Telstra renews calls to rein in NBN prices

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Telstra renews calls to rein in NBN prices

As income and net profit fall for the first half.

Telstra has renewed calls to rein in the steady march of NBN prices upwards, saying wholesale prices in the back half of this decade could eclipse current retail prices.

CEO Andrew Penn told the telco’s half-year results that NBN Co’s stated goals to increase average revenue per user (ARPU) would only increase retailers’ costs, which at some point would be passed on in the form of higher prices - unless something was to change.

He said the constant threat of higher prices in the NBN business created “an element of headwind”, on top of the “headwind” that Telstra has reported over the past few years attributed to the migration to the NBN.

“If NBN ARPUs continue to increase in line with the pricing structure, consumers will have to pay more. That is the bottom line,” Penn said.

“In fact, if you model it out to the second half of this decade, and they continue to use the same structure, wholesale prices will be higher than current retail prices, so that’s obviously not sustainable. 

“It doesn’t matter how much the operators reduce their costs - something has to give.”

NBN Co said yesterday during its own half-year results that it would soon commence its annual pricing consultation with retailers, though it is unclear just how much change might result from it. 

“[NBN Co] obviously are not committing to where that’s going to end up, but I hope that through that pricing consultation we can start to see some reasonable changes that actually lead to an industry where consumers can win, so they dont have to face significant increases to access, the operators can win so they can actually make a return on capital that means they can satisfy their shareholders, and then ultimately NBN Co [can win by] generating free cash flow to focus on upgrading the network over the long term,” Penn said.

“That pricing consultation discussion is going to be very important and I strongly encourage that to occur.”

Penn said his views on NBN Co’s wholesale pricing were broadly well-known - he has previously sought a $20 per month per user wholesale price cut.

He also said that the end of the rollout was good timing to take a harder look at NBN pricing.

Path to growth clearer

Telstra reported a 10.4 percent fall in total income to $12 billion, and a 2.2 percent fall in net profit to $1.1 billion for the half.

However, Penn declared that Telstra could “see the path to underlying growth ahead ... after a decade of disruption following the creation of the NBN, and with its rollout now declared complete.”

“The major headwinds we have been facing from the migration to the NBN are coming to an end,” Penn said.

“The in-year NBN headwinds peaked in the second half of the last financial year, reduced this half and will be substantially less in FY22.

“I am optimistic we are at a turning point financially.”

Takes back shops

Telstra also announced an intention to take “full ownership” of all of its branded retail stores across Australia. 

It currently has more than 60 Telstra-owned and operated stores, with another 166 branded stores run by individual licensees and a further 104 stores operated by Vita Group.

The telco said that “Vita Group and individual licensees are being notified of the plan with discussions and transition arrangements expected to progress over the coming months.”

Vita Group’s shares were trading down 83 cents or 26 percent following the announcement.

Penn said the telco recognised the value that its stores played in regional and rural communities.

"We know that in many regional and rural towns, the local Telstra store is a valued part of the community providing support and connectivity to a range of businesses and industries," he said.

"This will not change, and neither will our commitment to ensuring current licensee store customers continue to receive an excellent level of service."

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