quigley clarifies profit "misconceptions"

From Delimiter

Written by Renai LeMay on Tuesday, April 20, 2010 10:07

Quigley clarifies Senate NBN profit �misconceptions�
Tags: delimiter, ebitda, mike quigley, national broadband network, nbn co, profit, senate estimates

NBN Co chief executive Mike Quigley has attempted to clarify controversial comments he made during Senate questioning last week about the National Broadband Network�s commercial return, saying they didn�t tell the full story about the NBN�s profitability.

Quigley had been reported to have said in response to Senate Estimates Committee questioning that the $43 billion NBN wouldn�t make a financial return for 30 years.

But at the Communications Day Summit in Sydney today, he said he wanted to address such �misconceptions�, although he noted he had not been misquoted � just that there was more to the story. �The Senate discussion moves along fairly rapidly,� he said.

NBN Co�s business case, Quigley said, showed three critical aspects to its profitability.

Firstly, he said, NBN Co would generate a positive return on its costs before the end of the construction period of the fibre infrastructure � in other words, it would be EBITDA (earnings before interest, taxation, depreciation and amortisation) positive before the end of construction.

Secondly, Quigley noted that NBN Co was planning to recover yearly capital costs during the construction period � meaning it would be net income-positive after the buildout was finished.

And lastly, the NBN Co supremo noted the government business enterprise was planning to repay the Government�s equity contribution to the project � expected to run into the several tens of billions of dollars � within a 20 to 30-year time period.

Quigley said this time frame wasn�t unusual and pointed out that other telecommunications players such as US carrier Verizon was rolling out infrastructure with expected return to come along a similar period.

Some of the commentary around the NBN has focused tightly on to what extent the company will be attractive to commercial investors when the company is eventually privatised. But Quigley also noted Communications Minister had stated that the NBN was a project that had other aims than just having a commercial return.

Wireless
Quigley also attempted again to address the ongoing debate about whether the NBN�s fibre fixed infrastructure would be made irrelevant by the incoming wave of fast 3G mobile broadband services. �I want to clear up this misconception that it�s either wireless or fixed, because it�s both,� he said.

The executive said NBN Co had put together some calculations �on a Saturday afternoon for the sheer fun of it� on a hypothetical case of building the NBN purely with wireless technologies.

To build a network which would provide 5Mbps broadband (the fibre NBN promises 100Mbps) on a reliable basis with committed bandwith to each user in 60 percent of the population, he said, Australia would need some 80,000 cell towers. There are currently about 16,000, he said.

�It�s no accident that fibre to the premises is happening on a worldwide basis,� he said. And Quigley took one final jab at those that believe wireless services will make the NBN irrelevant.

�If you have 80,000 cell sites around austraila, what do you connect them with? With fibre,� he said.