Half-Year Report For the six months ended 31 December 2018 Legal Notice The Half-Year Financial Report was Date authorised for issue by the Directors on This Half-Year Report is for the six months 5 February 2019. The Directors have the ended 31 December 2018. power to amend and reissue the Half-Year Financial Report. Glossary Defined terms within this Half-Year Legal Notice Report should be read in conjunction Copyright subsists in this Half-Year with the glossary of terms within the Report. NBN Co owns that copyright. 2018 Annual Report. Other than as permitted under the Copyright Act 1968 (Cth), the Half-Year Report (in part or as a whole) cannot be reproduced, published, communicated or adapted without the prior written consent of NBN Co. Any request or inquiry to so use the Half-Year Report should be addressed to: The Chief Financial Officer NBN Co Limited Level 11, 100 Arthur Street North Sydney NSW 2060 Australia © 2019 NBN Co Limited ‘nbn’, ‘bring it on’, ‘Sky Muster’, ‘gen nbn’ and the Aurora device are trademarks of NBN Co Limited. ABN 86 136 533 741 © 2019 NBN Co Limited 1 NBN Co Half-Year Report For the six months ended 31 December 2018 Contents Overview Directors’ Report An overview of NBN Co’s Information on NBN Co’s Directors, corporate information, purpose operating performance and risk and goal. management. About NBN Co 2 Our business 12 Half-Year results summary 4 Operating and financial review 14 Customer experience 6 Risk management 24 Delivering social and economic benefits 8 Board of Directors 26 Other information 33 Half-Year Financial Report The NBN Co Group’s Half-Year Financial Report for the six months ended 31 December 2018. Auditor’s Independence Declaration 34 Consolidated financial statements 36 Notes to the financial statements 40 Directors’ declaration 56 Independent Auditor’s Review Report 57 2 Overview About NBN Co About NBN Co NBN Co is the company helping Australia transition to a digital future by building and operating Australia’s new high-speed, wholesale, local access broadband network. NBN Co’s purpose is to connect Australia and bridge the digital divide to ensure all Australians have access to a fast, reliable broadband network, as soon as possible, at affordable prices and at least possible cost. NBN Co has a commitment to deliver access to peak wholesale download data rates of at least 25 megabits per second (Mbps) to all premises across the network, and at least 50Mbps peak wholesale download data rates to 90 per cent of the fixed-line network1. 1 The nbn™ access network is being designed to provide these peak speeds to NBN Co Retail Service Providers (RSPs) at NBN Co’s network boundary. The nbn™ wholesale speed tiers available to RSPs vary depending on the nbn™ access network technology in your area. 3 NBN Co Half-Year Report For the six months ended 31 December 2018 As the network wholesaler, NBN Co provides wholesale broadband to all Retail Service Providers (RSPs) on a non-discriminatory basis. This approach is intended to level the playing field in the Australian telecommunications industry – enhancing competition and providing greater choice for consumers across the country. It is through RSPs that end users connect to the nbn™ access network for access to fast broadband. Building the nbn™ access network remains one of the largest and most complex infrastructure initiatives in Australia’s history, and one of the most ambitious in any telecommunications market around the world. With our goal of eight million homes and businesses connected by 2020, the network will be fundamental in enabling Australia to become a more connected, competitive and innovative nation. 4 Overview Half-Year results summary Half-Year results summary 31 December 2018 Ready to connect1 8.1m 32% 6.1m HY18 Premises activated1 4.7m 38% 3.4m HY18 1 Cumulative number of ready to connect, premises activated and ready for service. 5 NBN Co Half-Year Report For the six months ended 31 December 2018 Revenue Monthly average revenue per user (ARPU) $1.3b $45 46% $0.9b $44 HY18 HY18 Ready for Capital service1 expenditure 7.1m $2.8b 9.5m HY18 $2.9b HY18 34% 2% 6 Overview Customer experience Customer experience NBN Co’s Progress Connect commitment to customer experience is showing significant Ready to connect1 Right first time installations 3 progress. Installedof nbn ™right equipment the first time 10 100 92% 94% 93% 86% 87% 8.1m 8 80 To give the public a clear 7.0m 7.3m 6.1m 6.5m understanding on our 6 60 progress, NBN Co is reporting key customer 4 40 experience metrics 2 20 publicly through a monthly progress report. 