NBN Co CEO Stephen Rue has flagged that the company is on track to enjoy positive full-year earnings before tax, interest, depreciation and amortisation (EBITDA) for the first time, despite pledging additional capacity and retailer discounts last year.
In March 2020, the National Broadband Network (NBN) builder decided to “incrementally increase” its data capacity allocation to retail service providers (RSPs) in anticipation of a shift in peak traffic hours after facing increased pressure on its network as the COVID-19 pandemic saw thousands of Australians work from home.
The offer was extended a number of times last year as it became clear the additional pressure put on the nation’s broadband network was showing no signs of letting up as ever greater numbers of people shifted to remote work situations.
By December, NBN Co said it would offer retailers discounts and rebates on higher speed plans, following the conclusion of its additional capacity offer in response to the COVID-19 pandemic.
That new round of offers included “some” additional Connectivity Virtual Circuit (CVC) capacity at no cost, as well as wholesale pricing rebates, which NBN Co framed as “discounts” for internet retailers upgrading customers to higher speed plans.
The capacity additions were for its 100/40 Mbps, NBN Home Fast, NBN Home Superfast and NBN Home Ultrafast plans, from 1 December, for internet retailers that opt in for the fourth version of NBN Co’s Wholesale Broadband Agreement (WBA4), which was also introduced in December.
Meanwhile, the rebates, on offer from 1 February 2021 for six months, are applicable for its 50 Mbps speed tier, as well as the plans receiving capacity additions, and range from $2 to $24 per month.
Regardless of these capacity additions and retail rebates, all of which represented a departure from the company’s pricing structure before COVID-19 hit, the company’s latest financials, for the six months ending 31 December, show that its key performance metrics remain on track to meet its FY21 Corporate Plan forecasts.
“Our revenue and EBITDA exceeded forecast in the first half, and it was particularly pleasing to see the stronger than expected new customer activation numbers, demonstrating Australians’ reliance on the NBN network to meet their everyday needs,” Rue said.
“The strong total revenue growth in the first half puts us in solid position to achieve positive full year statutory EBITDA for the first time, which will be a significant financial milestone for the company," he added.
The move to increase capacity at no extra cost for retailers came after years of RSPs calling for such a change to the company’s longstanding approach to CVC pricing.
To be fair, the network builder had already started to shift its pricing structure in response to pressure from retailers.
However, the onset of COVID-19 and the resulting network demands worked to demonstrate any residual shortcomings of the existing pricing used by NBN Co, ultimately accelerating the company’s move to a model that better reflects the needs of Australian broadband users.
“During the first half, we continued to support the industry and customers through the COVID pandemic with a number of significant measures such as the extension of the additional CVC capacity at no additional cost to internet retailers until the end of January 2021," Rue said.
“We also brought forward the release of additional CVC data inclusions on our wholesale 100/40 Mbps, NBN Home Fast, NBN Home Superfast and NBN Home Ultrafast bundle discounts so they were available to internet retailers from 1 December 2020,” he added.
Regardless of this step-change to NBN Co’s pricing, the latest financials reveal a company that is making huge gains, with a trajectory that doesn’t appear to overly deviate from its projections pre-COVID.
NBN Co’s EBITDA for the six months ending 31 December, including subscriber costs, was $424 million, reflecting a $1.1 billion improvement on the corresponding period last year as a result of revenue growth and declining subscriber payments to Telstra and Optus, the company said.
Total revenue for the six months to the end of last year was $2.26 billion, up 25 per cent on H1 FY20, with the company on track to achieve FY21 forecast of $4.5 billion.
Moreover, NBN Co’s all-important Residential Average Revenue Per User (ARPU) remained steady at $45 in the six months to 31 December 2020, despite significant revenue forgone as a result of the company’s response on behalf of the community to the COVID-19 pandemic.
Naturally, all of these results stem from a period that saw the company connect approximately 660,000 additional premises and increase its footprint by approximately 160,000 premises in the six months to 31 December 2020, while enjoying declining subscriber payments to Telstra and Optus – all elements that were accounted for in one way or another in previous projections.
NBN Co’s seemingly comfortable position under an accelerated pricing regime that gives RSPs more of what they want, in terms of CVC pricing, seems to lend some credence to the ongoing criticism many retailers have lobbed at NBN Co over the years – criticism that may not have initially arisen had NBN Co’s pricing structure from the outset been closer to what it is today.