Telstra has once again pinned the National Broadband Network (NBN) as the cause of a drop in profitability, claiming it is responsible for AU$600 million in negative earnings before interest, tax, depreciation and amortisation (EBITDA).
In its results released on Thursday, Telstra said the cost to it from the NBN was now AU$1.7 billion in total, and that it has only seen half of the impact.
Overall for the company, revenue was down 3.6% to AU$27.8 billion compared to last year, EBITDA shrunk 21.7% to AU$8 billion, and net profit was cut by 40% to AU$2.1 billion.
Excluding costs from job cutting, Telstra said its EBITDA was down 11.4% to AU$9.4 billion.
“While the reported financial trends in FY19 were challenging, underlying trends are expected to improve over the course of FY20,” the company said.
Telstra is forecasting revenue of AU$25.7 billion to AU$27.7 billion for next year, with EBITDA between AU$7.3 billion to AU$7.8 billion, restructuring costs of AU$300 million, and NBN one-off payments of between AU$1.6 billion to AU$2 billion, with the government-owned network to cut its EBITDA by between AU$800 million to AU$1 billion.
Over recent weeks, NBN and Telstra have engaged in a round of finger pointing over which company is responsible for money disappearing from which company’s balance sheet.
In July, NBN struck out at Telstra’s complaints that the connectivity virtual circuit (CVC) charge that NBN puts on bandwidth needed to be scrapped and wholesale prices to be cut by AU$20.
Telstra CEO Andy Penn said at the time it was unprofitable for retailers to resell the NBN at current prices.
“An industry where wholesale prices result in zero margins for the downstream retail providers is unsustainable,” Penn said.
“It will result in higher retail prices, reduced competition and retail providers looking for ways to bypass the NBN altogether — which is bad for customers and bad for the industry.”
NBN CEO Stephen Rue hit back describing the wholesale price debate as “the industry gnashing about NBN Co’s pricing model”.
Rue said it should be remembered that NBN is serving the entire country, and it is not just about capital costs, but also ongoing costs to keep it running.
“Let’s not forget that the sum of all NBN Co payments to Telstra was around AU$2 billion this year,” Rue said.
“Our Corporate Plan points to a continuing payment to Telstra for access to ducts, dark fibre and facilities of AU$1 billion annually from FY21, representing 20% of forecast revenues, and continuing for decades after the build is completed.
“This has an obvious impact on wholesale prices.”
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