NBN Co eyes $500M revenue delay after HFC pause

NBN Co eyes $500M revenue delay after HFC pause

NBN Co's chief financial officer opens up over the financial hit of the HFC delay

NBN Co is set to see revenue hit of $50 million and a revenue delay of up to $500 million thanks to its temporarily halted hybrid fibre-coaxial (HFC) network rollout, according to the company’s chief financial officer, Stephen Rue.

“It depends on the length of time, of course, but if you take a six-month pause…for the period to 30 June, you’re talking around about $50 million,” Rue said during a Parliamentary inquiry hearing on 8 December after being asked what the revenue implication of the pause would be.

“That’s the impact on the revenue for the period to 30 June. If the whole program was delayed by six months, what [we] have I think is 1.9 million customers still to connect that we expect to connect.

“So, if all of those 1.9 million customers – and I don’t think that’s necessarily going to be the case – if they were all delayed by six months, you’d be talking about a $500 million delay in revenue,” he said.

Rue suggested that the $50 million revenue hit would come from the revenue paid to retail broadband providers that will have customers on their networks for longer than previously expected due to the HFC pause, which could continue for up to nine months.

However, Rue stressed that his estimates regarding the much larger revenue delay expectations are hypothetical and would be relevant only if all the work related to the HFC rollout was delayed for six months.

Rue also pointed out that NBN Co would continue to build out lead-ins and continue to build into new areas during the pause, and that the final financial fallout of the pause won’t be known for several months.

A the same time, both Rue and NBN Co CEO, Bill Morrow, stressed that neither the revenue delay, nor the $50 million in lost revenue would necessarily hit the company’s $49 billion funding allocation, thanks largely to a $2 billion contingency fund for such events.

“The decision to pause the HFC network doesn’t impact the overall $49 billion economics of the business, and it certainly doesn’t impact the outer years’ annual revenue stream,” Rue said.

“We’ve always had a contingency for something, so the net effect on the $49 billion plan is zero, effectively, because we have a contingency fund,” he said.

Rue’s estimates stand in stark contrast to Labor’s claims that the delay could cost anywhere from $420 million to $790 million, based loosely on analysis laid out in NBN Co’s own 2016 Corporate Plan.

“These figures, signed off by the NBN Board and Shareholder Ministers, clearly state a seven month delay in the HFC activations profile would have a $1 billion impact on rollout funding,” the joint release by Chambers and Rowland stated,” the Australian Labor Party’s Shadow Minister for Communications, Michelle Rowland, said in a statement released in November.

The company behind the rollout of Australia’s National Broadband Network (NBN) revealed in late November that would temporarily pause all new orders over its HFC access network as it works to fix issues with the technology and improve service standards across the network.

"We are going to delay the rollout of the HFC network until we can go back and calibrate a number of processes so we can adjust a number of issues on the network to give the level of quality that we know that HFC network is capable to give," Morrow said at the time.

"This will result in a six to nine-month average delay for those people that have yet to connect to the NBN network over HFC,” he said.

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