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Snake and ladders as Australian broadband realigns towards NBN



In the presentations given by Telstra CEO Andy Penn and CFO Vicki Brady on Thursday, the word ‘headwind’ appeared in close proximity to the letters NBN 16 times. The intent was clear, NBN had come and taken Telstra’s lunch, and was now busy consuming it.

But don’t panic just yet dear shareholders, the corner is being turned and FY20 is looking better.

To be clear about what Telstra is squealing about, it is losing money compared to previous years, a lot of money in fact. But it’s still making half a billion Australian dollars every three months.

Good work if you can get it.

In the middle of his presentation about how Telstra was reforming itself, and hence cutting a ton of jobs along the way, Penn went to the heart of the matter.

“Telstra’s circumstances today are very different from what they were before the NBN,” he said. “We are no longer the national wholesale provider — that part of our business, the revenue and value, is progressively being transferred back to the government via the NBN.”

Read: Telstra sees profit plunge 40% for full year

One of the problems with Telstra, as anyone that has sat through one of their retail shareholder days will know from grim experience, is that it is filled to the brim with boomers and retirees who bought into the Telstra privatisation craze that was led by stockbroker-in-chief John Howard and his offsider Peter Costello.

Rather than thinking about the future and undoing one of Hawke/Keating Labor’s biggest mistakes in combining Telecom Australia and OTC into a vertically integrated behemoth, the Howard government failed to entertain the thought of structural separation to a proper degree, and proceeded to flog the company into the arms of self-funded retirees and patriotic mum and dad investors.

This was all great for a while: The government got its money to pay down debt and pork barrel to the middle class, and investors got fat on Telstra’s dividends.

However, a 40% profit decline and its accompanying dividend reduction is exactly what those investors don’t need nor want at the moment.

With the global economy having a spasm thanks to a possible crackdown in Hong Kong and the sort of economic retaliation something like that would bring, alongside Washington continuing its tit-for-tat tariff battle with Beijing that could hurt both economies long before a full resolution is found, those Telstra investors have been left looking at the hole on their income statements that used to be filled with franking credits.

It’s almost as though someone wished on a monkey paw at the May election to keep franking credits, but then the paw went ahead and tanked the global economy to make sure companies were handing over as little money as possible.

See also: NBN reports positive full year EBITDA once Telstra payments excluded

On the other side of the equation, NBN worked out how to massage its reported results so it had at least one number not in red ink.

Excluding the AU$2 billion a year that NBN currently pays for access to Telstra’s exchanges, pits, and ducts, NBN says its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is AU$608 million. Penn said on Thursday the AU$2 billion was cheaper than if NBN had constructed it all from the ground up, but Penn also omitted that if Telstra was not vertically integrated in the first place, then Australians wouldn’t need to pay for access to assets they previously owned.

However, once those payments to Telstra and depreciation and amortisation are factored in, NBN finds itself in the hole with a AU$3.9 billion EBIT loss to its name.

NBN CEO Stephen Rue continues to repeat that the network will be finished on time and on budget, and the company will welcome the increase in average revenue per user (ARPU) from AU$44 a month to AU$46.

But another AU$5 a month will be needed to hit NBN’s ARPU target of AU$51.

Driving that increase is enterprise takeup of NBN services, which contributed AU$388 million to NBN’s AU$2.83 billion revenue total.

Speaking to analysts on Thursday, Penn said Telstra wasn’t expecting the NBN to divert capital into chasing business customers, and the impact of NBN gaining a piece of Telstra’s enterprise lunch is now higher than planned. This is quite the observation since it has been perfectly clear for years that NBN would not be able to hit its ARPU target on residential customers alone, leaving the question of what else Telstra has been blinkered towards if it couldn’t see this obvious train coming.

The pair of results were also a continuation of a skirmish between the pair of companies in recent weeks, with Telstra and NBN pointing fingers at each other over who is to blame for their respective woes.

It should not be shocking that Telstra is complaining that its golden goose is being taken away — one it shouldn’t have had in the first place in its current form. Equally, it should not be shocking that a surplus-obsessed government continues to force NBN to squeeze every last drop out of the CVC charge and Australia’s broadband retailers.

A look at the latest ACCC Wholesale Market Indicators Report shows what Telstra is in fear of losing.

After having an iron grip over the country’s hybrid fibre-coaxial (HFC) market after winning the cable war of the early 2000s, Telstra currently has 38% of the HFC market. That is far below the 48.6% overall market share Telstra commands across NBN technologies, so that means Telstra has lost a great number of customers.

One irony to think about is that the make up of the NBN is probably not that dissimilar to a world where Telstra was separated in the 90s, when the new wholesale company proceeded down the technology line of HFC, fibre-to-the-node (FttN), and then onto fibre-to-the-premise (FttP).

