NBN Co eyes break-even in 2031

Australian broadband wholesaler NBN Co has forecast it will take until the early 2030s to break even, more than 20 years after it was established.

According to a new forecast covering the next three-year regulatory period, the company expects to be able slash costs after completing its FTTP upgrade in late 2025.

The state-owned operator, formed in 2009, has been funded by $31 billion Australian dollars (US$20 billion) in government equity and a series of debt issues, including A$6.5 billion last year.

For the 2023-24 financial year it reported a net loss of A$1.2 billion, a 5% improvement from the previous year, on total revenue of A$5.5 billion. But commercial revenue grew just 2%, total debt rose 4% to A$26.9 billion and negative free cash flow blew out 22% to A$1.4 billion.

In a regulatory filing – part of the preparation for the 2026-29 regulatory cycle – the company forecast total spending of A$14.5 billion over the period, with capex of A$6.5 billion and opex of A$8 billion.

This would be 18% lower than the current three-year cycle, reflecting a shift from "build" to "operate," as well as some cost-cutting measures, the company said.

'Insufficient revenue'

It anticipated that by December 2025 it would hit its next major rollout milestone – the upgrade of 3.5 million FTTN premises and 1.5 million FTTC premises to FTTP.

But it said it does "not currently earn sufficient revenue from its prices to recover its annual building block costs" – a reference to the economic model that measures its financial performance against key strategic priorities.

According to the model, revenue is rising at a steady clip but is still well short of costs, which currently top A$7 billion and will peak at around A$9 billion in 2027.

However, the company says it is on track for annual revenue to "recover its annual building block costs by around financial year 2031."

This would reflect the combined revenue effects of growth in take-up and regulator-approved price increases.

The document also acknowledges the impact of "evolving competition" from FWA, LEO satellite and alternative fixed-line broadband services on the fiber wholesale network.

That said, while it is spending more than A$1 billion on satellite and FWA capex in the current three-year period, this will drop to just over A$500 million in the 2026-29 period.

The document also reveals that more than three-quarters of the NBN fixed-line network is capable of achieving wholesale download speeds of up to 1 Gbit/s.

Following an upgrade next September, some FTTP users will have access to up to 2 Gbit/s, although NBN Co's wholesale customers say there is not yet strong demand for multi-gigabit services.

It will take until the end of the 2030s before access to 2 Gbit/s and above is available across the entire FTTP and HFC networks, the paper said.