Aussie Broadband surprised by unexpected termination from Origin Energy
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More news: Aussie Broadband said it received an "unexpected notice" on Wednesday evening that Origin Energy would terminate its broadband contract on 12 April. This was followed by an announcement today that Aussie Broadband's rival Superloop had agreed a six-year contract with Origin.
Aussie Broadband said Origin requested that the broadband provider continue to provide certain services for a period of up to six months, post termination of its contract, and assist with the transfer to its new wholesale provider Superloop.
Discussions between Aussie Broadband and Origin had been ongoing for over six months regarding Origin's desire to migrate to a new service model. On 7 March Aussie Broadband rejected the proposed model as it would reduce annual EBITDA from $19 million in FY24 to an estimated $10 million in future years under the new terms.
Aussie Broadband said that while it provided an alternative proposal on the same day it received no further response from Origin.
Aussie Broadband shares continued to lower in morning trading, down 18% by 12pm AEDT. Shares in Superloop rose 33% at market open and were 26% higher by midday.
What they said: Aussie Broadband's group managing director Phillip Britt said: “We are disappointed we have not been able to reach an agreement with Origin to renew our white label wholesale agreement".
“ ... In the case of Origin it became clear that, given the contract parameters they set us, we would not be able to meet either of these objectives.
“Given the growth profile of ABB, and the retail and wholesale opportunities we are pursuing, we took the view that it was important that a disciplined approach to assessing contracts and how capital is deployed is critical."
Superloop soars on Origin contract as Aussie Broadband tumbles
More news: Superloop shares rocketed at market open after the telco announced a six-year broadband contract with ASX major Origin Energy.
Shares in Superloop were trading 33% higher at $1.40 by 10:45am AEDT.
Meanwhile, shares in Origin's previous broadband provider, Aussie Broadband, tumbled 14% in early trading.
The fall came despite the Australian Competition and Consumer Commission releasing a new report that found Aussie Broadband gained over 30,000 NBN wholesale services in the December 2023 quarter.
The ACCC report noted that Aussie Broadband led quarterly growth of smaller broadband providers, including Superloop which increased services by around 15,000, while the three major providers Telstra, TPG and Optus saw a total decline of nearly 80,000 services.
Superloop announces broadband contract with Origin Energy
The news: Telco and internet service provider Superloop has signed a broadband contract with Origin Energy which is expected to add $19 million to next year's earnings.
The numbers: The six-year contract will see Superloop provide wholesale internet services to Origin Energy and its subsidiaries. Superloop said that Origin's 130,000 broadband customer accounts will migrate onto Superloop's network, bringing its customer base to around 560,000.
Superloop also expects the deal to add more than $19 million of annual EBITDA once the subscriber base is fully transitioned in FY25.
As part of the contract, energy major Origin will be issued with nearly 20 million Superloop shares over two tranches, plus 55 million of options upfront on signing, with the opportunity to add up to $30 million of shares subject to achieving further customer growth milestones.
Meanwhile, Superloop upgraded its FY24 underlying EBITDA guidance from $49 million to $53 million to $51 million to $53 million, due to the "continued strength of Superloop's trading performance".
The context: Origin's previous broadband provider was Superloop's ASX rival Aussie Broadband, who made a failed $467 million takeover bid for Superloop last month.
What they said: Superloop CEO Paul Tyler said: "Securing the Origin contract is a key progress milestone in Superloop'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".
"In order to create strong alignment and pursue growth in broadband customers, we are delighted to welcome Origin as a shareholder and to issue it an option to acquire further shares," he said.
The sources: ASX announcement, ACCC report