NBN disclosed on Thursday it has 1.31 million FttP active connections, 2.71 million active FttN premises, 227,000 customers on fibre to the curb, almost 900,000 on HFC, and 285,000 on fixed wireless, and 95,500 on satellite.

But the difference between that parallel universe and this one, is that as New Zealand and the United Kingdom — two countries that separated their dominant formerly government-owned telco monopoly — head into a future where 10Gbps connections will be available more often than not, Australia will remain a bickering laggard.

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GM is throwing even more money at EVs and autonomous vehicles



General Motors plans to dramatically increase its spend on electric vehicles and autonomous driving, pledging $35 billion through 2025 as it races to bring new EVs to market. The company had previously said it would spend $27 billion in the same period, and will now pull forward battery manufacturing plans for its Ultium platform.

The goal now is to build two battery cell manufacturing plants in the US by mid-decade, to join the first plants that are currently under construction in Tennessee and Ohio. Right now, GM isn’t saying where it expects the new facilities to be located, or how much capacity they’re likely to have, with those details still to be confirmed.

As for the vehicles that will actually use those batteries, there GM is expanding its goals too. In November 2020, the automaker had said it planned 30 new EVs by 2025 globally; two-thirds of that range would be available in North America. Now, though, it’s adding new commercial products.

“GM will add to its North America plan new electric commercial trucks and other products that will take advantage of the creative design opportunities and flexibility enabled by the Ultium Platform,” the automaker said today. “In addition, GM will add additional US assembly capacity for EV SUVs.”

That US manufacturing component is key, given signs from the American government that future incentives and credits available to electric vehicle buyers will be dependent – in part – on where the car, SUV, or truck was built. According to the latest proposals, the maximum incentive of $12,500 would only be accessible for a vehicle priced at under $80,000, built in the US, and in a factory where workers are part of, or represented by, a labor union.

Location isn’t the only issue there. Although GM has revealed two Ultium-based vehicles, the GMC Hummer EV and Cadillac Lyriq, only the Cadillac looks set to come in at under that $80k ceiling. For GM to continue benefiting from the maximum incentives, it needs to figure out a way to make more affordable electric vehicles.

On the autonomous side of things, there GM has a number of fingers in the pie. Cruise, of which GM is the majority owner, already announced this week that it had secured $5 billion in credit from GM Financial in order to place a bulk order of the Origin AVs specially designed for its ride-hailing service. Revealed early last year, Origin – which has no traditional car controls – will be among the first Ultium-based EVs to go into production.

Cruise is also working with Honda, which co-developed the Origin, on an AV testing program in Japan. Honda, meanwhile, is co-developing two electric EVs with GM that will be based on Ultium. One of those will be branded as a Honda in the US, and the other an Acura.

It’s a time of big promises for automakers right now, as they tool up to try to carve out space in the growing electric vehicle category. Recent chip supply-chain struggles have threatened to put a dampener on those efforts, at least temporarily – GM said earlier this month that it would be cutting some features from its current vehicles, to work around shortages in hardware – but the reality is that none of the car companies can afford to slow down if they’re to meet both their self-imposed efforts and the requirements of legislators around things like emissions reductions.

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BMW X5-based hydrogen fuel cell prototype begins testing in Europe



BMW has begun testing an X5-based prototype running a hydrogen fuel cell powertrain. Affectionately referred to as the BMW i Hydrogen NEXT, the prototype is an all-electric vehicle fueled by the reaction of hydrogen and oxygen in a fuel cell. The German automaker firmly believes that hydrogen fuel cell technology can replace internal combustion engines, plug-in hybrids (PHEVs), and battery-electric vehicles (BEVs) as the future of mobility.

“Hydrogen fuel cell technology can be an attractive option for sustainable drive trains – especially in larger vehicle classes,” explained Frank Weber, member of the Board of Management of BMW AG responsible for Development. “That is why road testing of near-standard vehicles with a hydrogen fuel cell drivetrain is an important milestone in our research and development efforts.”

BMW has unveiled plans of releasing a limited series of hydrogen fuel cell SUVs in 2022. The carmaker is on track to debut a small production run of hydrogen-powered BMW X5 SUVs by later next year. Proof of this is the launch of a real-world testing program for the BMW I Hydrogen NEXT.

Unbeknownst to many, BMW’s been dabbling with hydrogen technology since the early 2000s. The automaker released a limited production run of the BMW Hydrogen 7 luxury car based on a V12-powered 7 Series limousine. But instead of having a fuel cell and electric motors, the Hydrogen 7 had the same 6.0-liter gasoline V12 engine that runs on both hydrogen and gasoline, officially making it the world’s first production-ready hydrogen vehicle.

