Aussie Broadband shares double on ASX debut with Shaw and Partners proudly acting as Sole Lead Manager to the IPO

Aussie Broadband's share price nearly doubled on the company's first day of trading on Friday, as investors proved bullish about the NBN retailer's prospects in what is ordinarily a notoriously unprofitable sector.

Managing director and chief executive Phillip Britt said he was "ecstatic" about the result. "Blown it away. Unbelievable result," he said.

The initial public offering offered 40 million shares at $1 a piece, 75 per cent of which went to institutional investors and 25 per cent to Aussie Broadband customers. By market close the shares were trading at $1.91.

The company's origina

l investors are still heavily invested in the company, including Mr Britt himself who holds just over 10 per cent.

Aussie Broadband's core service is NBN retail, a notoriously low margin business that many second-tier telcos have given up on. Telstra, by far the biggest NBN retailer, has repeatedly complained that the high wholesale price means it struggles to make any money at all out of reselling NBN.

Mr Britt said Aussie Broadband overcame this problem by charging at the higher end of the scale, and by efficiencies through its automation systems. Aussie Broadband sells NBN's most popular 50-megabit-per-second plan for $79 a month. TPG, by comparison, charges $69.99.

"We see ourselves as a software company that makes really great automation systems, and that happens to sell broadband," he said, adding that automation allowed it to reduce its own costs and provide competitive customer service.

Mr Britt said he believed Aussie Broadband's selling point was a smooth customer experience, which includes a lag time between signing up and being connected of just a few minutes, where no on-site work is required.

The company is now the country's fifth-biggest NBN retailer, with a total of 300,000 customers.

Mr Britt said the capital raised would be used "to accelerate infrastructure development, acquire new customers and expand its business product offering".

That will include laying its own fibre backhaul to 76 of the NBN's 121 points of interconnect, meaning it will not have to lease access to Telstra's backhaul fibre. It estimates the cost of that build, which began in May, at $67 million.

Along with the savings on leasing costs, that investment will also allow Aussie Broadband to serve business customers with its own fibre, rather than using the NBN's or another telco's fibre, providing a better margin. Businesses make up around 15 per cent of the company's customer base.

“Our own fibre in the ground goes to the heart of our approach to the business. It means that we can control quality and improve our customer experience even more, and it means we can start to drive down our backhaul costs,” Mr Britt said.

Aussie Broadband was formed in 2008 with the merger of two Victorian businesses – Wideband Networks, founded by Mr Britt and his partner John Reisinger in the Latrobe Valley, and Westvic Broadband, based in Warrnambool. The IPO was managed by Shaw and Partners.

Article source: AFR, 16 October 2020