@mikebrisy @occy im no ABB expert, for sure, but i did listen to the call out of interest. there seemed to be some confusion over the guidance numbers, with many moving parts, being, the loss of ORG profits on fy25 financials, underlying growth (if any), SYM synergies as well as ongoing spending on Buddy. to sum up looks as if the impact of ORG loss of $ was larger than expected, There is still some growth in the underlying biz occurring, SYM as disclosed, and Buddy's $10m spent maybe $7m will be ongoing as marketing, dilution up until b/e. Mgt also flagged possibly some cannibalisation, the issue of getting people excited without ABB brand support, expect margins to be within a couple of % lower than the premium product over time.

i would think Mgt would be surprised as the extent of the reaction, on my limited view

At the end of the day they're selling a commodity and launching the cheaper brand just highlights this. The 'brand' of providing better service is the same catch cry of all the past internet providers iiNET, TPG, Adam Internet etc before service levels inevitably fall or the brand is acquired.

I don't think ABB ever deserved a premium price but looks relatively attractive at current levels.

I'm perplexed by the reaction as well, as i didn't think we would see sub $3 again without a major slip up. I thought their trading update was pretty solid, but I couldn't attend their update briefing so maybe something was said that wasn't in the release? Symbio looks to have been assimilated well.

I wonder how much of the fall is the perception that Superloop are doing well, winning the Origin contract and growing NBN subscribers much quicker. Its all about margin though and I am not yet convinced that the Superloop numbers are the complete picture. Aussie BB are still adding total NBN subscribers across all of their categories, so no need to be worried yet that competition is catching them.

Still growing well with a 10-15% increase in EBITDA guidance for 2025 ($135-145m) which is after the costs associated with the $10m Buddy launch.

I actually like the Buddy idea, I disagree that it will undercut their own Aussie brand and even if people switch they expect it will operate on the same EBITDA margin as the premium services and any churn will be at the low end speeds. Looking at the Buddy plan speeds/pricings they are pretty similar to the low end of the existing offerings but will charge $15 less. I wonder if this is part of the strategy to keep growing the premium end and move it further in that direction. It will be high speeds and high customer service/reliability/experience while Buddy captures most people who just want some internet but aren't gaming or streaming on multiple devices. Buddy will have the help functions automated so the reliance on Australian based call centers (High costs) can be capped and limited to the higher priced options. The automation side could also be a way to learn how to do this well before rolling it over the wider Aussie BB to maintain/increase margins longer term.

Buddy

vs existing Aussie BB

Just a few observations:

• No one wants to compete on price alone in anything retail – it's live by the sword die by the sword. Even AMZN differentiates itself with an infinite range and free next day delivery.
• ABB is itself a challenger brand
• One of ABB's core offerings and points of differentiation is top notch Australian based customer service.

So, the question that I have is why would ABB, a company with ~8% market share, launch a challenger brand that is essentially their core product stripped of what makes it different to other ISPs? The real pain point at the value end of the market is they have a mercurial customer base that is very price conscious and shops around. It's expensive to acquire customers, they are not contracted and there is very little that ties someone to an ISP these days. I guess the best way to keep a customer in that scenario is that they never notice you, which they won't until...

...they need to contact support!

I think the valuation has been pretty heroic for some time, but these businesses just aren't something I understand all that well, tbh. I struggle with the concept of retail and commoditised – unless there is a market structure (duopoly, oligopoly etc) that favours incumbents.

My speculation is that I think they were worried about growth (and had the spare capacity to sell) and there's only so many people willing to pay premium prices for internet.

As someone who only uses cheap internet services and just see it as utility like electricity/gas/water - and never call or contact support - I may be colored in my thinking. I do live near the city though so maybe that's why I never have issues - I also don't game.

