NBN CEO Stephen Rue defends network's costs, says profitability 'on track'
National Broadband Network Co chief executive Stephen Rue has defended the prices charged to telecommunications companies and confirmed the future profitability of the $50 billion taxpayer-funded internet infrastructure business is "on track".
The NBN Co's revenue reached $1.3 billion in the six months to 31 December 2019, up 46 per cent compared to the same period in 2018, results posted on Monday morning show. The average revenue per user has reached $45 a month, which is on track for the NBN Co's plan to reach $51 by the 2022 financial year, Mr Rue said.
“I have full confidence in our ability to reach our 2020 target as our strong track record demonstrates," Mr Rue said in a statement. The NBN's corporate plan shows the roll out is forecast to be complete by 2020 with profitability expected about two years later.
Telecommunications companies have criticised the high wholesale costs of the NBN Co, which have led to eroded margins for internet providers on-selling the services to Australians.
Telstra chief executive Andy Penn has repeatedly called for the costs to be cut and recently warned his broadband arm's profit margins would fall to almost zero as the roll out continues, which could lead in prices being hiked. Analysts have disputed that raising prices is a likely proposition as there are more than 100 competitors selling NBN services.
Mr Rue said, during an earnings call, that it was "important NBN has the cashflows that enable us to continue to invest in the network".
"We are on track to complete the build by 2020. We are on track to become cashflow positive," he said.
The NBN Co has been making progress with significant enterprise contracts involving the major telcos, including a tie-up between the broadband wholesaler, Telstra and Woolworths and an expected imminent deal to provide the network's services between Optus and Coles.
Mr Rue said he was seeing "encouraging signals" that supported his expectations of reaching $1 billion in revenue from businesses by 2022. This income helps improve the average revenue figures and takes pressure away from the residential sector. The NBN Co is launching new discounted product bundles aimed specifically at attracting businesses in the near-future.
Telcos are keen on securing lucrative business contracts themselves, including using their 4G and upcoming high-speed mobile networks, known as 5G, networks to connect a wide range of companies including those in the agricultural sector as well as consumers.
Mr Rue defended the network against claims 5G would "overtake" the NBN infrastructure.
He said the "vast majority of data is still carried over fixed lines" and fixed line and mobile technologies would be "complementary" into the future.
The NBN reported a 32 per cent increase in the number of homes and businesses ready to join the NBN year-on-year, with 8.1 million premises able to connect, and a 38 per cent rise in active services to 4.6 million premises.
A joint statement from Communications Minister Mitch Fifield and Finance Minister Mathias Cormann said the results confirmed the company was exceeding its connections and financial targets.
"The results confirm an increased take up of higher speed tiers with 56 per cent of all NBN connected premises now on 50 Mbps plans or higher, increasing from 560,000 to 2.7 million premises in the 12 months since December 2017," he said.