29-Jan-2021:  Service Stream secures multi-year agreement with Telstra

Service Stream secures multi-year (3+1+1) Field Optimisation Agreement with Telstra

Leading essential network services company Service Stream Limited (ASX: SSM) is pleased to announce that it has secured a multi-year agreement with Telstra for the provision of design and construction services.

Under Telstra’s new commercial framework, Service Stream will be a key delivery partner responsible for performing design, construction and maintenance activities associated with its wireless and fixed-line infrastructure networks.

Under Telstra’s new Field Optimisation Program, Service Stream will be responsible for the provision of the following services:

• Site acquisition, design, construction and upgrade services of wireless infrastructure
• Design, construction and relocation of fixed-line network infrastructure

The five-year agreement is for an initial period of three years, with two x one-year extension options, at Telstra’s election. The agreement is expected to transition on or around April 2021.

Whilst the agreement does not provide guaranteed volumes, Service Stream has historically delivered approximately $70m of wireless and $30m in fixed-line infrastructure works per annum to Telstra under similar agreements, with a larger pool of delivery partners historically operating across allocated regions.

Managing Director, Leigh Mackender said: “Service Stream is very pleased to be selected as one of Telstra’s strategic delivery partners under their new Field Optimisation Agreement, continuing to support our long-term relationship which has existed for more than 15 years.  The business looks forward to partnering with Telstra and supporting both their wireless and fixed-line network programs, particularly at a time where demand for 5G wireless infrastructure is expected to increase.”

[I hold SSM shares.]

16-Dec-2020:  BSA secures nbn Contract     [BSA up +5.17% today]

And:   SSM secures multi-year Unified Operations Agreement with NBN     [SSM down -12.13% today].

Why?  One up, one down?  Because back in August, BSA couldn't get a guernsey, however SSM and DOW were proudly announcing 4 year contracts with 2 x 2 year extension options (same as today's announcements) with the nbn for basically all of Australia - except Tas.  DOW had WA, SA & NT, while SSM had Victoria, NSW, Queensland and the ACT.  BSA had been given a 1 year extension on an expiring contract, but were still trying to negotiate a longer term deal.

Today, DOW have announnced nothing, SSM have announced they have been allocated regions across Queensland, SA, NT and WA, but no mention of NSW or Victoria.  BSA have announced that they have been allocated regions across NSW and Victoria.  

I'm betting that the market is thinking that SSM have lost NSW and Victoria to BSA, however that's not the way I'm reading it.  The contracts that DOW and SSM announced in August were both 4 year contracts with extension options beyond 4 years.  It's only been 4 MONTHS.  I think the key term to note here is "regions".  For instance, one company could have Melbourne and Sydney, i.e. the greater metro areas of each city, while the other company could have the rest of each state, i.e. the rural areas and smaller cities.

What I'm reading is that BSA have finally managed to secure a longer term contract with nbn, but only for certain regions within 2 states.  However, SSM have now signed an ADDITIONAL contract with nbn which has given them work in WA, SA & NT plus additional work in Queensland, all in addition to the nbn work they will continue to do in NSW and Vic.  In fact, in today's announcement by SSM, they said:

"Following the recent signing of the Unify Networks agreement in August across a similar term, Service Stream will effectively be providing nbn with operations and maintenance support across all mainland states and territories under either the Unify Networks or Services agreements. We look forward to continuing to support nbn’s maintenance programs for many years to come."

So, they have NOT lost NSW and Vic.  I do NOT currently hold SSM or BSA (having owned both previously), but I do hold DOW shares.  If I was going to buy BSA or SSM, I would prefer to buy SSM at this point, as long as I could get them at a good price.  I consider Service Stream to be a far superior company to BSA.  I think SSM will recover today's -12% SP loss over the coming days as the market realises that this announcement by SSM was positive, not negative, and they simply have MORE nbn work now than they did before.

It's also positive for BSA of course, but the reality is that BSA have now secured ongoing nbn work (over at least the next 4 years) in two of Australia's states (albeit the two with the largest population), while SSM has contracts for the same nbn work in EVERY Australian mainland state and territory (everywhere but Tasmania).  And SSM is a larger, stronger, and better run company, in my opinion.

Further Reading:  https://www.itnews.com.au/news/nbn-co-signs-service-stream-downer-edi-to-new-field-services-deals-552655

https://www.downergroup.com/downer-awarded-new-four-year-nbn-contract

http://www.bsa.com.au/pages/sectors/communications/nbn.html

https://www.servicestream.com.au/networks/telecommunications

https://www.afr.com/politics/federal/nbn-push-for-fibre-to-the-home-20200922-p55xxv

https://www.afr.com/companies/telecommunications/nbn-raises-1-2b-in-ultra-cheap-corporate-debt-20201201-p56jo5

https://www.afr.com/companies/telecommunications/nbn-splashes-200m-on-it-upgrade-20201208-p56lj9

31-Aug-2020:  Service Stream (SSM):  SSM secures multi-year Unified Operations Agreement with NBN

See also:  Downer EDI (DOW):  31-Aug-2020:  Downer awarded new NBN contract

See also:  BSA Ltd (BSA): from their FY2020 Investor Presentation (24-Aug-2020):  Page 4 ("Full Year Highlights"), right side ("Order Book"):

• Foxtel’s preferred single national delivery partner – 3 year contract as sole provider;
• Negotiating with nbn to extend OMMA contract through to June 2021 (with further 6 month nbn option);
• Fire Build – strong order book with a number of contract wins in the period including WestConnex link 3A, Sydney Football Stadium, Gold Coast Airport and Sydney Metro; and
• National maintenance contract awards for Aldi and 7-Eleven with strong forward demand.

So, both Downer (DOW) and Service Stream (SSM) have today BOTH announced multi-year (4+2+2) Unified Field Operations (Networks) Agreements/Contracts with NBN.

Downer's agreement is valued at ~$320 million over the  maximum term of eight years.  Downer will provide services including network restoration, copper rehabilitation, alternate power system activities, network performance and capacity enhancement, urgent field service work and site maintenance across Western Australia, South Australia and the Northern Territory.

Under their new NBN agreement, Service Stream will continue to be responsible for performing operations and maintenance activities across core network technologies, including Fibre to the Node (FTTN), Fibre to the Premise (FTTP), Fibre to the Basement (FTTB) Fibre to the Curb (FTTC) and Hybrid Fibre Coax (HFC) as well as other technologies which may be introduced in the future.   The NBN has initially awarded Service Stream works across Victoria, New South Wales, Queensland and ACT, with additional works able to be allocated in other regions at nbn’s discretion. 

So, both DOW and SSM have today announced between 4 and 8 years more work for the NBN, and together they cover every Australian state and territory except Tasmania.  

BSA have announced nothing today, and I am of the opinion that they could well be left out in the cold in terms of NBN work going forwards.  They still have Foxtel, but with the huge increase in cheaper streaming services (Stan, Fetch, Netflix, etc.) now available, Foxtel is not growing, they are shrinking, so that Foxtel work is unlikely to provide a growing revenue stream into future years for BSA, in my opinion.  BSA still have their "Fire Build" work, but that tends to be project based, rather than recurring revenue.  They also have national maintenance contracts with Aldi and 7-Eleven going forwards, but they need more.  I have decided to cut BSA loose today, so I've just sold all my BSA shares - at 29 cps.  It was a relatively small position anyway, and I think there are better opportunities elsewhere.

[I don't own any SSM.  I do hold Downer (DOW) in my SMSF.]