Changes made by NBN Co to the timing of the National Broadband Network mean that Telstra for the third year in a row has had to revise its financial forecasts.
NBN Co last week released an updated corporate plan that revealed changes to its activation targets for FY20.
“Given the current priority on network optimisation and the degree of civil build required for FTTC [fibre to the curb], there has been a shift in phasing during FY20 for the deployment and activations,” the updated document states. “This extended the end point for the respective 18-month migration periods for some customers beyond the previously forecast timing.” (Once an area is declared ready for service by NBN Co, households have 18 months to migrate from the copper network to the NBN.)
NBN Co cut by 500,000 to 1.5 million the number of premises it expects to be connected in FY20. The company said it expects to connect 8.1 million premises by 30 June 2021, which is around six months later than it previously expected.
“Telstra’s FY20 guidance provided to the market on 15 August 2019 was predicated on NBN Co’s previous Corporate Plan 2019 and assumed the nbn rollout and migration in FY20 would be broadly in accordance with the 2019 plan,” Telstra said in a statement released to the ASX.
As part of the ‘definitive agreements’ (DA) between NBN Co and Telstra, Telstra receives a range of payments relating to NBN Co use of infrastructure such as pits and ducts. However, it also receives Per Subscriber Address Amount (PSAA) receipts, which relate to the migration of customers away from Telstra’s copper network.
Telstra said in August that for FY20 it was expecting net one-off NBN DA receipts of between $1.6 billion to $2.0 billion.
Because of the NBN rollout changes, some PSAA income will be deferred. However, Telstra said that the changes will be partly offset by the natural hedge including lower costs incurred connecting customers to the NBN, lower network payments to NBN Co, and retained wholesale income from services being migrated later than expected.
The telco last month said it expected total FY20 income in the range of $25.7 to $27.7 billion, with underlying EBITDA in the range of $7.3 to $7.8 billion.
Telstra has now dropped its guidance for total income by $400 million to $25.3 to $27.3 billion. Guidance for underlying EBITDA has increased by $100 million $7.4 to $7.9 billion. The telco said it expected net one-off NBN DA receipts (less NBN net cost to connect) of $600 to $800 million, down $200 million on its previous forecast.