However, BMW only built 100 examples of the Hydrogen 7, and all were available for lease to selected high-profile clients only. BMW will aim for more than 100 private lease clients for its next-gen hydrogen fuel cell SUV, and the proof is in the pudding.

BMW claims the i Hydrogen NEXT prototype combines hydrogen fuel cell technology with BMW’s fifth-gen eDrive technology, the latter also found in the BMW iX3 and incoming iX and i4 models. Capable of generating a maximum of 374 horsepower, BMW’s hydrogen fuel cell prototype is churning out the same power level as the brand’s six-cylinder inline petrol engines.

Similar to Jaguar Land Rover’s Defender hydrogen prototype, the i Hydrogen NEXT has a performance battery pack that boosts power when accelerating while recovering energy from braking and coasting. The prototype has two 700-bar storage tanks made of carbon-fiber-reinforced plastic (CFRP) that collectively hold six kilograms of hydrogen.

BMW has partnered with Japanese auto giant Toyota in developing the fuel cell for its i Hydrogen NEXT prototype. The two carmakers have been working since 2013 to study and optimize the scalability of hydrogen fuel cells in future vehicle offerings.

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Lincoln pledges full electrification by 2030



Lincoln will electrify its entire range by 2030, the automaker has announced, joining the industry shift toward ousting combustion engines in favor of zero-emissions. It comes after launching plug-in hybrid versions of several of its SUVs, with Lincoln promising to debut its first all-electric model in 2022.

By midway through this decade, meanwhile, Lincoln says it expects half of its global sales volume to be of zero-emissions vehicles. That’s ambitious, given right now the company doesn’t even have one such car to sell. Models like the Corsair Grand Touring offer a PHEV drivetrain, but the reality is that you only get 25 miles of electric range before the gas engine kicks in full-time.

Lincoln’s answer will be a new platform. It’s a newly flexible architecture, the automaker says, capable of underpinning rear-wheel drive and all-wheel drive battery-electric models: Lincoln plans to use it for four “new and distinct” EVs. This is, it’s worth noting, different from the Rivian skateboard platform; Lincoln had originally intended to use that for its EV, but that project has been put on hold.

Exactly what form its first electric model will take, Lincoln is coy on. The obvious option would be an SUV or crossover, of course. Not only is that the direction in which the market – and Lincoln’s existing sales – is trending, bigger cars offer more space to accommodate larger battery packs.

However Lincoln has been flirting with other possibilities, at least in concept form. The Zephyr Reflection was a design exercise with the tastes of the Chinese market – a huge one for the automaker – in mind, revealed at Auto Shanghai 2021 back in April. Evolving the recognizable cues of the discontinued Lincoln Continental, but with altogether bolder styling, it was billed as a preview of what the brand could do in the future. Lincoln’s exterior tease of the new EV’s front light graphics seems to line up with what we’ve seen from Zephyr Reflection.

Meanwhile, that concept’s approach chimes with what the automaker is saying about its upcoming EV. “Evolving Lincoln’s design, the fully electric Lincoln will deliver a more spacious interior that creates the ultimate expression of the Lincoln sanctuary,” the company promises. “On approach, the exterior presents a striking, modern aesthetic, while the iconic Lincoln star evolves to meet an electrified future. Thoughtful details inside create a truly rejuvenating space for all, with clever storage solutions and minimalistic panels, while a larger, expansive panoramic vista roof enhances natural light and provides a more open, airy feel throughout.”

That’s a whole lot of design-speak, but there’s no denying that EVs do have clear advantages in luxury vehicles. Instantaneous torque but from a quieter drivetrain, along with less intrusion from mechanical components into the cabin, all make a lot of sense for a high-end vehicle.

Lincoln’s target is more aggressive than that of corporate parent Ford, it’s worth noting. Ford expects to have around 40-percent of its models electric by 2030, though it does a commercial range of work trucks to consider. Lincoln, in contrast, has a much more focused portfolio.

As for charging, Lincoln plans to borrow Ford’s strategy of collating other providers into a central interface. That’ll be the Lincoln Charging Network, with partners like Electrify America and others included into the Lincoln Way app. You’ll presumably also be able to access that through Lincoln’s new infotainment system, which it is building atop Android.

Finally, there’ll be Lincoln ActiveGlide, a hands-free highway driving assistance system. Like Ford BlueCruise, it’ll use driver-attention cameras to make sure the person behind the wheel is paying attention to the road, even if their hands aren’t on the wheel. However it will only operate on stretches of pre-mapped, divided highway. Ford plans an over-the-air update to deliver BlueCruise functionality to Mustang Mach-E and F-150 models with the right hardware package later in 2021.

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