Friday, 17 April 2009

Applying a mortgage calculator to OneTel Mark II

Krudd thinks OneTel Mark II is going to cost up to $43 billion to blow, I mean build. Most of that money will be borrowed in the form of bonds.

Assuming a 30 year bond and a market interest rate, how much will OneTel Mk II have to repay each year to the bondholders? Let's think of it along the same lines as a mortgage. Yes, I know that the repayment milestones will be different and so on, but this is a nice simple way of looking at it. In a way, this is my version of a climate change computer model - I've made some wild assumptions, used some dodgy numbers and produced a scary result.

I asked the Westpac mortgage calculator to do the numbers on a 30 year loan that was fixed for 10 years with an interest rate of 6.99%. We can argue about what the coupon on the bonds would be, but let's just go with 6.99% because I can't reprogram this online calculator.

The result is a monthly repayment of $2858, or $34,286 per year. If we multiply that by 100,000, we find that OneTel Mk II will need to generate $3,428,600,000 per year just to make the capital and interest payments.

They'll need more money of course to run the network - to supply electricity, offices for all the managers, nice looking reception areas and of course - a fountain in the foyer.

But $3.4 billion a year is the minimum that they have to generate to stave off liquidiation.

Let's see, assuming that 4 million households sign on, that comes to $850 of revenue each household has to generate each year, or $70 per month.

That is $70 per billable household just to cover the repayments on the debt. There is nothing in here for depreciation (which will be another $3 billion or so per year), salaries, cars, offices and so on.

I can easily foresee a $200 bill per month for the cheapest level of service.


Anonymous said...

i can see rudd being told where to stick it..

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Anonymous said...

מחשבון משכנתא הוא כלי חשוב לקראת קניית דירה