Aussie Broadband launches $40m IPO to capitalise on a changing digital market

Internet service provider Aussie Broadband will use changing digital market trends brought on by the COVID-19 pandemic to stage a $40 million initial public offering and make its way onto the ASX boards next month.

The company is set to issue up to 40 million shares at $1 each via a prospectus launched last week to existing shareholders, new investors and eligible customers.

Customers will have a chance to purchase between 2,000 and 10,000 shares each for a potential total stake of $10 million.

If successful, the IPO will give the 12-year old telco a market capitalisation of $190.5 million and an implied enterprise value of $149.6 million – or more than 10 times its operating cashflow.

At the end of the process, existing shareholders – including founders, management and directors – are expected to hold approximately 83.09% at the minimum subscription of total shares on issue.

Aussie Broadband will commence trading on the ASX next month under the ticker “ABB”.

Economic timing

Chairman Adrian Fitzpatrick said the economic timing was right to move forward with a public listing.

The minimum $30.45 million subscription will facilitate Aussie Broadband’s execution of strategic goals including the acceleration of infrastructure development, the acquisition of new customers and an expansion of its business offering.

“COVID-19 has fast-tracked digital trends including remote and distributed work, e-commerce and the demand for streaming entertainment [to the point where] the internet is firmly embedded into our daily lives, and high speed internet has become essential to our work and lifestyle,” he said.

“Listing on the ASX and becoming a public company marks the beginning of the next chapter of our journey [fuelled by] the ever-increasing appetite of Australian consumers for fast and reliable internet connectivity.”

Strategic merger

Aussie Broadband was formed in 2008 following the strategic merger of Victorian companies Wideband Networks and Westvic Broadband.

It provides NBN (national broadband network) subscription plans and bundles to residential and business customers, as well as other telco services including VOIP (Voice over Internet Protocol), mobile plans and entertainment bundles through a partnership with Fetch TV.

In just over a decade, the company has grown to become Australia’s fifth largest provider of NBN services, and currently connects more than 250,000 residential and business customers across the country.

Figures from June 2019 show it provided approximately 60,000 new residential connections and generated $49.27 million in revenue.

By mid-2021, these numbers are expected to be closer to 368,000 residential connections and pro-forma revenue of $338.10 million.

Dark fibre network

In an effort to reduce its reliance on third party infrastructure and cater to increasing market demand, the company has embarked on a $67 million rollout of its own dark fibre (fibre optic cable) network.

The network is expected to replace 63% of its leased backhaul capacity to NBN Points of Interconnect (POIs) and will remove all leased dark fibre capacity which exists between capital city data centre sites.

“We estimate the fibre project will have a minimum useful life of 25 years, and improve [our] ability to provide redundancy and increase capacity loads to meet market demand,” Mr Fitzpatrick said.

“We expect this significant investment to materially improve future operating margins on a like-for-like basis.”

The dark fibre network project kicked off in May and is due for completion by 2022.