I don't think competing on price is that problematic as long as you have the lowest cost of production. If they are correct in their modelling then Buddy should be earning an EBITDA margin largely equivalent to ABB and it should act to broaden their addressable market as they can niche differentiate within the market with a high speed, high service premium brand and low cost, no frills brand that is easy and reliable. If they can still make the margin then it is a win, whether they can get the users across and keep them is uncertain, but given they created ABB from scratch then you would have to give then better than even odds of replicating that success with Buddy.

I agree NBN is largely a commodity and commodities are really about managing costs to create margin. They have previously done this well. I am thinking that Buddy was plan B (or maybe Plan A) once their Superloop takeover offer fell through, it would be interesting to know how long this move had been in the planning space for as I don't get the impression that it is a rushed move. They seem to have priced this to be amongst the cheapest offerings amongst other ISP's, apart from some of the intro 6 month pricing that then reverts type offers. This is effectively a $10m roll the dice on creating a new brand type deal, lots of upside if it works not much downside if it doesn't.

I listened to the call this morning and its worth it as their is a lot of good detail in it. It looks like the margin will be a few percentage points lower than existing ABB margin at the EBIDTA level. Although at the NPAT level they did mention that if an existing ABB subscriber switches to buddy then they would contribute $8 vs $10 currently, so part of Buddy is to capture that $8 from value orientated churn. Probably an indication that the premium brand is coming under pressure at the lower speed levels. To me you want to be low cost or premium, the in between space is hard I think.

Most of my future value scenarios for ABB are coming from the expansion of the Enterprise contracts, which from the call also sound like they are progressing well.

@Slideup I pretty much agree with everything in your post.

This is a classic market segmentation play - different product offerings, for different customer needs/willingness to pay, wrapped in different brands, but leveraging common infastructure and some common capabilities. There is no reason I can see why they can't be successful, and the price of this strategic option is low.

Since the announcement yesterday morning, I've wrestled with this one, and I think I'm not going to invest in $ABB again. But I do think $ABB is now significantly undervalued and that there is a high probability of making an excellent return over the next 6-18 months. (Just like last time it was obviously undervalued.) Which has made it a hard decision - why not take some easy money?

I'm still not settled on this, but over the last year I have done a lot of work on my RL portfolio, and there are several firms I am investing heavily in research on where I think I could be adding more, as well as several firms that I don't want to take capital away from. I'm not sure I have the personal capacity to add telcos back to the list, and to be perfectly honest, it is at the edge of my zone of competence and confidence.

Two things have spooked me: 1) $ABB's move on $SLC which I didn't understand, and thought was ill-advised coming so soon on the back of $SYM, which I still wanted to understand what it was doing from a value perspective and 2) Phil's revelation on his return from long service leave that he had considered calling time. On 1) I wonder if it was just a reactive move to head off the threat of losing Origin - and, if it was, that makes me even more concerned. This is because more often than not firms destroy value when they do large M&A.

As I've written consistently, I don't really like the telco sector and was always a bit Jekyll-and-Hyde about owning $ABB. I'm still mixed in my mind on this, because I do think there is a lot of money to be made in a relatively short term play on $ABB.

@mikebrisy, I'm not an expect but I have quizzed a telecomunications engineer and my understanding that the Superloop bid was opportunistic and what they wanted was the infrastructure and not the company- brands, people etc. From what I gather the addition of Superloop infrastructure would have really strengthened ABB. This is partly why I am keeping an eye on Superloop as I think they could be the lowest cost operator just needing to see their annual report numbers and see how they fit relative to ABB. I don't think it was a response to losing the Origin deal though as I don't think the timelines really line up. Superloop look like they have transformed a bit through management change and the origin contract was a bit of a catalyst for the market rerate.

I agree that large M&A are high risk points but ABB seem like they know how to integrate these. Symbio looks like they have been a relatively easy integration as they are keeping them as separate entities. Even companies that are good at M&A integration will sooner or later have a poor fit just from law of averages.

Totally agree that Phil Brit leaving would be a hard blow for the SP, but he sounds like he has moved to that higher level strategy position and seems pretty content with the new challenge.