Superloop and Origin Energy ink wholesale internet deal, enhancing broadband services

Australian internet provider Superloop (ASX: SLC) has signed a $19 million contract with Origin Energy (ASX: ORG) for the provision of wholesale internet services to the company and its subsidiaries.

The exclusive six-year deal will see Origin’s 130,000 broadband customer accounts migrate to the Superloop network during the 2025 financial year.

The move is expected to increase Superloop’s total customer numbers to 560,000.

When the transition is complete, it will add more than $19m in annualised earnings before interest, taxation, depreciation and amortisation (EBITDA) to Superloop’s bottom line.

Contract consideration

As consideration for the contract, Superloop will immediately issue 9.8m shares to Origin and another 9.8m shares once Origin’s subscriber base has been successfully migrated.

Superloop will also issue up to $30m in shares based on the achievement of customer growth milestones, including an increase in Origin’s customer base to 600,000 by the 2026 financial year.

Additionally, Origin will be granted 55.6m options upfront on signing the deal, equating to approximately 10% of Superloop’s diluted share capital.

The options will entitle Origin to purchase the same number of Superloop shares at the prevailing volume-weighted average price on the trading day before they are exercised.

Key milestone

Superloop chief executive officer Paul Tyler said the Origin contract was a “key progress milestone” in the company’s three-year growth strategy.

“It delivers a step-change in our customer numbers and cements our market position as a leading wholesale broadband and backhaul provider,” he said.

“We are delighted to welcome Origin as a shareholder and to issue an option to acquire further shares…[this deal will] help us create strong alignment and pursue growth in broadband customers.”

Enhanced momentum

Origin’s customer numbers will add to a strong momentum in Superloop’s own subscriber base, which jumped by 21,000 in January and February.

“With accelerating growth in our consumer segment and record wholesales for the first half of this year, which saw $9m in annualised new revenue, we expect to continue our strong growth in the financial year 2025,” Mr Tyler said.

“The announcement of this material contract with Origin, coupled with the strong performance of our existing business, reaffirms our confidence in the delivery of our three-year strategy and the underlying value being created for our shareholders.”

Superloop has ticked up its FY24 EBITDA guidance on the back of the deal from the previous $49m to $53m range to a revised $51m to $53m.

The company also anticipates that it will spend a one-off incremental $5m of growth capital expenditure (CAPEX), spread across FY24 and FY25, on top of its previous $20-22m CAPEX guidance.