There are fears the federal budget could take a $20 billion hit after an Australian National Audit Office (ANAO) report warned that a $19.5 billion government loan extended to NBN Co might not be repaid because of doubts the NBN will meet financial projections. From The AFR:
[ANAO] classified the chances that the NBN’s financial statements could be materially misstated as “high”. It also criticised an apparent lack of oversight and risk assessment in extending the $19.5 billion loan facility…
[The Government] has previously faced down concerns from a Parliamentary Budget Office report, which suggested the NBN wouldn’t make enough money to pay it back…
The ANAO’s warning is supported by NBN Co’s own financial results, which last month reported accumulated losses of $20.7 billion amid failure to meet revenue targets:
In its third-quarter results, released on Monday, NBN Co announced revenues of $2 billion but a net loss of $3.4 billion for the nine months to March 31, bringing accumulated losses to $20.7 billion over the NBN’s entire 10-year lifespan.
While the loss was expected, NBN Co revealed its average revenue per user (ARPU) per month was still way behind the target necessary to deliver a return on investment and remain a commercial operation.
The NBN’s business model is clearly failing. NBN Co is under immense pressure to cut wholesale prices, in a bid to raise prices for consumers and boost take-up, which would negatively impact revenue targets and ultimately force a write-down of the network.
When a write-down does eventually occur, the cost to the federal budget could be as high as $20 billion.
Two years ago, former Keating Government competition advisor, Fred Hilmer, predicted the NBN would “be sold at a bargain price with the commonwealth taking a hit and blaming its predecessors”.
Sadly, Hilmer’s predictions are looking prescient, with taxpayers facing a massive hit, while also being provided with a sub-standard service. What a mess.
