Aussie Broadband, Australia’s fifth largest provider of NBN services, is set to list on the ASX this October. The ISP will list with a $180.5m to $190.5m market capitalisation.
The announcement comes at a time where activity in the IPO market has been hugely destabilised by the pandemic.
“The coronavirus pandemic has impacted the appetite for companies listing publicly due to the heightened volatility, as well as the potential lack of clarity around future earnings and therefore valuations,” said a Commonwealth Bank spokesperson to Dynamic Business.
“Businesses more likely to IPO were ones that had seen their business hold up during the pandemic or tech businesses that have benefited from the pandemic environment.
“If conditions remain stable we anticipate that the IPO window will remain open. However, the upcoming US Election may cause activity to moderate in and around early November.”
Last week, existing customers, staff and institutional investors in Aussie Broadband were invited in an email to subscribe at $1.00 per share. Shares are allocated on a first come, first serve basis if the demand exceeds supply.
The ISP is selling between 30 million to 40 million shares to customers. Shares to customers are capped at $10 mn and each application will be a minimum of 2000 shares and a maximum of 10,000 shares.
According to the Australian Financial Review, Aussie Broadband has already raised $30 mn in an underwritten deal with Shaw and Partners at $1.00 per share.
Aussie Broadband was formed in 2008 from a merger and has grown to become Australia’s fifth largest provider of NBN services.
“When we started, we were two different companies: Wideband Networks and Westvic Boardband. We were in Gippsland and Westvic was in Warrnambool, but we worked quite closely,” said co-founder John Reisinger.
“We [initially] weren’t competing against each other. At one point we both started doing satellite broadband, and at that point we decided why compete – we could get together and provide a better service.”
They currently connect more than 250,000 residential and business customers and expect this to grow to approximately 368,000 by mid 2022.
In their prospectus, Aussie Broadband signalled that their strategy for growth hinges upon growing “market share by leveraging the Company’s evident customer loyalty to deliver new products and by investing in customer acquisition”. The Directors also have “no current intention to pay dividends” and plan to reinvest all cash flow into the business and capital expenditure projects.
The prospectus also warned that “any changes to the amounts and manner in which NBN access pricing is charged to carriers such as Aussie Broadband, have the potential to impact the Company.”
This risk appears to have materialised. Aussie Broadband will be increasing prices on their 100 Mbps tier plans in November due to increased NBN access costs and congestion during the COVID-19 pandemic.
“We had to raise prices, mainly the 100 Mbps plan, because of the increased costs with data used on those plans. Part of the cost was from NBN connectivity virtual circuit charges,” said Reisinger.
“We’re still at cost or losing money on some of those plans. We’re not increasing prices on the other plans, and we’re trying to put in a 75 Mbps tier in the middle for people who don’t want to pay the extra but don’t want to drop down to the 50-20 Mbps plans.”
Despite issues with NBN charges and economic instability, Aussie Broadband’s IPO may come at an opportune time.
“Over recent months economic indicators and investor confidence have continued to improve as major economies around the world have started to re-open. This has flowed through to improved market conditions which are more constructive for IPO activity,” said a CBA spokesperson.