@mbry9625, it takes two opinions to make a market.

One of the bits that i think gets overlooked with ABB, is that in addition to being an NBN reseller, they are also building there own fibre networks. They own this network and currently have 1200km concentrated in strategic locations in the capital cities. This lets them sidestep the NBN network and connect data centres and large customers together and extract more of the total revenue and will increase their margins over time. This was one of the aspects that shifted Unity wireless from being an ad hoc run of the mill operation to a very high quality, long life infrastructure buisness. I am not suggesting that ABB's fibre network will be of the scale of Unities but I do think it is a part of their competitive advantage. I don't see this quality discussed as much, but I do think that over time, it will further differentiate ABB from being seen as a ticket clipping reseller play in a very competitive market.

@loshell could to hear that their software is also up to scratch

Not a new play by any means (c.f. Pipe Networks as the canonical example of executing this strategy very successfully against the big boys in the "early days") but if done well, agree it will give them increasing flexibility and scale to meet customer needs with sub-linear opex growth. They can also do all this without having to try switch customers wholesale e.g. customers can keep their existing services intact but throw some new project work ABB's way to get some comfort working with them, which gives ABB the "in" to showcase their capabilities and hopefully win more of the existing business in the hands of the incumbent players.

[Hold small positions in ABB and SLC; used ABB for ages as my 100/40 plan NBN RSP before moving to SLC (still with them) to take advantage of their aggressive NBN RSP market entry pricing to build their retail customer base]

I have experience with IP network performance measurement/characterisation - telecomms/software engineering background and my day job is engineering the Netflix OpenConnect CDN which, in addition to powering Netflix streaming delivery, also underlies the fast.com speedtest service which is used as part of the ACCC's measurement methodology. I have also worked a bit with NBNCo engineers on their characterisation of NBN performance using the ACCC's methodology.

I'll avoid writing an essay on all the nuances inherent in this type of work and just second a lot of @mushroompanda's comments (although suspect they meant to say "... to prove that they don't over-subscribe" rather than "over-provision" in relation to CVC visibility).

Bottom line is that I consider both ABB's and SLC's NBN RSP offerings to be high quality (I hold no particular views on other NBN RSP offerings), and would caution anyone from reading too much into the ACCC report without doing a lot of spelunking of their own to tease apart the details.

Thanks mate @loshell. Appreciate the expert confirmation that I’m not talking complete crap :D

@mushroompanda, great analysis mate. You beat me to it, and frankly articulated that far better than I would have been able to. @loshell, also appreciate your input as someone with experience in the field. This sort of commentary reminds me why I love Strawman – you would simply struggle to find critical analysis like this elsewhere. 

I also think the ACCC has done a poor job in conveying this information to the average reader and sufficiently articulating what it means, while also failing to highlight the limitations in the data (and there are lots!).

Worth highlighting is the primary data point ACCC is using – ‘average percent of max. download speed’. The 1000 mbps, ‘home ultrafast’ and 500 mbps plans are the highest tiered plans in Australia. ABB is the leading provider of these plans countrywide. But if someone on the high-tier plan is getting 400mbps on the 500mbps plan for eg. – a good speed noting the limitations we have in Australia – this would poorly represent ABB in the results. More than half of ABB’s customers are on plans 100mbps and over. It is easy to see how they would be negatively impacted by a statistic which is best used (in my opinion) to judge plans/speeds around 20-30mpbs.  

To conclude, I don’t think using ‘average percent of max. download speed’ is an accurate or reliable way to judge NBN speeds. Shit data in, shit data out.

@Mujo, thanks for starting this dialogue. I agree that ABB market effectively, and most customers prefer the ability to pick up the phone and be connected to an Australia-based service rep in a matter of minutes (vs the poor service you typically receive elsewhere). Where I disagree is ACCC’s (and Lachlan’s) use of the above noted metric. I also think this doesn't sufficiently measure what I consider the most important part of the ABB thesis, alongside customer service -- reliable, high-quality connection.

