Aussie Broadband (ABB) shares savaged after downgrade
ABB -28.06%: shares in the fastest growing telco were hit hard today after tightening guidance to the lower end for the full year. Connections were up 54k in the 3rd quarter to 549k, though a significant portion of that came from their white label offering which is expected to roll off in the 4th quarter. NBN CVC costs were higher than expected, as were promo discounting and higher customer service costs as their call centres experienced higher than expected volumes with connection issues and increased migrations onto white label products. As a result, connections guidance was tightened to 580-585k (from 580-590k) and EBITDA guidance to $27m-28m, noting this excludes Over The Wire (OTW) acquisition contribution and costs. We spoke to CEO Phillip Britt after the announcement, some key takeaways:
• CVC costs are expected to normalize in the 4th quarter
• Pressure on the support team has eased which is expected to reduce customer churn
• Despite slightly increased churn rates, they continued to increase market share in the quarter
• They are working through the Over The Wire integration with a complete plan expected to be released around the full-year results later this year.
While today’s update was a miss to expectations, it’s priced similarly to other listed telcos despite a far superior growth profile. Today’s selling appears overdone.
