NBN Co stretches break-even point to 2023

NBN Co has revealed that it does not expect to find itself in a cash flow positive state until at least Financial Year 2023, a year later than the National Broadband Network (NBN) builder’s previous estimates released last year.

According to NBN Co’s latest annual corporate plan, which outlines the company’s long-range plans, projections and estimates from 2020 to 2023, the national network builder expects to see about A$700 million in positive cash flow in FY23.

At the same time, NBN Co’s latest estimates forecast negative cash flows of roughly A$200 million in FY22. This stands in stark contrast with the company’s Corporate Plan 2019-22, released in 2018, which forecast positive cash flows of around A$100 million in FY22.

One of the reasons for the new break-even point comes down to a reduction in activation figures in FY20, FY21 and FY22. Indeed, the latest report’s expected activation tally in FY23 stands at 8.6 million, which is 100,000 less than the expected 8.7 million in FY22 that was estimated in the 2019-22 corporate plan last year.

In FY20, the company now anticipates 500,000 fewer activations than it expected in the 2019-22 corporate plan, reducing its target from 7.5 million total activations to 7.0 million premises that year.

“Given the complexity of build expected through FY20, there has been a shift in phasing  for activations in FY20 and through FY21. The Company expects to connect 8.1 million customers by 30 June 2021,” the latest corporate plan stated.

NBN Co said in its report that this reduction is “purely a timing issue” around deployment and activations, with the Ready to Connect footprint coming later during FY20 than originally forecast in the previous year’s plan. The company added that there is no expected material change to the underlying performance of the business and revenue is forecast to recover to expected levels in subsequent years.

Another contributing factor for the delayed break-even point for the network builder is an increase in expected capital expenditure (capex) in FY20, FY21 and FY22, compared to the previous year’s figures. For example, NBN Co’s latest report puts expected capex in FY20 at A$4.3 billion. In last year’s report, the figure for FY20 was closer to A$3.6 billion.

These changes, of course, are reflected in the company’s all-important average revenue per user (ARPU) figures which, in the latest plan, indicate it expects to see residential ARPU rise from A$44 in FY19 to A$49 in FY23.

download (5)In last year’s plan, the company put its ARPU expectation at A$51 by FY22 – a figure that included business customers as well as residential customers. The decision to take the business contingent out of the ARPU equation in this year’s report was, according to NBN Co CEO Stephen Rue, to provide a more meaningful and transparent number.

The change in ARPU expectations is reflected in the company’s latest total revenue estimates, which are forecast to reach A$5.9 billion in FY23. While the total revenue figure for FY22 remains unchanged from last year’s estimates, the expected A$5.2 billion in FY21 and A$3.9 billion in FY20 have been downgraded in the latest plan to A$4.9 billion and A$3.7 billion, respectively.

Revenue is forecast to grow from A$2.8 billion in FY19 to A$3.7 billion in FY20 with the expected delay – or “rephasing” as NBN Co puts it – in network activations. Meanwhile, the plan continues to support a peak funding forecast of A$51 billion.

Despite tacking on an additional year until it expects to see positive cash flow and the reduction of anticipated activations in FY20, NBN Co remains upbeat about the rollout and ultimately meeting its stated goals.

In its report, NBN Co said that by the end of FY20, 11.5 million homes and businesses will be on track to be able to order a service on the network, fulfilling the commitment to complete the build in 2020. Currently, around 86 percent of premises throughout Australia are able to order an NBN service.

“To date, NBN Co and its delivery partners have rolled out more than 280,000 kilometres of fibre-optic cable, repurposed and upgraded existing HFC [Hybrid Fibre-Coaxial] and copper technologies, built a Fixed Wireless network comprising some 2,200 towers and approximately 13,000 cells, and launched two satellites,” said Rue.

“With completion of the network well in sight, now is the time to focus on how Australians in homes and businesses across the nation can get the most out of the NBN access network.

“Improving customer experience and satisfaction will remain the key driver in coming years as we complete the transition to become a full-scale service delivery organisation – and we will put customers at the centre of everything we do.” he said.

