Annual Report 2014–15 nbn Annual Report Report Annual 2014-15 Contents Page About nbn 3 nbn’s objectives and purpose 5 Key highlights in FY2015 9 Chairman and Chief Executive Officer’s message 11 Directors’ report 15 Corporate governance statement 53 Auditor’s independence declaration 67 Financial statements 69 Statement of profit or loss and other comprehensive income 70 Statement of financial position 71 Statement of changes in equity 72 Statement of cash flows 73 Notes to the financial statements 74 Directors’ declaration 129 Independent auditor’s report 130 Regulatory reporting requirements index 132 Regulatory report 134 Glossary 144 The financial statements were authorised for issue by the Board of Directors on 17 August 2015. The Directors have the power to amend and reissue the financial statements. Legal Notice Copyright Copyright © 2015 nbn co limited (‘nbn’). Copyright subsists in this annual report. nbn owns that copyright. Other than as permitted under the Copyright Act 1968 (Cth), the annual report (in part or as a whole) cannot be reproduced, published, communicated or adapted without the prior written consent of nbn. ‘nbn’, ‘bring it on’, and the Aurora device are trademarks of nbn co limited ABN 86 136 533 741. Any request or inquiry to so use the annual report should be addressed to: The Chief Financial Officer nbn co limited Level 11, 100 Arthur Street North Sydney NSW 2060 Australia Date This annual report is for the year ended 30 June 2015. Glossary Defined terms within this annual report should be read in conjunction with the Glossary on pages 144 to 151. 1 2 nbn Annual Report 2014–15 About nbn About nbn Established in 2009, To achieve this objective, the nbn™ network has been structured as a wholesale-only nbn co limited (nbn or the access network available on equivalent Company) is owned by the terms to all access seekers. This is intended to level the playing field for Australian Commonwealth of Australia. telecommunications and create real and nbn’s key objective is to vibrant competition within the industry. ensure all Australians have nbn is a Government Business access to very fast broadband Enterprise (GBE) incorporated under the Corporations Act 2001 and operated as soon as possible, at under the Public Governance, Performance affordable prices and at and Accountability Act 2013 (PGPA Act), which superseded the Commonwealth least cost to taxpayers. Authorities and Companies Act 1997 (CAC Act) on 1 July 2014. 3 4 nbn Annual Report 2014–15 nbn’s objectives and purpose nbn’s objectives and purpose The SoE also provides, among other Statement of things, that: • To minimise cost and increase speed of Expectations deployment, the rollout should allow for an Optimised Multi-Technology Mix model; nbn’s objectives are set by • The design of the network will be guided the Shareholder Ministers in by the Government’s policy objectives of a document referred to as a providing access to download data rates of at least 25 megabits per second* (Mbps) Statement of Expectations to all premises and at least 50 Mbps* (SoE), which is supplemented to 90 per cent of fixed line premises from time to time by policy as soon as possible; directives and correspondence. • The nbn™ network is intended to be a wholesale-only access network, nbn’s current objectives are available on equivalent terms to set out in the 8 April 2014 SoE, all access seekers; and which outlines the Australian • nbn has flexibility and discretion in Government’s commitment to operational, technology and network design decisions, within the constraints complete the nbn™ network of a public equity capital limit of and ensure all Australians $29.5 billion. have access to very fast * The nbn™ network is being designed to provide broadband as soon as possible, these peak speeds to nbn’s retail service providers at nbn’s network boundary. End-user experience, at affordable prices and at including the speeds actually achieved over the nbn™ network, depends on the technology over least cost to taxpayers. nbn’s which services are delivered to premises and some factors outside nbn’s control, such as end-user overriding objective is to fulfil equipment quality, software and retail broadband plans, and how the retail service provider designs this commitment. its network. 5 nbn Annual Report 2014–15 nbn’s objectives and purpose • Direct benefits are already apparent Purpose: connect in areas such as commerce, including applications that reduce administration Australia, bridge costs and cloud technologies that can reduce IT spending; the divide • National public benefits are arising from innovations in e-government, health The primary role of nbn is to enable and the environment. Furthermore, Australia’s greater participation in the online resources and online learning digital economy and to help bridge the are opening up greater educational digital divide – between young and old, opportunities for our students; city and country, and between Australia and the rest of the world. • Indirect benefits include greater social inclusion and