Senate Environment and Communications Legislation Committee [Part 2], , 2:06:27 to 2:26:51
NBN Co executives address Fitch rating agency assessments and the organization's debt maturity profile. The CEO provides updates on revenue projections and the adoption of high-speed internet tiers across Australia.
Topics: Infrastructure, Government spending
Speakers: Speaker 10, Senator Sarah Henderson, Speaker 1, Unknown Speaker, Interjection
I now call officers from NBN Co Limited. Uh, welcome Miss Ellie Mcweeny, chief executive officer, and to members of your team at the table and in the room. Uh, do you wish to make an opening statement?
>> I do. Thank you, chair.
>> Thank you.
>> Um, chair, thank you to you and to the members of the committee. Uh, before I start, if I may, I would like to acknowledge the devastating and deeply troubling attack on Dr. Helen Haines. Uh, like so many Australians at NBM, we were shocked and deeply concerned by what occurred and our thoughts with Dr. Haines, her family, her colleagues, and everyone impacted by this incredibly distressing incident. Dr. Haines is a passionate advocate for regional communities and for ensuring regional Australians can access the connectivity and the opportunities across Australia. And at MBM, we greatly value her advocacy and her commitment to regional As we turn to today's and tonight's proceedings, it is a privilege to be back here before the committee to provide an update on NBN's progress. I'm joined by our chief financial officer, Simon Atinson, chief customer officer, Anna Perin, chief operating officer, Dion Lebanovich, and our chief development officer for regional remote, Gavin Williams. At the heart of everything we do at MBN is our purpose. And our purpose is to elevate Australia by connecting people and by powering progress. And that purpose is reflected in the progress we have made this year. And we have strengthened the network, expanded access to more reliable and faster broadband. And we are building the digital infrastructure that Australia will rely on, we think, and we know for decades to come. Chair, FY26 financial year was a successful year for NBN. And in an increasingly competitive environment, we delivered strong operational and financial results. We accelerated the transition from legacy copper technologies to more reliable future ready fiber and continue to lift the capability and resilience of the network. Uh today I'd like to cover uh three key things with the committee. the outcomes we delivered in financial year 26, the growing momentum behind Australia's transition from legacy copper to fiber and the work underway to strengthen network resilience as we prepare for the upcoming high-risk weather season. FY26 was a year of excellent progress for FB uh NBN and it was reinforced by the AC's final replacement determination which was released on the 27th of August of this year and the determination represents a landmark regulatory outcome for MBN and it provides regulatory certainty for FY27 to 29 and it effectively validated 100% of NBN's forecast capital and operating expenditure as prudent and efficient. The AC also concluded that close to 99% of NBN's historical capex expenditure and that was across FY 24 to 26 met the same standard. Together these findings provide strong independent validation of MBN strategy, investment framework and long-term approach to network modernization. Against that backdrop, we met or exceeded key FY26 financial guidance targets. By way of highlights, total revenue grew 3% and that was to 5.92 billion. Our Ebidar grew 5% to $4.46 billion. Telecommunications revenue grew by 4% to 5.75 billion. that was supported by the adoption of higher speed tiers and operating costs I think importantly reduced by 52 million or 3% and that reflects the discipline cost management and the growing benefits of transitioning Australians from copper and that legacy copper to full fiber at the same time we continued to accelerate our fiber roll out in FY26 we upgraded more than 575,000 premises uh homes and businesses rather from copper to fiber and that's a 34% uplift on the previous year and we reached 3.3 million premises on our fiber network and that's a 24% increase on the previous year. This marked a clear inflection point with more customers connected to fiber than copper for the first time in MBN's history. And those results demonstrate an important point. As more Australians benefit from more reliable, faster services, the nation ga gains a more capable and more resilient asset. So to my second point, accelerating Australia's move to fiber chair, the momentum high in Australia's transition from copper to fiber continues to strengthen. It's now been 1 year since we launched Accelerate Great, the most significant uplift in MBN's high-speed wholesale tiers since the network was established. And the response, the customer response has been strong. At the end of FY26, 47% of customers were on 100 megabits and above, and that's up from 32% the year before. And 37% of customers were on 500 megabits or above. And that is up from 4% the previous year. Today around 3.5 million premises are connected to 500 megabits and above. And that's making for the first time the 500 megbit plan the most popular speed tier on the MBN network. Fiber is underpending underpinning this shift. It's delivering more reliable, more resilient, and faster connectivity with capacity to support the growing digital data demands, including more connected devices, cloud services, and emerging technologies such as AI. That demand is already increasing. By the end of September, average monthly downloads have increased 14% yearonear, while average monthly uploads have increased 18%. And together, these trends demonstrate that Australians are consuming, creating, and sharing more data. It's reinforcing the importance of continued investment in high-capacity broadband infrastructure. And this will be even more important as AI, cloud computing, real-time