Telstra hanging on line as NBN halts part of rollout

TELSTRA is assessing the damage to its revenue forecasts after the company rolling out the national broadband network abruptly altered its plans.

Prime Minister Malcolm Turnbull at a NBN work site.

TELSTRA is assessing the damage to its revenue forecasts after the company rolling out the national broadband network abruptly altered its plans.

The trouble-plagued NBN Co announced it was halting parts of the rollout that used the telco’s pay-TV cables.

Telstra is now working out how much of the $2.5 billion it was tipped to receive from NBN Co this year will be delayed.

NBN Co wants to connect about three million Australian houses to its network over the cables Telstra uses for Foxtel and broadband.

But it halted use of those cables yesterday amid a growing number of complaints about dropouts and other problems from customers who had switched to the NBN.

Telstra said it had been told by NBN Co it would cease sales to households using that cabling — known as hybrid-fibre coaxial — for six to nine months from December 11 as it tried to solve the problems.

NBN Co said the delay would be in effect until “incremental field work” was undertaken to “raise the quality of service for end users”.

Prime Minister Malcolm Turnbull at a NBN work site.

Shares in Telstra, Australia’s biggest telecommunications group, dipped as it flagged the delay, closing down 0.6 per cent at $3.46.

In a statement to investors, it said its earlier financial forecasts for the year to next June “included an assumption that the NBN rollout would be broadly in accordance with the NBN corporate plan 2017”.

“Telstra will assess the effect of today’s announcement in conjunction with the NBN Co corporate plan 2018 on its outlook ... and advise the market once that assessment is complete,” the telco said.

“The delay in the NBN rollout will delay a proportion of the payments to Telstra from NBN into future periods.”

NBN Co compensates Telstra in return for access to the cables and infrastructure such as copper cables previously used for landline phones.

Last year, Telstra received about $1.25 billion from NBN Co for disconnecting customers from both copper and HFC.

At its full-year results in August, the telco said it would receive $2 billion to $2.5 billion this financial year for the transfer of customers off copper and HFC networks, plus associated payments.

The delay is another headache for Telstra chief Andy Penn, who this year revealed the NBN would cut a $3 billion hole in the telco’s annual earnings as it lost its wholesale monopoly.

Telstra chief executive Andy Penn. Picture: Claudia Baxter

To cope with such changes, the telco this year flagged plans to cut its dividend.

Starting this financial year, it will pay out 70 per cent to 90 per cent of underlying earnings ending its practise of paying out almost all net profit.

Telstra expects its total dividend payout this financial year to be about 22c a share, fully franked, down from 31c.

Shares in the group have fallen almost 30 per cent over the past year, and on October 5 closed at their lowest level in more than five years — $3.38.

NBN Co started using the HFC cables under the federal government’s strategy to reduce the cost of the rollout using a “multi-technology mix”.

That was a marked change from the Rudd-Gillard government blueprint — based on fibre being rolled out to every house and business.

NBN Co said it was confident of hitting its goal of completing the rollout and connecting eight million premises by 2020. “There are so many elements of this industry transformation that we cannot directly control, but we are serious about improving that which we can,” chief executive Bill Morrow said.

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