Inabox buy hits MNF Group financials

Telecommunications software and services provider MNF Group (ASX:MNF) has flagged declines in revenue and profit for the year ending June, citing negative impacts stemming from its acquisition of Inabox Group’s (ASX:IAB) wholesale business, among other factors.

MNF Group’s after-tax net profit fell by roughly 3.9 percent, compared to the year prior, to $11.4 million, the company told shareholders in its annual financial results, released on 27 August. At the same time, revenue declined by about 2.4 percent, to nearly $215.6 million.

The company said its 2019 net profit after tax (NPAT) was negatively impacted by $1.2 million of acquisition costs, associated with the Inabox purchase, incurred during the year. It also flagged amortisation costs of $1.4 million during the year. 

MNF Group struck a deal to acquire the wholesale and enablement business of Inabox Group late last year, in a deal worth between $30.5 million-$35.5 million, ultimately fending off a rival offer for the business by SB&G Telecoms in December. 

The company has touted its successful acquisition as being highly complementary and synergistic with the wholesale business of its Symbio brand. 

“IAB performs a leading role in the Australian wholesale telecommunications market and brings considerable volume and scale to the MNF business. The company is also recognised as the leading provider of SaaS enablement services to the industry – strongly complementing the MNF business,” MNF Group CEO Rene Sugo said when the acquisition plans were announced.

In its latest financials, MNF Group told shareholders that the integration of the business is well underway, with most of the operational teams set to complete integration over the next few months and network integration expected to be finalised by the end of 2020. 

The company also indicated that, although full year revenue had declined, in part due to a decrease in lower margin transactional revenue, its gross profit margin had increased from $69 million in FY18 to $82.5 million this year. 

While MNF Group’s revenue and NPAT figures were slightly down, the company’s underlying NPAT – not including acquisition and amortisation expenses – in 2019 was up by 13 percent, year-on-year, to $15.9 million.

In the same period, the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 11 percent, to $27.2 million, with FY20 guidance remaining unchanged at $33 million-$36 million. 

Verizon strikes NBN Enterprise Ethernet reseller deal

The local arm of US telco giant Verizon has signed a reseller deal with NBN Co to supply the National Broadband Network (NBN) builder’s Enterprise Ethernet offering to its local customer base. 

The move gives Verizon Australia’s local customers, the bulk of which are government entities and private sector enterprises, the ability to combine NBN Co’s business-oriented broadband product with Verizon’s own services, such as Software Defined Networking (SDN) and Virtual Network Services (VNS).

“This agreement provides choice and competition that hasn’t existed on this scale before. Businesses, particularly those outside of the major cities, deserve access to the globally recognised, best in class services and capabilities that Verizon offers,” Robert Le Busque, Verizon’s regional managing director in Australia, said. 

“A robust network is the backbone of any business, and particularly today, where digital business is the norm, and organisations are increasingly looking for scalable, flexible network capacity to support global growth. 

“Verizon is pleased to be able to present a compelling alternative to Australian enterprise and government businesses,” he added. 

For Verizon, the deal marks a new milestone in its 20-plus year history in Australia, which has seen the company named among the panellists on the australian Federal Government’s Whole-of-Government Telecommunications Services Panel. 

The move sees Verizon join a handful of existing NBN resellers, including Telstra, Vocus and TPG, already offering the Enterprise Ethernet product, which is aimed squarely at the high-margin business market. 

NBN Co launched the wholesale enterprise product, which offers symmetrical speeds of up to 1Gbps and premium customer service, in October last year. At the time, the network builder said that its Enterprise Ethernet connections are designed to be built on request and feature a point-to-point fibre connection.

“This wholesale product has been developed with the specific needs of global enterprise and government organisations in mind. It is capable of delivering the service required by businesses that use data-intensive applications such enterprise network systems and cloud-based solutions,” NBN Co chief customer officer for business Paul Tyler said at the time. 

At launch, the product was touted as being packaged with a premium service-level agreement between NBN Co and retail service providers (RSPs) to provide faster resolution of faults as well as to encourage RSPs to offer an increased service experience for mission-critical applications. 

