From what I’ve read in the industry press today, 15,000 was Uniti’s NBN customer base of small business and retail customers. While I haven’t seen it stated explicitly, I think it was their entire retail and small business segment.

Uniti is a $4bn privately held infrastructure company. They want to build and maintain networks, and serve the wholesale market. Retail and small business is non-core and it’s such a small customer base it doesn’t make sense to keep it as a non-core holding. It makes perfect sense for Uniti to have offloaded it. It’s a case of “grow or go”. They chose the latter.

That’s my reading of the situation.

Thank you @mikebrisy

During their acquisition spree, Uniti purchased many assets that were not core to their business. To prevent conflicts of interest, I believe, the ACCC required Uniti to operate their RSP’s (retail service providers) separately from the rest of their operations. An obvious doubling up of opex, for Uniti. As pointed out by @mikebrisythe RSP business was not core to Uniti’s operation, so it makes sense that Uniti has divested this part of their business.

In my view, there were likely other bidders for the customers due to the immediate boost in revenue from the acquisition. Given Uniti's history of deal-making, I doubt that the business was sold for a low price. Hopefully, ABB adhered to their expected return on investment in terms of customer acquisition cost. The other unknown is the value of these new customers in terms of the high-paying, low-churn subscribers that ABB seeks.

I also think it is possible that a non-disclosure agreement was involved in the transaction, particularly since Uniti is a private company and the increase in subscribers is not materially significant for ABB.

Thinking out loud maybe it was a tactical move from ABB, if we don’t buy it someone else will, we only need xx% to stick with us to make it worthwhile.

@jayjayjayjay at a system level, sign-ups are indeed slowing as NBN penetration matures. However, I think that is reflected in valuations, because the data is published by NBNCo. It is certainly relfected in mine!

The question I am interested in, is to what extent $ABB's marketing and brand strength allow it to outperform the industry and take share. That's the key thing I'll be looking for at the next result, as it is central to the thesis.

On this deal, it's not material for $ABB, so I'd hope they only took it on if the deal was favourable to them. Given the decision by Uniti to exit this segment, I'd assume the benefit for them is that it allows them to take out some costs. From a commercial perspective, that prize would be what the Aussie side of the negotiation would be looking to get a share of. But of course, if Uniti ran a competitive process for the sale, there's always "winner's curse" to think about.

Taking a step back, I would expect $ABB to have a disciplined process for assessing Value per Customer and ROI, whether acquired organically or inorganically. Provided that's the case, then I am indifferent to the mode of acquisition. The only slight qualification would be that I like $ABB to continue to get the maximum number of customers on the highest value plans.

I've also noticed $ABB SP roll of its recovery trend. I guess until the proof point of the next result, we are at the whim of macro news, momentum traders and spurious narratives (I saw a broker recommendation recently which was "Sell - high interest rates will affect share price" ... go figure!

Disc: Held in RL and SM

@mikebrisy Agree with everything you said. I am a massive fan of Phillip britt and his story so i am not concerned about them making good business decisions.

In regard to the broker recommendation and slapping a sell on the stock. Opting to go without internet I do believe that this is a factor to consider (as well as starlink). I myself have considered getting rid of my internet and just upgrading my phone plan. I rarely watch TV/streaming services and I am not a gamer. So my use of internet is pretty basic, mainly running a small online business. Having said that there are times I stream sport or watch a Netflix series, and this is the reason I have not followed through with this consideration. I still think overall I would be better off using my phone data and generally it is faster internet. In regard to ABB though they do their best to take the high-priced high margin deals and i would expect people who choose this option are unlikely to go without internet, I mean they signed up to the most expensive offering for a reason right? they are reliant on it. I also don't see internet as something people will just go without it would have to be such an insignificant amount. Even myself I am with TPG and I fucking hate how slow it is especially in the evenings but I CBF changing (plus it isn't that easy)

Good discussion. Agree @mikebrisy, the question of residential adds slowing down is a question of when, not if. Aussie need to be prepared to pivot away from this, the good news is I think they have spent the last 18 months doing just that. Investment in their own fibre and a push towards business and a lesser extent mobile demonstrate this. Business is the big one for me -- sticky, more stable revenues and better margins. It is a no brainer for Aussie. Their brand across the board is absolutely essential here though, that is undoubtedly their competitive advantage. While residential is slowing, I still want to see gradual organic growth nationwide -- the result of customers churning across due to their reputation.

