Australia's NBN Secures $14.4B Govt Loan

Australia's NBN has received a A$19.5 billion ($14.4 billion) loan from the government to complete the rollout of its national broadband network.

The public sector operator, whose goal is to cover all Australians with the wholesale network by 2020, had previously expected to raise that amount on debt markets next year but will now be solely reliant on government financing during the deployment phase.

Authorities had already committed A$29.5 billion ($21.8 billion) to the project in equity funding with a view to privatizing the business in future.

The announcement comes amid ongoing concern about the task facing NBN Co Ltd. The loss-making operator has acknowledged it will need to speed up its rollout activities to hit targets and has recently been accused of pricing its wholesale services too highly.

Other critics are upset about its heavy reliance on copper-based broadband technologies. Under the original scheme, NBN had intended to connect more than 90% of Australians to a high-speed fiber-to-the-premises (FTTP) network, but plans were scaled back following a change in government.

Under the current plan, the company aims to connect just 17-21% of homes using FTTP, relying on hybrid fiber coax to connect another 21-27% and fiber-to-the-node technology for between 43-54%.

Fixed wireless and satellite technologies will be used to connect 7% of premises in more remote communities.

"NBN has been advised the government will loan the remaining $19.5 billion [$14.4 billion] required for the total $49 billion [$36 billion] base case peak funding forecast," said Bill Morrow, NBN's CEO, in a statement emailed to Light Reading. "With security of funding in place, we are focused on the job at hand of building the network and providing fast broadband access and universal connectivity to all Australians by 2020."

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According to reports in Australia's mainstream media, the government loan will be provided over the 2017-18 period and need repaying by 2021.

The operator is reportedly borrowing at a favorable interest rate of 3.71% and is expected to have to refinance the loan on external markets in future.

NBN currently has about 1.2 million customer "activations" on its network and covers roughly 3.2 million premises in total. By 2020, it needs to provide a service of at least 25 Mbit/s to 8 million homes and business, under existing plans.

"That is hugely challenging," said JB Rousselot, NBN Co's chief operations officer, during the recent Broadband World Forum in London. "It is going to require a huge effort from everyone but we've got a great track record of achieving and we've hit operational and financial targets for the last nine quarters in a row." (See NBN Must Speed Up to Hit 2020 Targets, Says Senior Exec.)

NBN Co's revenues soared to A$421 million ($311 million) in the 2016 fiscal year, from A$164 million ($121 million) in 2015, although its net loss after tax widened by about 36%, to A$2.75 billion ($2 billion), over the same period.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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