0 0 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Compared against 31 December 2017, Connected homes Meeting agreed the recently reported and businesses2 installation times4 metrics show that NBN Co has made strong Meeting agreed installation times 4.5 105 97% progress in the following 4.7m 94% 92% 95% 93% 4.4m areas during the period 4.0m 84 3.5 3.7m to 31 December 2018. 3.4m 63 2.5 42 1.5 21 0.5 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 7 NBN Co Half-Year Report For the six months ended 31 December 2018 Use Fix Average network bandwidth Fixed-line network Meeting agreed fault 5 6 9 congestion (per week) Fixedcongestion Line network congestion restoration times 1.5 0.110 0.10% 100 92% 1hr 30mins 90% 91% 82% 83% 1.2 0.088 0.08% 80 0.07% 0.9 0.066 60 0.6 0.044 40 38mins 40mins 0.3 25mins 0.022 0.02% 0.02% 18mins 20 0.0 0.000 0 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Uptake to higher peak Network Faults after connection wholesale speed plans availability8 completed (per 100 Uptake to higher peak wholesale7 speed50Mbps plans or 50Mbps higher orplans higher plans10 connected homes and businesses)10 60 56% 101.0 1.05 1.0 1.0 50% 0.9 50 99.9% 99.9% 100% 100% 99.9% 45% 99.8 0.84 0.8 0.8 40 37% 98.6 0.63 30 97.4 0.42 20 16% 10 96.2 0.21 0 95.0 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 1,2 Cumulative number of premises ready to connect and connected homes and businesses. 3,4,5,6,7,8,9,10 Refer to page 59 for further details on how the performance against key metrics has been calculated. 8 Overview Delivering social and economic benefits Delivering social and economic benefits The nbn™ 1 Creating new opportunities for access network online education is having a significant x2 impact on nbn™ connected Australians are twice as Australians in likely to enrol in online learning courses. connected areas. Over 65 Almost four out of five over-65-year-old Research conducted by leading nbn™ connected users are engaged in economists AlphaBeta, commissioned non-formal education, compared with just by NBN Co, shows the nbn™ broadband over one in two non-nbn™ connected users. access network is expected to contribute more than $10.4 billion a year in economic activity nationally, Aged 45–64 of which $5.3 billion a year will be nbn™ connected users aged 45 to 64 are generated in regional areas by the end 40 per cent more likely to use the internet of the rollout. The report indicates the for learning online compared to those in nbn™ access network is helping to non-nbn™ connected areas. reshape the way Australians educate themselves, stay connected to family and friends, and how they engage with the workforce. Sources: Latest economic benefit reports https://www.nbnco.com.au/corporate- information/media-centre/media-statements/ fast-broadband-helping-to-drive-greater- female-entrepreneurship https://www.nbnco.com.au/corporate- information/media-centre/media-statements/ nbn-co-connected-society https://www.nbnco.com.au/corporate- information/media-centre/media-statements/ older-australian-learners 9 NBN Co Half-Year Report For the six months ended 31 December 2018 2 Helping Australians 3 Supporting greater stay connected to female workforce family and friends participation 30% 20 times nbn™ connected Australians are at least The number of self-employed women in 30 per cent more likely to use the internet nbn™ network connected regions is to stay in touch with loved ones. growing on average 2.3 per cent a year, or 20 times the pace of growth in the number of self-employed women in areas 3+ hours not yet connected to the nbn™ network. Australians who are nbn™ connected are spending an additional three hours online per week keeping in touch with family and x2 friends than those not connected. Self-employed women working from home grew on average at twice the pace in nbn™ connected regions, compared to all other 96% self-employed women in non-nbn™ nbn™ connected users are using the network regions. internet to socialise and build relationships, compared with 74 per cent of non-nbn™ x5 connected users. Self-employed women working part-time grew on average five times the pace in regions connected to the nbn™ network compared to non-nbn™ regions.