Aussie Broadband (ASX:ABB): A likeable telco that can reach for the skies again

Aussie Broadband (ASX:ABB) is a good illustration of a Telco stock you can like (as opposed to Telstra). Since listing on the ASX in 2020 at $1 per share it has substantially grown its customer base, revenues and, consequently, its share price. It went as high as $5.95 in late April 2022 before dipping after informing shareholders it would only meet the lower end of its guidance.

Things have improved in the last couple of years, as seen in its FY24 and 1H25 results. And it was able to survive Trump’s tariffs, sitting on a 15% gain in the first half of the calendar year. 

 

Who is Aussie Broadband?

Aussie Broadband is one of several NBN providers in Australia and prides itself in its high internet speeds and customer service experience. It was formed in 2008 through the merger of two regional telcos – Wideband Networks and Westvic Broadband. Retail telco is a notoriously low-margin business, especially if it’s the NBN – even the major telcos hate it. It is also a thankless industry to be in with customers expecting perfect service, given how much we rely on the Internet.

Aussie Broadband is able to make money through automation systems that lower the cost, but also provide a smooth customer experience, enabling sign-ups that can be done without any on-site work. The company’s app, used by nearly 80% of its customers, allows certain issues to be self-resolved and customers to monitor their usage.

As for customer service, ABB is highly rated by customers for its sign-up experience, its products, internet speed and for having a local call centre with low wait times. It is the 34th most trusted brand in Australia, ranking 1st among telcos. 

 

Strong growth since listing

Aussie Broadband has had constant growth in all its customer segments (not to mention its top and bottom lines), year-on-year, quarter-on-quarter. 

 

 

 

In FY24, Aussie made almost $1bn in revenue, up 27%, a $360.6m gross profit and a $26.4m net profit. It paid its first dividend, 4 cents per share. Its revenue is up 5 fold since listing and its gross margin has grown every year.

Since listing, Aussie Broadband has rolled out new products, including mobile plans and white label, rolled out its fibre optic network and acquired telco solutions providers Over the Wire and Symbio. The company recently launched Buddy Telco, an alternative NBN provider that aims to provide lower cost through an entirely self-service model. There is a target of 100,000 customers for Buddy within 3 years.  

For FY25, it had guided to $133-138m EBITDA (10-14% growth from FY24’s figure excluding non-recurring items).

 

An unblemished record becomes blemished

Things haven’t been as smooth as the company’s growth suggests. In May 2022, Aussie Broadband put out a quarterly trading update that spooked investors, who sent shares down 60% in the following 6 months. Although it reiterated its EBITDA guidance, it was towards the lower end of the original guidance – Aussie Broadband provided $27-$30m for the full year just 3 months earlier.

When a company has an unblemished record that suddenly becomes blemished, this can have a significant impact – shareholders can realised negative aspects a company that they may have previously disregarded.

For Aussie Broadband, the most peculiar is that it targets the low-margin retail telco segment. In contrast, market darling Uniti had traditionally been wholesale only as well as an alternative network to the NBN rather than just another provider. We also observe that while the company is NPAT profitable, it has been (and admittedly still is) low margin, at just 2.6% in FY23 and FY24. As a company that had gone up so much, with such a high valuation and without blemish in its 18 months of listed life, it was an easy target for investors to sell off.

 

Bouncing back

Over the following 18 months, things improved off the back of ABB’s financial results for FY23, FY24 and 1H25. But things haven’t been entirely smooth.

For several months, Aussie Broadband tried to buy Bevan Slattery-founded Superloop (ASX:SLC). Even though the companies acknowledged it would make strategic sense, the $466m takeover bid (offered in shares) was rejected. Aussie Broadband had accumulated a 19.9% stake in the company, indicating its intentions, but was not only rebuffed by Superloop, but ordered to sell its shares in the company to below 12%.

ABB’s founder Phillip Britt retired as MD in February to focus on a community-focused venture in the Gippsland region. He remained on the board, but has sold some of his shares to fund the venture. Britt was replaced by former CFO Brian Maher.

 

Why we think there’s share price growth left in it

In the current environment where consumers are strapped for cash, the companies that will perform the best are those that consumers find the best value for money. First, a segment they can’t cut back their spending on (without compromising their way of life too substantially) and second, where the company offers the best value for money. Consider Baby Bunting (ASX:BBN) as a case in point – cash-strapped parents dumped buying baby clothes enmasse as they realised could get the same product from Big W for a far lower price.

Aussie Broadband is in a different basket, however. Its broadband is similarly priced to competitors, but customers get a lot more bang for their buck than with competing telcos. We admire its growth record since its founding and listing as well as its high reputation in the industry.

The 7 analysts covering the company agree. For FY25, consensus estimates call for $1.1bn in revenue and a $28.7m profit (both up 10%). In FY26, $1.3bn in revenue and a $43m profit (up 8% and 50%) and in FY27, $1.43bn in revenue and a $57.3m profit (up 10% and 33%). These estimates derive a P/E of 19.9x for FY25. The 10 analysts covering the company have a mean share price of $4.44.

Although the company has not given specific goals for those years, these are the company’s goals for the end of FY28 (3 years from now).

 

 

 

Keep your eye on Aussie Broadband

Clearly, whether or not you invest in this company all comes down to whether or not you believe it can continue its high top line growth while gradually growing its bottom line. We think it can, given the recent acquisitions, its reputation in the industry and the long-term, no ‘BS’ attitude of the company’s management.

 

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