Question 1

Is NBN's recent revenue growth sustainable over the long term?

Accepted Answer

NBN delivered a 156.7% revenue increase to A$421 million in FY16, but future growth faces structural headwinds. While the company forecasts a revenue CAGR of 46.1% through FY22, high CVC pricing and fixed mobile substitution threaten the company's ability to meet its 2020 connection targets.

Question 2

How are wholesale costs impacting the profitability of retail providers?

Accepted Answer

Current wholesale structures leave Retail Service Providers (RSPs) with an estimated gross profit margin of just 32.8% on 25/2 Mbps services. This margin compression will likely persist until at least the next federal election, forcing RSPs to choose between consolidation or aggressive fixed mobile substitution strategies.

Question 3

What is the primary risk to NBN's return on investment?

Accepted Answer

The high cost of deployment, specifically the A$4,411 average cost per premise for brownfield FTTP, makes achieving a commercial return difficult without significantly higher ARPUs. If NBN cannot increase ARPU through its new business broadband services, a capital write-down may be required to address government ROI concerns.

Question 4

Are users actually switching to the network as planned?

Accepted Answer

NBN reached 1.1 million active end-users by June 2016, but the path to 2020 connection targets is narrowing. Competitive pressure from Telstra and TPG’s mobile networks is driving fixed mobile substitution, which directly undermines the fixed-line connection volume required for NBN to remain off the federal budget.

Risks to NBN becoming more visible

Abstract

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Abstract

Key Takeaways

Frequently Asked Questions

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