AGL Energy (ASX:AGL) ventures into broadband business

AGL Energy Limited plans to offer broadband services. Could this be a turnaround for Australia’s biggest electricity and gas retailer?
The post AGL Energy (ASX:AGL) ventures into broadband business appeared first on Motley Fool Australia. –

Australia’s biggest electricity and gas retailer, AGL Energy Limited (ASX: AGL), has announced plans to offer broadband services under its own name. The move aims to take advantage of the company’s vast customer base by offering bundled packages of energy and internet services. The news came just as Telstra Corporation Ltd (ASX: TLS) is considering a foray into the energy market in a bid to boost its revenues. 

Details of AGL’s new broadband offer

AGL aims to bundle a multi-product offering that includes energy, internet, and phone services to its large customer base. The company says it will offer three unlimited data plans costing $70-$95 a month, with a $15 discount to customers who bundle them with AGL’s energy contract plans.

This is not the first time AGL has made a foray into the telecommunications sector. In 2000, the company bought phone and internet company Dingo Blue from Cable & Wireless Optus for $22 million. The business went under and was closed down just two years later. 

In 2019, AGL again ventured into telecommunications with its $27 million acquisition of Southern Phone Company, which has a 100,000-customer base. That purchase came after it abandoned an earlier bid to buy another telecommunications company, Vocus Group.  

The move by AGL is consistent with a  pattern seen in the United Kingdom and Europe where retail energy and telecommunication provides have recently ventured into each other’s territory. As an example, UK’s Shell Energy (AMS: RDSA) recently began offering ultrafast fibre broadband packages to the market. 

How has AGL share price performed in 2020?

AGL has had a disappointing performance in FY 2020, and weak guidance for the 12 months ahead. AGL Energy reported an underlying profit after tax of $816 million for FY 2020. This was a 22% decline on the prior corresponding period. For FY21, management has provided underlying profit after tax guidance of between $560 million and $660 million, much lower than its figures in FY20.

The AGL share price has lost almost 30% on a year-to-date basis.  It closed the week of trading at $12.87. At that price, the company commands a market cap of $8.16 billion.

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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post AGL Energy (ASX:AGL) ventures into broadband business appeared first on Motley Fool Australia.

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