I am a customer and shareholder of ABB, and have thus far not found any significant issues with the speed of the connection where I am in Sydney's NW suburbs (though I am on the everyday plan). As long as the service is generally available and customers are happy with their experience overall, I don't think a few bps of speed will make a significant difference with regard to customer churn.

Just because we've been talking about it, I thought I'd give a first hand account of ABB from a customer perspective. Much gets said, in positive sense (from a consumer perspective), about their customer service. Equally much gets said, in derisive sense (from an investor perspective), about the value of customer service generally. Intellectually it doesn't make a great moat, but if gets customers onto your product who cares about the intellectual argument?

We recently moved (again) and we took the chance to move across to Aussie, given what I'd heard about them and even if the product is a commodity, the service isn't. Maybe you save a couple of bucks but I'd rather have some peace of mind if something went wrong (as it often does when you move). This was particularly true given we were moving down to the beach - well we already were living down the beach but we were moving to a different beach if you take my meaning. Lots of pros, including I get to surf, but one big con being less reliable services. Sure enough there were issues over a number of days. One thing Aussie spruiks is that it uses onshore call centres that don't use scripts. This was really evident. At one stage I couldn't get the computer to connect despite the fact it had connected the day before, despite having internet and despite other devices connecting. At some point I imagine other companies would of said there's a local issue with your computer - not our problem. The CSR didn't do that, instead he patiently stuck with me for an hour, reconfiguring modem settings until we got something that worked.

I can't see myself moving to another provider anytime soon. I'll let you argue over whether that's a moat or not but in the meantime I'm going to be happily paying them every month.

[Hold a bit IRL only]

@Noddy74 I agree that discussions of moats get over-intellectualised. However, great customer service in a sector known for poor customer service is a differentiator and it can confer competitive advantage. Customer acquisition and retention metrics are important growth and margin drivers in telcos (and other competitive, commoditised service industries). If $ABB has a differentiated capability that - despite trying - the market leaders cannot emulate, then it starts to look like a competitive advantage which is being sustained (which is as good as a moat if they retain their focus on it, as far as I am concerned, albeit a moat that needs continual care and attention).

Objectively, $ABBs NPS is significantly better than $TLS and $TPG, so they clearly doing this better than the giants.

A few commentators here and elsewhere have noted a potential issue in the ACCC report on speed delivered versus label claim. Again, I am of the view that this is likely due to the product bias of the customer portfolio towards higher speed plans versus competitors. But I agree with others that it is something to keep an eye on, lest it become part of the customer experience narrative should a trend develop.

Several commentators have noted that $ABB had two major customers speaking about their strengths at the recent Investor Day. You've provided another example of a customer who has become an advocate. Once your customers start doing your sales and marketing team's work for you, you are on to a winner.

I'm a long-standing $TLS Broadband customer in an inner city area where we get a lot of drop-outs. I've never found the customer support very helpful and its just too much effort to try and get more from it. As a holder of $ABB, I am going to give their service a go in hte New Year - largely because of the excellent word of mouth I've heard.

From what I can gather, the fall in SP is a reaction to their slowing new retail adds and ongoing capex. NBN rollout created a once-in-a-generation churn event from $TLS, and they caught this and delivered well. But now, we are back to a more mature market dynamic. However, if they really can sustain outperforming the competition in customer service, then growth of a few points ahead of the market at a competitive margin, while they also continue to grow enterprise / commercial sector in addition, means a forward P/E of 20 is undemanding.

I initiated a small position in RL about 3 months ago, and have now accumulated a 3.5% position. I am still considering whether to go a bit further and have a bit more analysis to do. The more I learn about the company, the more I like it,

Disc: Held in RL and SM.

** I was unable to see the Investor Day live, but the transcipt is available and I am working through that. Claude Walker's gang and Gaurav Sodhi have also written up notes following the sessions. I have been travelling overseas the last two weeks, and so have some catching up to do on my equity research. I'll pen a note if anything comes out of the work that hasn't already been reporterd here.