ACMA takes aim at 5G innovation with class licensing updates

The Australian Communications and Media Authority (ACMA) hopes to support new innovative technologies and wireless data communications systems, including those underpinning 5G, with a range of fresh updates to the country’s class licensing arrangements.

The ACMA’s proposed variation to Australia’s Radiocommunications (Low Interference Potential Devices) Class Licence came into effect on 19 August, with the new licensing arrangements expected to support new technology applications and “bring Australia into line with international arrangements”.

Among the changes, which are contained in the Radiocommunications (Low Interference Potential Devices) Class Licence Variation 2019 (No. 1), are new arrangements for ‘all transmitters’ in the 57–64 GHz band aimed at supporting new interactive motion sensing technology that operates in this particular frequency range and can be used to enable touchless control of device functions or features.

Other changes include an expansion of frequency range for 60 GHz (57–66 GHz) data communication systems to now cover 57–71 GHz, for both indoor and outdoor usage, which the ACMA suggests will support wireless gigabit systems with applications such as backhaul for 5G and Wi-Fi.

The updates also saw the revision of arrangements for underground transmitters in certain bands, a move designed to support fixed and mobile services from 70–520 MHz to provide improved support for underground activities, such as mining.

Additionally, the new class licensing variation includes a revision of arrangements for radars in the 76–77 GHz frequency band in order to provide support for radar use in rail crossing and road safety applications.

There are also new arrangements for ground and wall penetration radar (30–12,400 MHz) to facilitate the usage of applications across a variety of industry sectors, such as agriculture, railways and underground pipe detection in the telecommunication industry.

Some of the new changes also work to align existing arrangements for ultra-wideband devices with United States and European arrangements for generic, indoor and outdoor devices operating in 3,100–3,400 MHz and 8,500–9,000 MHz ranges, along with aircraft applications (6,000–8,500 MHz), aimed at further supporting the use of such devices in Australia.

The ACMA first put the call out to industry for comment and feedback on its proposed updates to class licensing arrangements in December 2018. The updates were to be implemented by varying the Radiocommunications (Low Interference Potential Devices) Class Licence 2015 (LIPD Class Licence).

Now that the updates are in effect, the ACMA invites further suggestions from industry and individuals on devices and technologies for “possible future updates” to class licensing arrangements of the Low Interference Potential Devices Class Licence. 

US adds 46 Huawei affiliates to Entity List, extends export licence

The United States Department of Commerce has added a further 46 Huawei affiliates to its Entity List, a move the Chinese telecommunications technology manufacturer claims is politically motivated and has “nothing to do with national security”.

The US Department of Commerce’s Bureau of Industry and Security (BIS) said on 19 August it had identified 46 additional Huawei Technologies affiliates that “require inclusion on the Entity List,” as part of a routine review of all Entity Listings. 

Since May, the Department has added over one hundred individuals or organisations to the Entity List in connection to Huawei. The new restrictions on the freshly identified affiliates are effective from 19 August.

Huawei was added to the US Entity List, which identifies foreign parties prohibited from receiving certain items from US-based organisations, after the Department of Commerce decided the company was “engaged in activities that are contrary to US national security or foreign policy interests”. 

“We oppose the US Commerce Department’s decision to add another 46 Huawei affiliates to the Entity List,” Huawei hit back in a statement. “It’s clear that this decision, made at this particular time, is politically motivated and has nothing to do with national security. 

“These actions violate the basic principles of free market competition. They are in no one’s interests, including US companies. Attempts to suppress Huawei’s business won’t help the United States achieve technological leadership,” the Shenzhen-based firm added.

“We call on the US government to put an end to this unjust treatment and remove Huawei from the Entity List,” it said.

While adding 46 new Huawei affiliates to the Entity List, the US Department of Commerce also granted a 90-day extension to the Temporary General License (TGL), authorising limited transactions involving the export of items by US companies to Huawei and its non-U.S. affiliates that are subject to the Entity List. 

The Department said the decision to extend the TGL is intended to give US consumers  the necessary time to transition away from Huawei equipment. 

