Senate Estimates: NBN Co chairman Ziggy Switkowski says NBN could still be sold for $50 billion

NBN Co chairman Ziggy Switkowski says that there is still a chance that the NBN could still be sold for $50 billion.

28/7/16 NBN Co Chairman Ziggy Switkowski. Picture: Aaron Francis

NBN Co chairman Ziggy Switkowski says that there is still a chance that the National Broadband Network could still be sold for $50 billion once the National Broadband Network is fully rolled out.

Speaking to the Senate Estimates Committee on Tuesday Dr Switkowski said the final sale price of the NBN will depend on how the privatisation process is planned out, the health of the overall business by 2021 and what regulatory settings will be put in place.

“While there is downside risks, the current valuation is supported by our full year projected numbers, I can certainly generate figures around $50bn for the value of this enterprise in the early 2020,” he said.

Dr Switkowski also said he was confident that the NBN won’t need a write-down

“Write-down is not the within the gift of management or government they are driven by accounting rules, the network is not complete, we currently don’t have the customer base we expect to have by 2020, the ability properly value this asset (NBN) probably won’t be available to us until the 2020s.”

“I can rule out a write-down, this is my personal view, any consideration on the value of the NBN will await until the business moves into a relatively normal, conventional mode, which will happen when we finish the build in 2020, we compete the conversion of all households and business in 2021, we turn cash flow positive and then whoever needs to make the judgement will make it then,” he said.

While Telstra chairman John Mullen recently pointed out that the telco was the natural inheritor of the NBN, Dr Switkowski said there was no reason why that was the only option available, if and when the NBN is privatised.

He said that disaggregating the NBN, along access technologies or geographic location — may be one of a number of options.

“It’s a question of what combination you go forward with over what time and who might be obvious buyers.”

“Some would say that the NBN represents the prefect profile for long term investors that want an assured annuity stream -superannuation funds.”

“Others will say that there are parts of the NBN that can be merged sensibly with an existing telecom company, there might be private equity buyers that look at part of the network and find it attractive.”

“There are options but I think the discussion should await the completion of the network build,” Dr Switkowski added.

Meanwhile, NBN CO’s new boss Stephen Rue ruled out any drastic reduction in wholesale prices, taking particular aim at the latest call by Telstra boss Andrew Penn for current charges to be cut by $20.

There’s growing clamour from the telecommunications industry that NBN Co’s high wholesale pricesare making high speed broadband unaffordable for consumers.

Telstra boss Andrew Penn last week called for a “more than $20” a month cut to the wholesale charges warning that reseller margins were “rapidly falling to zero”.

Mr Roux told the committee that the current wholesale pricing was appropriate and that Mr Penn’s comments were more a reflection of the cost pressures the telecom industry is tackling

“The Telstra CEO is clearly concerned around cost, so it would be natural for him to make a call for a reduction in costs, but our business plan is built upon a very significant in internet capability an uplift that will provide the economy very significant benefit.”

“End users appreciate the value of the NBN and I would hope that the retailers can sell that value to the end users.

Earlier on Tuesday, the federal government said it remained confident that NBN Co will be able to pay back the $19.5 billion it was loaned by Canberra in 2016, amid ongoing speculation that the company, rolling out the National Broadband Network won’t be able to deliver a financial return.

The latest bout of concern stems from the government’s decision in August to give NBN Co an extra three years to repay and refinance the loan give to in November 2016. The $19.5bn loan, at an interest rate of 3.96 per cent, came on top of the $29.5bn already invested in the project by the government.

NBN Co was originally expected to repay the loan by 2021 but has been given extra time to cover for the slowdown in the rollout of the network over the last 12 months.

“Issues such as the pause on the Hybrid Coaxial Fibre (HFC) rollout and the requirement, as identified in the NBN Co corporate plan, for additional investment in fixed wireless, as well as the customer experience improvements that have been made have impacted both peak funding and also the revenue cash flow of the company,” Mike Mrdak, Secretary of the Department of Communications and the Arts, told the senate committee.

“Hence the decision by the government to put in an extended period for the repayment of the loan and enable the company to go to the external market for private debt.”

“We think the company is in a position to service he loan as it falls due.”