NBN Co already running at 500% Cost Benefit Ratio. Why the Vertigan/Ergas Review hold-up?

The Michael Vertigan and Henry Ergas "Cost Benefit Analysis" of NBN Co was announced on 12-Dec-2013 and is still yet to deliver their review.
Meanwhile, NBN Co has achieved more than 500% Cost-Benfit Ratio.

There are two problems I have with the assumptions and methodology announced:

• Even under the dubiously recalculated figures, the IRR (Internal Rate of Return) of all versions of the NBN Co business plan is positive, albeit FTTP was 2%, down from the Quigley Business Plan of 7.1%.
• NBN Co is not, and never has been, an expenditure-only investment.
• The "Cost" of the CBA is zero by definition, and the resulting Cost-Benefit Ratio is infinite.
• From the announced revised estimates, there was never a reason to run a CBA, once positive IRR's were established.

• On the available Government Funding figures, somewhere between $5.3B and $7B has been injected as equity by the Federal Government into NBN Co.
• There is already a directly attributable and precisely measurable economic Benefit of the NBN project: the additional increase in Market Value of listed Telecoms companies.
• This is at least $36.5 billion,
• for a Cost-Benefit ratio, already, in excess of 500%.
• This is the direct benefit only to shareholders of the companies.

• Other Identifiable Economic Benefits
• There are considerable more identifiable and measurable components to the wider Economic Benefits of the guaranteed, selectable and dependable high access-rates of the NBN Co wholesale services.
• The least of these is the Labour Time Cost savings of Small Business and at-home work, a value of which can be estimated from the higher average download volumes of NBN Co customers compared to the all services. Reported by the ABS as 40GB/month vs 30GB/month. A 33% increase in download volume.
• At the average download rate of 5Mbps reported by the ABS, 10GB (80Gbits) is 4.5 hours/month saved. Even at a minimum wage rate of $16/hr, this 53hrs/year or $850/year/subscriber (household).
• At 30-Jun-2014, NBN Co reported adding 105,000 fixed-line subscribers with 210,000 subs in all, a yearly subscriber Labour Cost benefit of $90M/yr on $5-7B, or 1.8%/year. Scaled up to the anticipated 10M subscribers, that's $9B/yr identifiable value to subscribers. Over the 30 year life of the project, this is an additional ~50% Cost-Benefit Ratio.
• Current subscriber figures are also available from NBN Co.
• If an actual Value in Use of Time to subscribers was calculated, I suspect the figure would be closed to $150/hr, both for business and discretionary time for domestic use.

Supporting Data

According to NBN Co's 2013 Annual Report (120pp) [as the latest figures available]:

To date NBN Co has been funded by successive equity injections from the Commonwealth totalling $5.3 billion, including $2.4 billion in FY2013. (pg 113)
and "Government Funding, FY 2013: $5,229 (pg 105)"

Data from Google Finance, 16-Aug-2014.
Shares selected from "Related Companies".
Only one of the identified companies, Macquarie Telecom, lost share valuation during the period.

The period selected was from 24-Jun-2012, the date that the NBN-Telstra Definitive Agreements were signed. This was considerably after the $2.60 minimum share price reached around Dec-2011.

The calculation accounted for the impact of the increased value in the Australia stock market, calculated by the S&P ASX-200 ['XJO' to Google Finance].

Additional Financial Data is included to allow better comparisons to be made between the classes of business (high P/E ratios for high-growth companies, low P/E for mature companies).

Table 1. Growth of ASX Telecomms Stocks 24-Jun-11, Aug-2014

Ticker	Company name	Increase	Start	ASX Adjusted	NBN Contrib	Extra Mkt Cap ($M)	Shares (M)	Price
XJO	S&P/ASX 200	20.42%						5,566.50
TLS	Telstra Corporation Ltd	86.98%	$2.98	$3.59	$1.99	$24,181	12,173.84	$5.58
SGT	Singapore Telecommunications Ltd	41.88%	$2.35	$2.83	$0.51	$7,959	15,754.49	$3.34
TPM	TPG Telecom Ltd	231.93%	$1.71	$2.05	$3.61	$2,753	763.25	$5.66
IIN	iiNet Limited	194.06%	$2.71	$3.27	$4.71	$756	160.40	$7.98
MTU	M2 Group Ltd	90.93%	$3.47	$4.18	$2.44	$425	173.72	$6.62
AMM	Amcom Telecommunications Ltd	73.78%	$1.12	$1.35	$0.60	$152	253.21	$1.95
VOC	Vocus Communications Ltd	111.01%	$2.51	$3.02	$2.28	$212	92.99	$5.30
MNF	My Net Fone Limited	1,261.10%	$0.20	$0.24	$2.51	$143	56.89	$2.75
MAQ	Macquarie Telecom Group Ltd	-48.82%	$10.16	$12.23	-$7.03	-$148	21.05	$5.20
Total						$36,431

Table 2.  ASX Telecomms Stocks at Aug-2014 (1 of 2)

Ticker	Company name	Shares (M)	Price	P/E ratio	Mkt Cap ($M)	Dividend yield
XJO	S&P/ASX 200		5,566.50
TLS	Telstra Corporation Ltd	12,173.84	$5.58	16.76	$67,930	5.29
SGT	Singapore Telecommunications Ltd	15,754.49	$3.34		$52,620	3.09
TPM	TPG Telecom Ltd	763.25	$5.66	27.91	$4,320	1.50
IIN	iiNet Limited	160.40	$7.98	22.29	$1,280	2.51
MTU	M2 Group Ltd	173.72	$6.62	23.03	$1,150	3.25
AMM	Amcom Telecommunications Ltd	253.21	$1.95	22.11	$494	3.19
VOC	Vocus Communications Ltd	92.99	$5.30	70.85	$493	0.26
MNF	My Net Fone Limited	56.89	$2.75	33.89	$156	1.64
MAQ	Macquarie Telecom Group Ltd	21.05	$5.20	25.13	$109	4.62

Table 3.  ASX Telecomms Stocks at Aug-2014 (2 of 2)

Ticker		Return on avg assets	Return on avg equity	Return on investment	Net profit margin	Gross margin	Operating margin	Employees	Revenue ($M)	Net income ($M)
TLS		9.90	31.65	13.02	15.05	74.97	23.75	32,686	25,678.00	3,865.00
SGT
TPM		15.20	22.83	18.75	20.59	54.71	30.26	939	724.53	149.16
IIN		7.70	19.95	10.02	6.48	47.37	9.98	546	940.99	60.94
MTU		6.48	18.11	9.07	6.43	37.90	9.55	169	681.04	43.78
AMM		9.85	15.53	12.19	13.14	61.98	20.28	317	170.41	22.39
VOC		3.92	9.02	5.06	7.62	60.21	20.57	6	66.91	5.10
MNF		19.67	62.12	50.72	8.96	38.13	11.65		46.21	4.14
MAQ		8.44	11.99	11.24	5.49	60.66	7.42	419	206.41	11.33