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· Posted on
February 21, 2024

NBN Co has pulled out the scissors to write off at least $31 billion of costs... but will my internet plz get faster now?!

The NBN Co will write off at least $31 billion of the costs of the network.

What's the key learning?

  • The original idea was to someday privatise the NBN - which means it needs to demonstrate that it can actually make a return on the major investmentut the projected internal rates of return of NBN Co are currently well below the measures needed
  • The internal rate of return or IRR is a metric used to estimate the profitability of potential investments.
  • IRR can be used to compare the profitability of two different scenarios - like opening up a new shop business vs expanding the current business.

👉 Background: NBN aka the National Broadband Network was conceived way back in 2009. Since then, governments have spent nearly $44 billion on the build of its infrastructure. Yikes!

👉 What happened: NBN is a wholesaler that gives Telstra, Optus, TPG and co access to a supposedly faster speed networks… for a fee. The original idea was to someday privatise the NBN - which means it needs to demonstrate that it can actually make a return on the major investment.

👉 What else: But the projected internal rates of return of NBN Co are currently well below the measures needed. So now, the NBN Co will write off at least $31 billion of the costs of the network.

What's the key learning?

💡The internal rate of return or IRR is a metric used to estimate the profitability of potential investments. Generally speaking, the higher an internal rate of return, the more appealing an investment is to undertake.

💡IRR can be used to compare the profitability of two different scenarios - like opening up a new shop business vs expanding the current business. While both projects could add value to the company, it is likely that one will deliver a higher rate of return.

💡For NBN, the internal rate of return would aim to measure to how and when NBN would become profitable.

So clearly, NBN is struggling to become profitable and maintain its costs...

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