“As we continue to urge consumers to transition away from Huawei’s products, we recognise that more time is necessary to prevent any disruption,” Secretary of Commerce Wilbur Ross said. “Simultaneously, we are constantly working at the Department to ensure that any exports to Huawei and its affiliates do not violate the terms of the Entity Listing or Temporary General License.”

Huawei claimed that neither the expanded Entity List, nor the 90-day export licence extension will markedly affect its business. 

“The extension of the Temporary General License does not change the fact that Huawei has been treated unjustly. Today’s decision won’t have a substantial impact on Huawei’s business either way. We will continue to focus on developing the best possible products and providing the best possible services to our customers around the world,” the company said. 

Indeed, Huawei Chairman Liang Hua noted, “neither production nor shipment has been interrupted, not for one single day”. 

Despite these claims, Huawei has taken significant action against the US Government over other moves to restrict its trade with US entities. Earlier this year, Huawei filed a complaint in a US federal court challenging the constitutionality of Section 889 of the 2019 National Defense Authorization Act (NDAA), which bars US Government agencies from buying Huawei equipment and services.

Through this action, Huawei sought a declaratory judgment that US restrictions targeting Huawei are unconstitutional, and a permanent injunction against these restrictions.

“The US Congress has repeatedly failed to produce any evidence to support its restrictions on Huawei products. We are compelled to take this legal action as a proper and last resort,” explained Guo Ping, Huawei Rotating Chairman, at the time. 

“This ban not only is unlawful, but also restricts Huawei from engaging in fair competition, ultimately harming U.S. consumers. We look forward to the court’s verdict, and trust that it will benefit both Huawei and the American people.”

Risk of competing goals ‘negatively impacting’ NBN quality, affordability: Infrastructure Australia

If the National Broadband Network (NBN) can’t meet all of its stated goals and obligations once the rollout is complete, the ability for Australians to access affordable and high-quality services over the network may be “negatively affected”.

This is according to the Australian Infrastructure Audit 2019, published on 13 August by the nation’s independent infrastructure advisor, Infrastructure Australia, the independent advisory body tasked with strategically auditing the nation’s key infrastructure.

The audit report, which covered areas such as transport, energy and water, delivered a mixed report card for the country’s telecommunication landscape, identifying several challenges relating to Australia’s fixed-line broadband offering, rural and regional availability, pricing and the NBN’s technology mix, among other things.

Unsurprisingly, the report’s telecommunications section focused heavily on the NBN, as one of the country’s largest infrastructure projects. One of the challenges highlighted in the audit report was an “inherent tension between the NBN’s strategic goals”.

It suggested that this tension will ultimately require potential trade-offs between the NBN achieving user outcomes and delivering a return on the capital investment made by taxpayers.

“If all goals cannot be achieved, the ability for Australians to access affordable and high-quality NBN services may be negatively affected,” the report authors said.

Moreover, the report suggested that these tensions raise the question as to whether or not the network will be sold and, if so, how exactly the assets would be divested and therefore how the market will be structured.

“A proposed eventual sale of the NBN to the private sector raises challenges in striking the right balance between realising its value for shareholders and achieving long-term goals for users,” Infrastructure Australia noted. “Decisions about restructuring and sale can affect both short- and long-term service delivery and outcomes for users.”

Another challenge relating to the NBN noted centred on its technology mix having been diversified, meaning that different users will receive different types of connections.

“This change will deliver varied outcomes for users, and some may shoulder higher costs or receive lower-quality services,” the report authors added.

As such, according to Infrastructure Australia, a range of NBN process and performance issues have arisen as the rollout has proceeded and users have migrated to the network, some of which are being dealt with by the company behind the rollout, NBN Co.

In addition, the independent infrastructure advisor flagged the risks that 5G network rollouts in Australia might present to the long-term competitive position of the NBN.

“Looking forward, risks for the NBN include competition from ongoing fixed line services and 5G fixed wireless substitution,” it said. “There is also the possibility of competition in remote locations from emerging low Earth orbit satellite technologies and other satellite technologies.”