I wouldn't have thought Aussie have paid much for the acquisition at all. This is a business that basically refuses to provide the same discounts like the rest of the industry because they don't believe it is sustainable. I would hazard a guess and say the Uniti customers are probably mid to high end of the tier level for Aussie, hence the appeal in bringing them across.

@jayjayjayjay not to generalise or assume, but I would think (and hope for our investment in Aussie!) that you are absolutely in the minority with that one. Flexible work arrangements and a shift towards streaming basically result in most households requiring internet. I am also not worried about Starlink/satellite unless they start to scale and their costs essentially halve. Part of Aussie's appeal is being able to pick up the phone and call someone and be connected in two minutes. @jayjayjayjay you also touch on the other positive for Aussie -- the low end of the market are the ones more likely to shift across to mobile wifi. Aussie typically attracts the high end of the market who want Australia-based staff, reliable connection, high speeds and fibre. I have little concern about wifi and satellite hurting Aussie, but if I was a provider like Belong I would be bracing for a world of pain.

Re: internet not being something people will go without, completely agree. It is one of the most important services for households, akin to power, water and gas. I am not too worried about inflation because I don't think a good portion of Aussie customers would consider downgrading/removing their internet to save money.

Changing provider is easier than you think @jayjayjayjay, give Aussie a call ;)

@Rocket6 pretty much agree with everything you have mentioned. I am absolutely in the minority but hear me out. I firmly believe lots of the younger population will potentially gravitate towards larger phone/data plans then have internet and phone, likely this won’t impact Aussie and would impact low margin dealers. A large portion of the younger population watch Netflix etc on the phone/laptop these days. Having said that I doubt that impacts high margin Aussie deals and defiantly not the higher margin business sector. Overall I think internet is a necessity and most will have it and there will be a small percentage of people who may be impacted and go with the phone plan. I do agree this is a minority and the internet is a necessity. I also firmly believe that as AI becomes bigger and more involved in everyone’s home and life in general plans will just become larger in general and the need for faster plans greater leading to more signing up to larger offerings which is great for providers like ABB. I am very bullish on ABB I just like to consider all factors moving forward.

Some good discussion here. I agree with @Rocket6, it's a matter of when, not if. I hold ABB IRL and on Strawman and the central tenants to the thesis for me rest on:

• Their ability to maintain their retail customer service moat and charge more for it.
• Their ability to deliver significant growth in the business sector off the back of the OTW acquisition
• Phill Britt's ownership and ongoing involvement. Even to this day Phil still occasionally directly engages with the public relating to customer service matters on Whirlpool: https://forums.whirlpool.net.au/thread/374pm227

Aside from these things, the other two risks that I’m keeping an eye out for, that may start to impact confidence (for retail) are:

• other service providers starting to bundle more into their offers; reducing TCO of subscriptions for a portion of the customer base. e.g. Netflix, stan etc. this seems unlikely at present
• Starlink becomes much cheaper

In the retail space it seems that ISP’s have relatively few options to increase GP aside from just increasing subscription prices, which is what they’ve been able to do with their moat. Opportunities to increase margin are limited and much like with the energy reselling market, making mistakes in this space can very quickly lead to bankruptcy. Incidentally, this is why I would never invest in a pure play retail ISP.

The acquisition of OTW should opportunities to grow margin. I went to their booth at the Garter CIO symposium on the Gold Coast last September and took some time to learn about the various solutions and managed service offerings they provide, as well as reference customers. I was encouraged. The OTW acquisition now gives ABB credibility when approaching enterprise and government clients (or responding to govt tenders). ABB is now backed up by a range of referenceable organisations in the business sector. Their managed services (whilst typically a lower margin business), creates a lot of stickiness with customers and unlike some of the competition in this space, ABB will be far more nimbler. Whilst their 2023 H1 results talk to a ‘positive mix shift towards higher margin segments’, it’s hard to get a sense at this stage of how successful they will be in winning new business in the enterprise and government space. In any case, I feel that the OTW acquisition has been an encouraging pivot for ABB and it’s great to see that Michael Omeros is sill with them.

Another point I really like the culture they try to drive with their corporate values:

1. Don’t be ordinary, be awesome,
2. Think BIG
3. No Bullsh*t,
4. Be good to people
5. Have fun.

A great set of values, matched with the corporate culture creates a great environment to work in which means that it's easier to retain good staff for less $$, it makes the company an attractive proposition for good talent & customers also benefit through their interactions with happy people. This is even more important for them now with the OTW acquisition and B2B engagement.