equal opportunity; and At a time when Australia is undergoing fundamental shifts, including an ageing • Benefits will flow from new applications population and evolving economic and ways of working that are yet to conditions, nbn is delivering vital be invented. infrastructure investment, transforming the way business operates and the way we live our lives: 6 7 8 nbn Annual Report 2014–15 KEY highlights in FY2015 KEY highlights in FY2015 More than 1 million premises serviceable Telecommunications revenue $161 Premises activated Major agreements million signed 2.7 × FY2014 +131% against FY2014 with Telstra to 485,615 and Optus Customer experience metric rating Employee 6.6 engagement score out of 10 52 51% retail service +7 percentage providers points against signed up FY2014 9 10 nbn Annual Report 2014–15 Chairman and Chief Executive Officer’s message Chairman and Chief Executive Officer’s message This has been a year of Factors such as the increasing popularity of video streaming services are delivering important progress in the a step change in the use and volume of delivery of better broadband data. It is estimated that 100 million homes subscribe to these so-called over-the-top across Australia with the video products globally, with the market achievement by the Company set to double in the next five years. Widespread storing of information in of its annual rollout targets. the cloud is also putting a premium on Around one in 10 Australian premises is upload speeds and influencing the design now able to order an nbn™ service. This of our network. represents a doubling compared to the As a result of this increasing data usage, the previous year. Of the premises within our global technology company Cisco forecasts expanding network, nearly half are now that consumption will rise threefold by active on the nbn™ network, buying 2019 to 136 Exabytes per month.* What products from one of 52 registered may surprise the casual observer of the retail service providers. Australian telecommunications debate This represents significant progress over is that the overwhelming bulk of data the past 12 months. Nevertheless, the transmitted locally is done so over existing Company acknowledges there remains telecommunications networks. much to be done to meet its overall goals. Our achievements are set against the background of the rapid transformation of the global telecommunications market and the way in which families and businesses are consuming broadband services. * Source: Cisco Visual Networking Index 2015. 11 nbn Annual Report 2014–15 Chairman and Chief Executive Officer’s message Advances in technology, such as the Data Indeed, the Company is already well Over Cable Service Interface Specification advanced in the transition to the Multi- (DOCSIS) 3.1, enable broadband providers Technology Mix rollout model. The to deliver faster speeds and increased commercial launch of the first of the capacity over existing infrastructure, additional technologies – Fibre-to-the- thereby negating the need to spend Basement – occurred during the year. By additional time and money overbuilding 30 June 2015, the plan or construction it with fibre optic cable. work began for the first 780,000 premises earmarked to receive fast broadband by means of Fibre-to-the-Node. The Company Momentum also conducted a successful trial of Hybrid Fibre Coaxial (HFC) technology, procured and progress HFC equipment and outlined a blueprint to upgrade the entire HFC footprint to the Among the critical achievements of DOCSIS 3.1 standard, which is capable of the Company in the period were the delivering gigabit speeds. renegotiation of the agreements with SingTel Optus (Optus) and Telstra for Outside the fixed line footprint, the nbn™ the progressive acquisition and/or use satellite service took a considerable step of certain elements of their network forward, with the first of the two satellites assets, as well as the successful passing key testing procedures and being negotiation of new construction contracts cleared for launch into orbit in the first that deliver flexible volume commitments, half of FY2016. The fixed wireless network competition between delivery partners has also scaled significantly this past year, and pricing based on outcomes instead with 429 sites acquired servicing 268,397 of complicated schedule inputs. homes and businesses. Taken together, these achievements put These two networks, providing high speed nbn in a solid position to move from a broadband access for rural, regional and linear growth curve to an exponential remote communities, are increasingly one to meet the Government’s objective viewed around the world as among the of ensuring every home and workplace most advanced applications of technology in Australia can receive high speed to deliver high speed broadband to areas broadband by 2020. unsuited for fixed line services. To that end, the Company repositioned the nbn™ brand, moving away from the image of a utility function to that of a visionary company that can deliver positive benefits for every Australian.