However, the report also pointed out a potential silver lining, noting an opportunity for the NBN to leverage these technologies to deliver better services in its existing fixed wireless and satellite coverage areas.

Rural and regional Australians still missing out

Infrastructure Australia’s examination of the services offered to people in rural and regional areas was somewhat tempered by the existing limitations of the various technologies available, even with the NBN rollout underway.

“NBN’s use of fixed wireless and satellite technologies limits the choice of available broadband speeds and download quotas, particularly for remote areas,” it said. “However, these services are often the only option for regional Australian consumers and businesses.

“Although NBN is launching business-grade NBN services, these do not currently extend to [its] fixed wireless and satellite access technologies,” it said, noting NBN Co’s plans to deliver a business-grade satellite service this year.

More generally, however, Infrastructure Australia identified a range of issues with the current telecommunications services available for consumers in rural and regional areas, and for some minorities.

“The specific needs of rural and remote users are often overlooked in upgrades to national telecommunications infrastructure,” the report authors said. “Income, age, disability, education and Aboriginal and Torres Strait Islander status are all factors that influence levels of digital inclusion.”

“Geography also matters,” it said. “In rural and remote settings, the cost of providing telecommunications infrastructure increases and the returns reduce as population densities decline. In some cases, this limits the scope for universal coverage by commercially-focused private sector operators, without government intervention.”

“While Australia’s mobile footprint includes over 99 percent of the population, it covers only one-third of total landmass, meaning there is limited service in particular rural and remote areas, for example along transport corridors,” it added.

However, the audit report also cautiously identified opportunities to improve the telecommunications services for the digitally disadvantaged, and for rural and remote communities and businesses.

“5G mobile technology provides a potential step change in mobile telecommunications infrastructure for Australia, offering huge benefits including faster mobile data, minimal delays and the ability to separate services on the same network. However, the cost of rolling out 5G is high, and without a change in prioritisation, existing issues may be exacerbated in rural and remote areas,” the report authors said.

Telcos fined $88K for breaking NBN info rules

The Australian Communications and Media Authority (ACMA) has fined seven telcos a combined total of $88,200 for failing to comply with rules aimed at ensuring consumers receive adequate information about their National Broadband Network (NBN) services.

Telechoice, My Net Fone, Aussie Broadband, Activ8me, Flip TV, Mate Communicate and Hello Broadband have all received infringement notices from the ACMA for failing to comply with the Telecommunications (NBN Consumer Information) Industry Standard 2018.

The infringement notices are the first such notices to be issued under the new standard, which requires telcos to provide clear and meaningful information about their NBN plans in their advertising and in one-page key facts sheets, since it came into effect in September last year. 

The standard itself is part of a broader suite of rules drawn up by the ACMA in 2018 in an effort to improve Australian consumers’ experience migrating to the NBN. Among the rules introduced by the ACMA is a requirement of NBN resellers to give consumers the information they need to choose an NBN plan that works for them. 

Other rules introduced by the ACMA require telcos to test that their new NBN services are working, provide an interim service to consumers or reconnect an old service if there are delays in getting a new NBN service working and moving swiftly to resolve consumer complaints. 

The ACMA Authority Member Fiona Cameron said that telcos have had ample time to familiarise themselves and ensure they are in compliance with the ACMA’s NBN rules.

“Failure to comply in this late stage of the NBN rollout is not acceptable and warranted stronger action,” Cameron said.

‘Failing to give consumers clear and honest information about NBN plans is unacceptable and can lead to misleading conduct as recently highlighted by the recent Telecommunications Industry Ombudsman’s report.

“Telcos need to provide information that will assist consumers to choose an NBN plan that suits their needs and if they don’t they will be held to account,” she said. 

The fines come just days after a new report by the Telecommunications Industry Ombudsman (TIO) lifted the lid on the practice of a “small number” of telemarketers misleading and pressuring Australian consumers to sell them NBN services they may not want or need.

In the report, the office of the TIO said that between January and December last year, it received 1,729 complaints about misleading conduct involving services delivered over the NBN.