago, when we released a three-year plan to reach three-quarters of Australians by mid-2018, the plan was derided by the then shadow communications minister as a ‘ramp up that Evil Knevil couldn’t jump’. But NBN has managed to achieve what some said was impossible.”

NBN has met predictions made in 2015 of passing 5.4 million premises by mid-2017 (it has passed 5.7 million) and activating 2.3 million premises. But it has also revised down the number to be connected by July 2018 from 9.1 million to 8.7 million.

Capital expenditure has been higher than expected at $5.8 billion rather than $5 billion, and operating expenses (including subscriber payments) were $3.7 billion compared with predictions in 2015 of $3.4 billion. However, revenue of $1 billion was $200 million more than expected.

If NBN Co needs more funding from 2021, it will have to get a loan from banks or commercial markets. By this time, it expects to have revenue of $5.4 billion but high costs will reduce this to a positive cash flow of $1 million.

NBN revised down the number of total premises to be connected by 2021 because the initial target of 11.9 million was based on inaccurate geographic data that overestimated the number of premises in Australia by 300,000. The new target is 11.6 million premises.

Labor’s communications spokeswoman, Michelle Rowland, criticised NBN’s progress, saying Prime Minister Malcolm Turnbull promised in 2013 he would deliver the NBN for $29.5 billion by the end of 2016. Mr Turnbull was opposition communications spokesman at the time.

“Today’s corporate plan confirms the NBN is now due to be complete by July 2020, at a cost of nearly $50 billion to the Australian taxpayer,” Ms Rowland said.

“That is 3?? years late, and $20 billion over budget. This joke of an NBN is not faster or cheaper, it is slower and more expensive.”

NBN Co expects about 8.6 million active connections in 2021 out of 11.6 million serviceable premises, giving it average monthly revenue of $52 per user, up from $43 today. The increase in revenue is expected to come as people move to higher speed tiers.

In the plan, NBN revealed the cost of fibre-to-the-curb (FTTC) installations for the first time. This technology will cost $2900 per premise, which is $600 more than fibre-to-the-node (FTTN) and cable connections, but $1500 cheaper than a fibre-to-the-premise (FTTP) connection.

FTTC will be faster than FTTN because it brings fibre closer to the house. About 1 million premises in areas with Optus’ HFC cable will get FTTC instead of upgraded cable.

The government-owned entity will also start differentiating between premises that are “ready for service” and those that are “ready for connection”. There is about a six-month gap between premises declared “ready for service” and those that are “ready for connection”, which may have left consumers wondering why a premise declared ready could not yet connect.

NBN will now “aim to complete all civil works before declaring a home ready to connect and accepting an order”, according to the corporate report.

This means that of 8.7 million premises expected to be “ready for service” by July 2018, about 400,000 will still be six months from being able to connect.

“All we have done is rename ‘serviceable’ to ‘ready to connect’. We want this to be the prominent measure going forward … all we are trying to do is just clean up the language,” Mr Morrow said, adding all premises will be ready to connect by 2021.

NBN will stop spending money on FTTP by 2019. By 2021, FTTP will be available at 2 million (17 per cent of) premises, FTTN will be available at 4.6 million (39 per cent of) premises, FTTC at 1 million (8.5 per cent of) premises and upgraded HFC at 3.1 million premises(26 per cent). About 1 million people living in regional Australia will be using satellite or fixed wireless connections.

Internet activist Laurie Patton from Internet Australia called on NBN Co to increase the number of FTTC connections, calling the technology a “reasonable middle ground”.

“At least it can be upgraded down the road whereas when it comes to FTTN, it’s a case of ripping it out at great expense,” Mr Patton said.

“The way it’s going, whoever is in office in 2020 will have to deal with our biggest ever national infrastructure debacle. NBN Co will owe the government about $19 billion and within five to 10 years it will need to fund a very expensive replacement of the FTTN rollout.”

This story Administrator ready to work first appeared on Nanjing Night Net.

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