Reflecting on nbn’s third quarter results

8-minute read
Stephen Rue, Chief Executive Officer at nbn, shares his thoughts on the company’s third quarter results for fiscal year 2020.

There’s no doubt that the COVID-19 pandemic – and its wide-ranging impacts on the economy, business, schooling and life as we knew it – has been a challenge for us all.

For nbn, it’s been our biggest test because our nation has never relied on broadband connectivity like it does today.

I can proudly say, though, not only has the nbn™ broadband access network held up, it’s performed exceptionally well.

It’s what this network was built to do.

It’s what the thousands of employees – both internal and external – have been working towards over the past decade: to build this critical piece of telecommunications infrastructure to help support the nation’s digital needs now and into the future.

And, as our third quarter results clearly show, our business remains on a strong trajectory as it continues to roll out this network and connect Australians across the entire continent.

Chief Financial Officer, Philip Knox, talks numbers

Despite the disruption and challenges brought about by COVID-19, our third quarter results confirm nbn’s continued strong financial and operational performance.

Ready to connect

During the third quarter, 670,000 additional premises were declared ready to connect, bringing the total number to 11.2 million. This was delivered despite the difficulties posed to conducting fieldwork as a result of COVID-19.

Revenue

Revenue increased by 38 per cent on the previous year to $2.8 billion for the nine months ended 31 March 2020 primarily driven by the significant increase in residential and business customers, and an uplift in residential Average Revenue Per User (ARPU) to $45, which is largely due to customers selecting or upgrading to higher speed tier plans.
Chief Financial Officer at nbn, Philip Knox.

Activations

At the end of March, 6.9 million Australian homes and businesses were connected to services over the nbn™ access network, which is a 36 per cent increase compared to the same time a year ago. With the continued strong take up of broadband services on the network in April, we have recently reached the 7 million activation milestone, two months ahead of budget.

Speed

68 per cent of all customers are now on a speed tier plan of 50 Mbps or higher, up from 58 per cent on the previous year.

Operating costs

On a like for like basis, total operating expenses increased approximately three per cent compared to the previous period, primarily due to assurance, maintenance and restoration services. This is in line with expectation as our network expands and customer numbers grow.

Capital expenditure

$3.7 billion dollars invested in capital expenditure – network construction and connecting customers at scale account for the majority, as well as investment in customer experience initiatives.

EBITDA before Subscriber Costs

EBITDA before Subscriber Costs continues to grow at $1.25 billion for the nine-month period, remaining on track to exceed our Corporate Plan target of $1.5 billion for the fiscal year. 
Source: NBN Co Third Quarter Results FY2020.

The significant milestones our Chief Financial Officer Philip Knox outlines above in our third quarter results have become even more meaningful in the uncertain times we’re all living through due to COVID-19.

Even with the disruptions and obstacles caused by this year’s devastating bushfires and the COVID-19 pandemic, though, we continue to track closely with the forecasts in our Corporate Plan for activations, earnings and revenue.

Yet, despite those promising results, it’s no exaggeration to say this has been one of our most challenging quarters.

Performing in tough times

When we last updated the market on results in February, the disruption and economic damage that COVID-19 was about to unleash on the world was just beginning.

While it’s been an enormous disruption for us all, I’m proud to say that we have met every challenge thrown at us.

We have continued business-as-usual activities, including rolling out the network, connecting homes and business, and investing in better customer experience, while many industries and workplaces have been forced to slow down.

This is an incredible achievement and testament to the hard work of all our people, who have banded together, put the nation’s needs above their own and worked tirelessly around the clock to ensure we all stay connected through this crisis.

By working closely with our industry, we’ve also ensured the nbn™ access network can support the nation’s increasing online needs by:

Created in consultation with industry, the relief fund is aimed at helping internet providers connect low income households with home schooling needs, supporting emergency and essential services, and assisting small and medium businesses and residential customers who are facing financial hardship.

While I believe it’s important to recognise the hard work our industry has been putting in, we’re not yet out of the woods when it comes to COVID-19.

More challenges to come, but we’re ready

Government and health experts continue to advise that we should expect more months of social distancing, which means telco networks will continue to play their vital role in keeping the nation connected.

We have already seen significant changes to our network profile and, since the start of April, have been releasing weekly metrics to show how network usage has changed since COVID-19 and social distancing measures came into effect.

These metrics are fascinating, and I encourage you to visit our website to view these each week as they are released.

We feel it’s important to highlight these figures to the public so they can see the very real impact that millions of Australians working and studying from home has had on our network.

These metrics also show just how well the nbn™ access network has been built to handle the ever-growing data demand from our customers.

Whether it’s school children using broadband to access online education tools; health clinics conducting telehealth consultations; or workforces supporting more of their employees from home – the importance of investing in, and maintaining a ubiquitous, high-speed, broadband network has never been clearer.

We know the customer experience of our network during these COVID-19 times has been exceptional, with our internal metrics tracking at their best-ever levels.

This shows that we have built a network that has handled the rigours of significantly increased usage, while also keeping congestion, faults and outages at very low levels.

It’s not just about the numbers

Of course, the increased usage we’re seeing and the strong performance of our network has also been possible thanks to the 40 per cent extra capacity we’ve offered to internet providers free of charge.

This credit of capacity back to internet providers and the $150 million relief package, clearly have a financial impact on nbn, but we have absolutely no reservations about making these decisions.

In fact, we’re incredibly proud to support internet providers and the nation with these offers and relief measures if it means more Australians can stay connected through this crisis.

Prioritising the immediate needs of our customers at this unprecedented time – even if it means a cost consequence to us – is simply the right thing to do to.

We don’t foresee network usage going back to the pre-COVID-19 levels, instead, we expect more people to be working and studying from home in the future and this will certainly result in even more data demand.

And we expect many of the business and social trends we have seen to continue. Indeed, we see an acceleration of the digitisation of the economy.

We’ve shown that our network can handle that load, but we also know that we need to continue investing in it to ensure we keep up with the needs of the nation.  

Ready and waiting

So finally, like the nation and businesses everywhere, we are yet to see the full implications of the COVID-19 pandemic play out for nbn.

But, while we may not know how far – or for how long – the fallout from this health and economic crisis will extend, we do know that nbn will be here to support the nation.

We will continue rolling out the nbn™ access network, connecting homes and businesses, and investing in this network for all Australians so that, when the time comes to recover, we will be ready.

Stephen on our Private Sector Funding

This is our inaugural, long-term borrowing from private debt markets.

Our finance team ran a very competitive process and our offer was oversubscribed, which is an incredibly strong endorsement of nbn’s future outlook.

We have entered into bilateral agreements with a group of banks to receive credit facilities totalling $6.1 billion.

Securing these credit facilities will help us finish the job of building the nbn™ access network and provide flexibility to maintain a financially prudent level of liquidity, and the opportunity to accelerate value accretive initiatives.

Significantly, this raising has been secured with no covenants and no government guarantees, which is testament to the incredible asset we have built for the nation, the strong financial foundations we have laid for this business, and the long-term outlook on our ability to create real social and economic value for the nation through nbn.

The securing of this funding also comes at a time when the nation, businesses and schools have needed the nbn™ access network like never before.