Meanwhile, NBN Co has achieved more than 500% Cost-Benfit Ratio.
There are two problems I have with the assumptions and methodology announced:
- Even under the dubiously recalculated figures, the IRR (Internal Rate of Return) of all versions of the NBN Co business plan is positive, albeit FTTP was 2%, down from the Quigley Business Plan of 7.1%.
- NBN Co is not, and never has been, an expenditure-only investment.
- The "Cost" of the CBA is zero by definition, and the resulting Cost-Benefit Ratio is infinite.
- From the announced revised estimates, there was never a reason to run a CBA, once positive IRR's were established.
- On the available Government Funding figures, somewhere between $5.3B and $7B has been injected as equity by the Federal Government into NBN Co.
- There is already a directly attributable and precisely measurable economic Benefit of the NBN project: the additional increase in Market Value of listed Telecoms companies.
- This is at least $36.5 billion,
- for a Cost-Benefit ratio, already, in excess of 500%.
- This is the direct benefit only to shareholders of the companies.
- Other Identifiable Economic Benefits
- There are considerable more identifiable and measurable components to the wider Economic Benefits of the guaranteed, selectable and dependable high access-rates of the NBN Co wholesale services.
- The least of these is the Labour Time Cost savings of Small Business and at-home work, a value of which can be estimated from the higher average download volumes of NBN Co customers compared to the all services. Reported by the ABS as 40GB/month vs 30GB/month. A 33% increase in download volume.
- At the average download rate of 5Mbps reported by the ABS, 10GB (80Gbits) is 4.5 hours/month saved. Even at a minimum wage rate of $16/hr, this 53hrs/year or $850/year/subscriber (household).
- At 30-Jun-2014, NBN Co reported adding 105,000 fixed-line subscribers with 210,000 subs in all, a yearly subscriber Labour Cost benefit of $90M/yr on $5-7B, or 1.8%/year. Scaled up to the anticipated 10M subscribers, that's $9B/yr identifiable value to subscribers. Over the 30 year life of the project, this is an additional ~50% Cost-Benefit Ratio.
- If an actual Value in Use of Time to subscribers was calculated, I suspect the figure would be closed to $150/hr, both for business and discretionary time for domestic use.
According to NBN Co's 2013 Annual Report (120pp) [as the latest figures available]:
To date NBN Co has been funded by successive equity injections from the Commonwealth totalling $5.3 billion, including $2.4 billion in FY2013. (pg 113)Data from Google Finance, 16-Aug-2014.
and "Government Funding, FY 2013: $5,229 (pg 105)"
Shares selected from "Related Companies".
Only one of the identified companies, Macquarie Telecom, lost share valuation during the period.
The period selected was from 24-Jun-2012, the date that the NBN-Telstra Definitive Agreements were signed. This was considerably after the $2.60 minimum share price reached around Dec-2011.
The calculation accounted for the impact of the increased value in the Australia stock market, calculated by the S&P ASX-200 ['XJO' to Google Finance].
Additional Financial Data is included to allow better comparisons to be made between the classes of business (high P/E ratios for high-growth companies, low P/E for mature companies).
|Ticker||Company name||Increase||Start||ASX Adjusted||NBN Contrib||Extra Mkt Cap ($M)||Shares (M)||Price|
|TLS||Telstra Corporation Ltd||86.98%||$2.98||$3.59||$1.99||$24,181||12,173.84||$5.58|
|SGT||Singapore Telecommunications Ltd||41.88%||$2.35||$2.83||$0.51||$7,959||15,754.49||$3.34|
|TPM||TPG Telecom Ltd||231.93%||$1.71||$2.05||$3.61||$2,753||763.25||$5.66|
|MTU||M2 Group Ltd||90.93%||$3.47||$4.18||$2.44||$425||173.72||$6.62|
|AMM||Amcom Telecommunications Ltd||73.78%||$1.12||$1.35||$0.60||$152||253.21||$1.95|
|VOC||Vocus Communications Ltd||111.01%||$2.51||$3.02||$2.28||$212||92.99||$5.30|
|MNF||My Net Fone Limited||1,261.10%||$0.20||$0.24||$2.51||$143||56.89||$2.75|
|MAQ||Macquarie Telecom Group Ltd||-48.82%||$10.16||$12.23||-$7.03||-$148||21.05||$5.20|
|Ticker||Company name||Shares (M)||Price||P/E ratio||Mkt Cap ($M)||Dividend yield|
|TLS||Telstra Corporation Ltd||12,173.84||$5.58||16.76||$67,930||5.29|
|SGT||Singapore Telecommunications Ltd||15,754.49||$3.34||$52,620||3.09|
|TPM||TPG Telecom Ltd||763.25||$5.66||27.91||$4,320||1.50|
|MTU||M2 Group Ltd||173.72||$6.62||23.03||$1,150||3.25|
|AMM||Amcom Telecommunications Ltd||253.21||$1.95||22.11||$494||3.19|
|VOC||Vocus Communications Ltd||92.99||$5.30||70.85||$493||0.26|
|MNF||My Net Fone Limited||56.89||$2.75||33.89||$156||1.64|
|MAQ||Macquarie Telecom Group Ltd||21.05||$5.20||25.13||$109||4.62|
|Ticker||Return on avg assets||Return on avg equity||Return on investment||Net profit margin||Gross margin||Operating margin||Employees||Revenue ($M)||Net income ($M)|