collaboration, and other data inensive applications place greater demands on the network performance, on reliability, and resilience. Access to worldclass digital infrastructure will be an important enabler of Australia's future productivity and economic growth and fiber provides the reliability, the capacity and the upgrade path reg um required to support that growth across regional and metropolitan Australia. Over the past four years, NBN has undertaken one of the largest digital infrastructure upgrades in Australia's history and we've transformed the capa capability of the network. In 2022, just 46% of fixedline premises could access wholesale speeds of 1 Gbits. Today, 90% of homes and businesses can order a highly reliable multi- gigabit service. And once the remaining copper fiber footprint has been upgraded, more than 11.6 million homes and businesses representing around 94% of the fixed line footprint will be able to access multi- gigabit capable services. And importantly I think and this is very important this capability will extend well beyond our cities reaching 99% of regional fixed line premises by 2030. So the final step in achieving that outcome is the upgrade of the remaining 622,000 premises served by legacy copper on our fiber to the net uh fiber to the node technology where we continue to make strong progress and we remain on track to make all eligible premises ready for a fiber upgrade by the end of 2030 and at this end of September of this year 95% of that footprint has progressed to detailed designs. 48% are now in construction and more than 100,000 of that 622,000 are now ready to order a fiber upgrade. Another important milestone was achieved on the 1st of July this year when fiber to the curb customers on legacy copper technology became eligible to upgrade to fiber without needing to subscribe to higher speed wholesale plans. This is helping Australia's uh acceleration and that migration away from aging legacy copper infrastructure. And building on this change, NBN is progressively removing similar spell tier uh eligibility requirements across the remaining fiber to the node upgrade footprint with implementation planned for March of 2027. So the objective is simple. Make it easier for Australians to access the benefits of full fiber. Customers are increasingly choosing fiber because it delivers what modern households and businesses need most. More capacity, lower latency, greater reliability, and a superior broadband experience. And as more Australians move to fiber, we are seeing fewer faults, fewer technician visits, and better comm uh community resilience. At the same time, fiber is improving network economics, driving capital efficiency, and helping us build a stronger, more resilient Australian broadband network. So whether measured through upgrade volume, high-speed tier adoption, data consumption or customer behavior, the direction is clear. Australians are choosing fiber and once connected, they're increasingly choosing more reliable and faster services. So chair, finally to my last point, resilience remains central to our purpose. And as we approach another high-risisk weather season, MBN has undertaken extensive preparations to help Australians remain connected before, during, and after severe weather events. This includes prepositioning generators, fuel supplies, satellite trucks, fly array satellite uh kits, temporary network restoration equipment, and specialist field resources in identified risk areas. We also continue to work closely with emergency management agencies, utilities, government stakeholders to coordinate the response and recovery arrangements. A key component of this preparation is EM365 and that's our year round preparedness and resilience program. Through EM365, we provide customers with practical preparedness information, outage notifications, multilingual resources, and guidance to help uh households, businesses, and communities prepared for emergency and maintain communications during times of disruption. Importantly, resilience is not only how we respond during severe weather events. It's also about how we continue to strengthen the network itself. And again, as we've mentioned previously, as more customers transition from legacy copper to fiber, they benefit from an infrastructure that is inherently more resilient with fewer points of failure, less reliance on powered infrastructure in the field, and faster restoration following major weather events. Fiber now represents the majority of active fixed line connections. It's improving reliability and resilience while reducing operational complexity, strengthening network economics as communities, businesses, and government services become increasingly dependent on digital connectivity, the importance of reliable, resilient national network will continue to grow. So chair, in closing, across these areas, the resilience of the network, the performance of the business, and the investments we're making to the future, the direction is clear. NBN is delivering modern, high performance, sovereign digital infrastructure that will underpin Australia's economic and social development for decades to come. We're delivering on our commitments, strengthening the network, and improving the experience for Australians who rely on it every day. Thank you, Chair, and I welcome the committee's questions.
>> Senator Henderson.
>> Uh, thank you very much, Chair, and Miss Sweeney, and to your team. Thank you very much for attendance. Apologies that we are running a a bit or more than a bit behind. Look, I want to refer to the assessment by leading rating agency Fitch. Uh it's raised concerns that MBN Co is going to take uh longer than it should to clear its debt owing to slower than expected uh upgrades. Uh, can I ask you to speak directly to the warning that Fitch has issued? And are you expecting many more people will upgrade to faster speed plans?
>> Simon's our um chief financial officer. I might get him to answer that question.
