«If you’ve got a relatively new prime minister and relatively new treasurer … they might look at it relatively early in their tenure.»
Mr Penn, who has run Telstra since 2015, did not have a view on «who is going to win» the election and believes a Coalition government would eventually come under pressure to change the prices due to the «laws of arithmetic».
The past three years have been difficult for Telstra management which has cut staff in response to lower profit margins. Telstra once owned wholesale telecommunications infrastructure in Australia but the NBN means it must compete for broadband customers in the same way as its rivals. Telstra shares have fallen 39 per cent over the past three years compared with a 22 per cent rise in the ASX200.
With a change in government potentially providing telcos with an opportunity to change the NBN’s pricing structure, Mr Penn has created a new division within the company called InfraCo which aims to «provide a solution» for the government if it looks to privatise the network after all homes are connected.
Ms Rowland said last week that she was finalising her policy on NBN and had not ruled out a write-down in the network’s value, saying any write-down was not a government decision and needed a trigger but the «possibility of that happening looks more likely». Analysts estimate the write-down in the project’s value could be $20 billion.
If you’ve got a relatively new Prime Minister and relatively new treasurer … they might look at it relatively early in their tenure.
The NBN was formed with the expectation it would generate a profit and has maintained it can achieve a 3.2 per cent return after the roll out completes.
A write-down could be politically difficult for Labor as it would be reflected in the budget but broadband providers could pass some saving along to customers.
Intelligent Investor telco analyst and deputy head of research Gaurav Sodhi said he would usually «be skeptical of an industry crying about lower margins but in this case there’s no doubt in my mind there will be an NBN write down».
A Labor government would be the perfect opportunity. It’s never going to be the Liberals to do it,» Mr Sodhi said.
Finance Minister Mathias Cormann said in a statement that valuations of government assets are made in line with accounting standards and are subject to independent audit.
«Retail businesses engaged with NBN would like to see lower prices and higher margins for themselves,» he said. “It is not and should not be a political decision.»
“Those arguing for a write-down in order to facilitate lower prices (and higher margins) for other businesses with commercial interests in this industry are essentially arguing that the taxpayer rather than customers should carry more of the cost burden of the services provided by NBN and accessed by NBN customers,» he said.
Mr Penn blames the NBN as one of the major reasons behind his decision to cut 8000 jobs from the company as part of a radical turnaround strategy for the next few years called Telstra 2022, or T22, as the services were previously supplied by Telstra. Telstra has 32,293 employees (though is in the process of cutting 8000 staff from this number) and has the largest market share of telco customers in Australia.
Telstra was given funds by the NBN Co as part of the roll out to compensate for the government-funded network taking control of the infrastructure and accessing ducts and pits. When signed in 2014 the agreement was worth about $11 billion to the telco.
There are no easy options here and we know every form of action or inaction carries some type of trade-off.
Shadow Communications Minister Michelle Rowland said in a statement that whoever wins the next election would have «a series of big challenges on their hands» to handle the economics of the NBN.
“There are no easy options here and we know every form of action or inaction carries some type of trade-off,» Ms Rowland said.
The NBN’s internal forecasts expect revenue to reach $5.6 billion by the 2021 financial year and a 3.2 per cent return on investment. An NBN Co spokesman said the board remained confident in its ability to meet forecasts.
«We do not see any basis for a write-down,» the spokesman said.
However, a note from wealth management firm Morgans on 22 January said it was “looking increasingly likely that a Labor government would write down the NBN in 2019 which would provide a positive to the telco sector”.
Ratings agency S&P last year called a write-down of the NBN «inevitable» while JP Morgan’s Eric Pan said in a note this week the NBN needed a $20 billion write-down to cut prices enough to provide Australians with low cost internet and improve telcos’ margins.
Jennifer Duke is a media and telecommunications journalist for The Sydney Morning Herald and The Age.