Menu
NBN reseller “land-grab” hampers profit projections

NBN reseller “land-grab” hampers profit projections

If all goes well, nbn expects to become cashflow positive by 2021

Bill Morrow - CEO, nbn

Bill Morrow - CEO, nbn

nbn chief, Bill Morrow, has put National Broadband Network (NBN) resellers on alert, claiming that customer footprint “land-grabs” are hampering efforts to raise the average revenues arising from the network’s customers.

Since the NBN rollout began, average revenue per user (ARPU) has played an essential role in the modelling of the estimated future profit of the company behind the construction of the network.

Indeed, nbn’s 2017 Corporate Plan referred to an increase in ARPU as one of just a handful of “critical sensitivities” that could affect the company’s long-term financial outlook and impact its peak funding range.

In February, nbn again flagged its ARPU rate as a risk factor to its revenue forecasts, with Morrow himself suggesting that nbn would need a greater uptake of higher-speed products to reach the $5 billion annual revenue target it had set itself for 2020.

However, the company’s ARPU has remained static now for the better part of the past two years.

Now, with less than three years until the rollout is set to wrap up, the behavior of many retail service providers (RSPs) switching customers over to the NBN continues to hamper efforts to raise the ARPU.

In its annual financial results for the year ending June, nbn revealed that its ARPU remained static at $43 per user, per month, in line with the previous year’s tally.

In its 2018-2021 Corporate Plan, released on 31 August, the company revealed that it expects its ARPU to increase to around $52 by the 2021 financial year.

But the behaviour some RSPs is working to hamper network builder’s efforts to reach this goal, according to Morrow.

“One of the designs of the NBN was to make sure we had a low barrier to entry to bring in retailers that can offer different service levels, and different product bases to hit virtually every segment within this country,” Morrow said at the launch of the 2018-2021 Corporate Plan.

“All up, we figure there are about 180 different brands selling into the country today. Now that’s great news, but it has created a little bit of this land-grab phenomenon where there are elements and signs of a price war.

“Now, on one hand that’s good for the consumer, there’s no doubt about that, you keep prices down very low. On the other hand, we’re missing opportunities to truly tailor our products and services to the end users’ needs,” he said.

The low price base crated by such competition would also likely have the effect of keeping the ARPU lower than it could be.

Much of this, according to Morrow, has to do with the expectations of many Australians coming off the legacy ADSL networks provided by various telcos nationally, and the efforts by RSPs to win customers by simply shifting them over onto the nbn at a similar price point.

“So, it’s very easy to take an existing customer who was on that ADSL service before, paying whatever price point they were paying, and say ‘let me just roll you over to NBN’…and in some cases, they lock them down into a year or a two-year contract at the same time,” Morrow said.

One of the factors giving Morrow and his team hope that the ARPU will, indeed, reach $52 by 2021 is the compound annual growth rate (CAGR) of data consumption in Australia.

However, if RSPs are signing former ADSL customers up to the very basest-level – and least expensive – NBN products available, there is a chance that the expected CAGR could come in under predictions.

Further, the latest Corporate Plan itself cautions that “consumers across the world continue to expect bandwidth increases without additional spend, creating a challenge to ARPU growth”.

Regardless, Morrow remains optimistic that growing data demands and increased buy-in from the business segment are likely to help see ARPU reach the lofty heights expected of it to deliver the profits forecasted for 2021 and beyond.

As it stands, nbn expects 2021 to be the first year the company will be cash-flow positive. This is off the back of predicted overall revenue of $5.4 billion in that year.

Meanwhile, nbn said it remains on track to complete the network build in 2020 within $49 billion peak funding, with the expected number of homes and businesses with an active nbn service in 2020 remaining set at 8.1 million.

The peak funding base case forecast of $49 billion comes with a further tightened range of $47 billion to $51 billion.

Looking toward the next year, Morrow said the coming 12 month period would see three million premises added to the network's footprint, while additional premises are expected to be hooked up via the company's newer fibre-to-the-curb (FttC) technology. It is understand these premises were previously slated for fibre-to-the-node (FttN) connection.

"We have made slight changes to the FY2018 incremental footprint, with 200,000 fewer premises expected to exist, and around 200,000 premises shifted into FY2019 to receive our network upgrade to FttC technology,” Morrow said.

“FttC is currently expected to support one million premises, and we continue to look for ways to make it cost effective to hopefully expand that footprint further. As planned, we will launch FttC in 2018.

“On top of the reduced number of expected premises in FY2020 plans, we have also been able to bring forward the rollout for 200,000 premises, making them ready for service earlier in FY2019. This now means we expect to be 97 per cent completed by end of June 2019,” he said.


Follow Us

Join the newsletter!

Error: Please check your email address.

Tags Bill MorrowNAtional Broadband NetworknbnNBNTelstra

Show Comments