>> Thank you, Senator, for the question. Uh, Fitch uh published that article without sorry, the Australian published that article without any reference to Fitch. They didn't talk to Fitch about the um the review that was put out and subsequent to the article, Fitch contacted the Australian and corrected the inaccuracies in the article. What I can tell you is that Fitch LA previous to this uh last issued its guidance in September of 2025 in the same month that we uh we launched our accelerate great program and made estimates around what that program would do in their own life. they don't have access to our information and with the benefit of a year of um data actual data they were able to adjust those um forecasts so it wasn't so far it wasn't so much as a reduction in their forecast it was a correction in the forecasting if the Australian journalist had contacted Fitch that's what Fitch would have told >> well um well the the picture from Finn Fitch was not a good one and that because is of the amount of debt being carried by MBN. Um so could you please update the committee on your debt levels and and the impact that that is having on your credit rating. I understand your credit rating hasn't changed, but uh you are carrying an enormous amount of debt and so I would just ask if you could explain both that and also the the general concerns in relation to your future projections, financial projections as to managing that debt. >> Thank you, Senator. There are a couple of questions in there, so if I can just deal with one at a time. Firstly, Fitch reinforced their rating. They didn't issue any concern. They issued a reinforced our rating at a stable outlook. So, there was no change in that rating. In fact, >> no, I didn't say there was >> just to go to the credibility of the the Ford view. Secondly, um we have been just recently rated by the Japanese credit rating agency as trip as double A um which is consistent with the u with the ratings that we see with Fitch and Moody's. Um we are currently sitting at 8.95 times net debt debar and I would note that um only a few years ago that was at 13 times and we have a trajectory that is seeing a reduction in that to investment grade between six and and or four and six times net debt to even da we find that the current debt levels are manageable and we're currently we've just raised $600 million US in the uh in the US market in the 144A market at record levels for NBN at levels that had never been achieved before recog recognizing the the um the confidence that investors have in the MBN story. >> Um can I just ask you what are the maturity dates and the refinancing amounts for each year to 2030 and how much of the 27.45 billion in net debt must be refinanced at materially higher interest rates uh compared to what has been available Sorry, Senator. Is the question around the FY 2030 refinance, the >> maturity dates and the refinancing amounts for each year to 2030? >> So, roughly, Senator, we have approximately $3 billion of debt to raise each year. And that's consistent with what we've done historically. Um, that usually requires us to raise money through both the bond markets in in the European market, the US market, and the Australian market. We also have um existing facilities, syndicated facilities with Australian banks and a number of international banks to maintain our liquidity. As far as the your question as to the cost of debt, yes, when some of this debt was raised, it was raised at record lows when in fact interest rates were close to zero. Uh and but what I would say then is that the margin the spread that was being paid was quite high. What we're seeing now is as rates increase, we're seeing that that margin come down. And I think that's demonstrated by the the um the prior um 10-year bond to the one we've just raised, which was in FY23. Uh we raised at a higher cost um that one compared to the most recent one by just a couple of points. And that's because while the underlying treasuries went up over that period of time, the spreads came down because of the confidence. So in fact we're raising in that bond alone it's uh it's cheaper than it was 3 years >> Okay. So I did ask for the maturity dates and refinancing amounts for each year to 2030. Do you have >> I would have to give take that on question on notice. We do have in our publicly disclosed information we have the um the forward curve but we don't have each of the bonds with each of the dates specifically specified. I would have to take that as question on notice. if I if I have, could you, um, back to you, Miss Sweeney. Uh, could you please explain your projections in relation to upgrades to higher speeds? >> Mhm. if you could just because um I'm just trying to understand what are your forward projections in relation to your revenues. there is a there is obviously and I'm raising concerns. Uh you've had some robust expectations as to a percentage of Australians who would move on to the higher speeds but >> it looks like those expectations are not being met. Could you please talk me through that and what impact that will have on revenues?
>> Senator, I think it's fair to say that the accelerate rate program which we ran last year which uh again today uh I think today we're close to 49.4% of Australians are on 100 megbit and above as of today and 39.9% today of Australians are on 500 megbit and above. The data point to share with you is that in September of last year, 4% of Australians were on 500 megbits and above. And today, as we see more customers moving to Fiverr, um, and more orders coming into our business, 77 76 78% of those are the high speed tiers as well. So, at the moment, Senator, and again, I can't give you a projection out to 2030. As you know, we're restricted in terms of the projections we can give based on the debt markets that we are in. Um but uh today we are tracking ahead of our high-speed tier forecast um into the integrated operating plan for this year.
>> Can you walk me through that? What is that forecast
>> for this year?
>> Yes.
>> I think in terms of the um the 49% that we expected to be on 100 meg. Uh we're about four basis points ahead of that.
>> Uh have you got have you got sort of um data in recent years so we can have a look at how that is tracking? Do you have anything available to you? right now that you can walk me through
>> of of how we're tracking over the last year.
>> That's right. Yes,
>> Senator, I can share with you that uh 4% of Australians last year were on 500 megabits and above and today 39.9% are. So that's a significant uplift in terms of Australians being able to access value on our high-speed tier networks which are fiber and HFC. So again, we are tracking ahead of where we expected to be on that. And look again, Senator, I'd have to say, you know, a lot of that goes to the great work from the retail service providers. Uh I think if you've been watching the market, it's incredibly competitive at the moment and we're seeing great offers for Australians around that 500 megabits per second price point. And again, it's great to see Australians being able to realize that value, better speeds, and going onto fiber, a much better customer