Aussie Broadband (ASX:ABB) share price drops out on trading update and NBN gripe

Aussie Broadband aired its grievances with the NBN in an update this morning.
The post Aussie Broadband (ASX:ABB) share price drops out on trading update and NBN gripe appeared first on The Motley Fool Australia. –

The Aussie Broadband Ltd (ASX: ABB) share price is in the red today after the company used its quarterly trading update to slam NBN for allegedly profiting from lockdowns.

The telecommunications company posted an impressive performance for the quarter ended 30 September 2021. However, it also reported its costs for NBN’s CVC (connectivity virtual circuit) management increased 137% to $3.3 million over the quarter. The company stated:

Aussie Broadband believes NBN is earning additional CVC overage revenue as a direct result of the lockdowns, whilst incurring little to no incremental cost.

At the time of writing, the Aussie Broadband share price is $5.00, 1.57% lower than its previous close.

Let’s take a closer look at the company’s first quarter of financial year 2022 and its grievance with NBN.

Aussie Broadband share price gains on strong quarter

The first quarter was a good one for Aussie Broadband.

It saw its revenue increase 11.3% quarter on quarter, reaching $111.4 million. That was boosted by its expanded first month free broadband promotion and two months free mobile services promotion.

Its total number of broadband connections increased by 11% on the previous quarter. Its business broadband connections increased by 13% and the company onboarded 15% more mobile services.

Because of its seemingly successful sales campaign, the company’s promotion spend increased.

Aussie Broadband noted it was happy to sacrifice its intra-period earnings before interest, tax, depreciation, and amortisation (EBITDA) for higher levels of subscriber growth.

The company also started connecting services for its first white label customer, Origin Energy Ltd (ASX: ORG), over the quarter just been.

Finally, it has nearly finished migrating mobile customers from the Telstra Corporation Ltd (ASX: TLS) network to Optus. To date, it has retained more than 90% of its mobile customers through the switch.

NBN gripe

However, it wasn’t all positive news from the ASX newbie this morning. Aussie Broadband aired its grievances with the NBN, stating the network is profiting from lockdowns.

Aussie Broadband claimed NBN isn’t doing enough to share the weight of increased demand for internet during lockdowns.

Basically, NBN charges internet providers differing amounts depending on how many connectivity virtual circuits (CVC) they have access to.

CVC sort of works like another form of bandwidth. The more a customer has access to, the faster their internet will be. And over the quarter, Aussie Broadband provided the fastest internet of all major Australian providers.

The trouble apparently is, when everyone is stuck at home, internet providers need to provide more internet.

Aussie Broadband states providing more CVC capacity doesn’t increase costs for NBN. It said the industry believes providers are “bearing an unfair share of the cost… and NBN should be doing more to support Australians during this difficult period.”

Over the quarter just been, Aussie Broadband was given around $800,000 worth of rebates from NBN for increased CVC usage. From 1 October, those rebates have been changed, but the changes won’t be backdated.

Aussie Broadband also took advantage of NBN’s focus on fast campaign, which lessened its costs by an estimated $1 million. Still, Aussie Broadband stated:

Had the company not proactively migrated customers under the focus on fast campaign, and had NBN not provided relief during the period, total CVC expense for the quarter would have been an estimated $5.1 million, an increase of 264% on the previous quarter.

What’s next for Aussie Broadband?

Aussie Broadband also provided the market with some guidance for the coming quarter.

It expects to onboard between 53,000 and 60,000 new broadband customers, including 20,000 white label services, over the second quarter.

Due to lockdowns in Victoria and New South Wales, the company also expects its increased CVC usage charges to continue. Though, usage has lessened in New South Wales recently, supporting the idea that the costs will return to normal when lockdowns end.  

Finally, Aussie Broadband believes its marketing and promotional costs will stay high through Q2 and for the rest of financial year 2022, if growth opportunities continue.

The post Aussie Broadband (ASX:ABB) share price drops out on trading update and NBN gripe appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Aussie Broadband Limited. The Motley Fool Australia has recommended Aussie Broadband Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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