McKinsey Study: NBN not good for private investors

McKinsey Study: NBN not good for private investors

Study calls for caution in private investment as Conroy marks deadline for Telstra negotiations

The National Broadband Network (NBN) won’t offer enough financial certainty to attract private investors until its eight-year rollout is complete, according to the McKinsey Implementation Study.

The $25 million study said private investors value certainty that the NBN simply can’t provide.

“It would require Government to provide certainty upfront around the regulatory and policy safeguards it intends to implement, a requirement with which it would be difficult, if not impossible for Government to comply,” it said. “NBN Co could be attractive to a wide range of potential investors, but will be a large and complicated business to privatise.”

The study said a worst-case scenario for the build would cost $42.8 billion. Taxpayers will pay at least $26bn within the first six years, of which $18.3bn will be forked out over the next four years.

“Full Government ownership should be maintained until after the roll-out is complete,” it said. “Although it is plausible that NBN Co could be ready for privatisation within 5 years from completion of roll-out … this timing is aggressive.

Australian Greens spokesperson, Senator Scott Ludlam, said the report added weight to calls for the NBN to be kept in Government hands permanently without private investor interference.

“The most important priority is to negotiate a settlement with Telstra,” he said. “I think there’s some good evidence for maintaining a wholesale infrastructure. The 15-year period is about where the public has made its money back and where NBN Co starts paying dividends and it can either be doing that to shareholders or to taxpayers.”

While the study said a deal with Telstra would greatly boost stability and cut costs, it added a contract would be difficult to reach because of the major differences between how Telstra and the Government value the telco’s copper network.

“[The] Government’s Telecommunications Legislation Amendment is still under consideration by Parliament,” it said. “Given this uncertainty, if Government’s goal is to maximise the likelihood of its objectives for the NBN being met, the imperative for Government is to maintain its resolve to continue to proceed unilaterally.”

A Telstra spokesperson said the telco would consider the study in detail, but would be unlikely to comment until after a deal with the Government was reached.

But the Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy, signalled a potential deadline for talks with Telstra despite declining to comment on the ongoing negotiations.

“The complexities are still enormous but the constructive dialogue that’s been going on for the last four or five months continues,” he said. “I couldn’t imagine we could keep talking to the end of June. At some point you’ve got to either get there … or shake hands and walk away if you can’t.”

According to a statement by the Shadow Minister for Broadband, Communications and the Digital Economy, Tony Smith, the study does not stop the NBN from being a reckless and irresponsible option.

“The implementation study confirms that taxpayers will wear a huge risk for many years to come,” he said. “The $26bn of public money is just the starting point.

“The build cost and timeframe rely on nothing at all going wrong and everything going right – from a government where almost nothing is ever on time, on budget or delivered competently.”

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Tags Senator Stephen ConroyCommunications and the Digital EconomyMinister for BroadbandNational Broadband Network (NBN)Senator Scott LudlamAustralian GreensMcKinsey Implementation study


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