NBN posts AU$336m loss for Q1

NBN has grown its customer base and revenue substantially, but also recorded a loss of AU$336 million.

While the National Broadband Network (NBN) company has increased its telecommunications revenue for Q1 FY16 by more than 150 percent quarter on quarter, to AU$71 million, is has also recorded earnings before interest, tax, depreciation and amortisation (EBITDA) amounting to a loss of AU$336 million.

The company also recorded AU$1.06 billion in capex, paired with operating expenses of AU$409 million. Total revenue was AU$73 million.

The company noted that it has increased the number of homes ready for service by 91 percent year on year, to 1.38 million premises, with active NBN users growing by almost 130 percent over the same period, to 610,000 premises.

Premises activated as of September 30 numbered 37,063 on NBN's satellite service, a drop of 4,579 premises from the same time last year; 67,860 across fixed-wireless, signalling a growth of 45,236 premises; 375 on fibre to the node (FttN), up from last year's zero premises; and 505,414 on fibre to the premises (FttP), an increase of 302,430.

Cost per premises for building out the network was AU$4,406 for FttP brownfields, a slight increase from the AU$4,387 last quarter; AU$2,737 for FttP greenfields, a decrease from last quarter's AU$2,798; and AU$3,601 for fixed-wireless, a growth from last quarter's AU$3,595.

Average revenue per user (ARPU) also grew by 2.9 percent during the quarter, to AU$43.

"The figures give the company confidence that it is tracking well towards its full-year targets," said NBN CEO Bill Morrow in a statement on Monday morning.

"At the same time, we have recently set the course for the completion of the rollout. Our recent Corporate Plan, coupled with our construction plan for the next three years, covers 85 percent of the country, with the remainder of the rollout on course to be completed by 2020."

The company said the losses were "expected", attributing them to the increasing rate of building out of the FttP, FttN, and hybrid fibre-coaxial (HFC) networks as well as investments in new IT technologies and software.

In regards to speeds across the fibre network, NBN recorded that as of September 30, 43 percent of users have 25Mbps down/5Mbps up; 35 percent have 12Mbps/1Mbps; 17 percent have 100Mbps/40Mbps; 4 percent have 50Mbps/20Mbps; and 1 percent have 25Mbps/10Mbps.

On its wireless network, 82 percent of users have speeds of 25Mbps/5Mbps, while 18 percent have 12Mbps/1Mbps.

"Getting fast broadband to all is more important than getting extremely fast services to a few. It brings forward revenue, and closes the digital divide. The speed-tier mix for the quarter provides very clear evidence of why this is the right approach," Morrow said during the results call.

"However, it is important to highlight that by 2020, more than 50 percent of the network will be capable of gigabit-per-second speeds. And more than 90 percent overall will be capable of 50Mbps. So we are also preparing further upgrade paths to meet future demands across the whole network."

NBN also announced that it is undertaking a HFC trial in Redcliffe, Queensland, in which 300 premises and four retail service providers (RSPs) will take part.

"The pilot marks pleasing progress for our HFC product," said Morrow.

"It will pave the way for the commercial release of HFC in 2016, marking the release of the final MTM (multi-technology mix) technology. It will also help put us on course to meet our target of delivering better broadband to 8 million happy homes by 2020."

For FY15, NBN posted a loss of AU$1.5 billion, with revenue coming in at AU$161 million, up from last year's AU$60 million.

The company attributed this to expenses following a workforce expansion and the revised contracts with Optus and Telstra.

The company also revealed in its three-year corporate plan last quarter that the peak funding cost for the project will reach between AU$46 billion and AU$56 billion, with a base case peak funding target of AU$49 billion.

NBN forecast that its EBITDA will continue falling, from the AU$1.5 billion loss announced for FY15 out to a AU$2.9 billion loss for FY18. Cash flow will also decline as capital spending ramps up, from the AU$4.8 billion loss reported for FY15, down to AU$9.7 billion forecast for FY18.

ARPU, however, will increase from AU$40 in FY15 up to AU$44 by FY18.

The Coalition's so-called MTM NBN model aims to cover 20 percent of the Australian population with FttP; 38 percent with fibre to the node and fibre to the building (FttB); 34 percent with HFC; 5 percent with fixed-wireless; and 3 percent with satellite services.

NBN switched on its FttN network in September, claiming download speeds of up to 100Mbps, and launched the first of its two new AU$620 million Ka-band satellites as part of its long-term satellite solution last month, which will provide those living in rural and remote areas with download speeds of up to 25Mbps.

The company has also been trialling G.fast FttB technology, attaining throughput speeds of 800Mbps during testing in Melbourne.

In addition, it will be deploying fibre-to-the-distribution-point (FttdP) connections -- but only for premises that are located more than 1 kilometre from a node.

NBN recently revealed in its three-year construction plan that the network will reach 9.5 million homes by September 2018. Prime Minister Malcolm Turnbull also claimed that the MTM NBN would cost less and be delivered faster than Labor's full FttP rollout.

"The corporate plan shows that the multi-technology mix remains the most cost- and time-efficient means of completing the NBN, delivering upgrades six to eight years sooner, and at around AU$30 billion less cost than an all-fibre to the premises alternative," the former communications minister said in a joint statement with Finance Minister Mathias Cormann in August.

Last month, however, NBN revealed that while copper lines between the node and the home will not need to be replaced, the company will need to add or replace copper between the node and the pillar where necessary in rolling out its FttN network.

"So today, there's a feeder copper cable that goes into our neighbourhood entry point, where a pillar stands up out of the street, usually near the footpath. We want to access that pillar, because it has a distribution network that goes to each one of our homes. Now, we want to access it with our optical technology that we're delivering with fibre to the node, but ... if it is across the room or down the block, we have to put copper to be able to get to that node," Morrow said.

According to Morrow, copper has to be used rather than fibre-optic cable in certain cases depending on the distances being covered.

"We're going to run fibre to wherever our node can be, ideally right next to the pillar. But that ideal is not always something that we can do. So when it has to be a couple of homes away, or half a block away, then we need to be able to access the copper that's in the pillar and tie it to the electronic sets in our node, and we wouldn't run our optics to do that, because if we could do that, we would stand the node up next to the pillar, so we've got to extend the copper over to the node."

Defective cable will also be replaced, with more added where there is not enough to service the homes in a given area. NBN has spent AU$14 million to acquire 1,800km of copper, enough to last the company five months.