Aussie Broadband

The Business

ABB resells NBN broadband and mobile services across three divisions: Residential (60% of FY26 revenue), Business/Enterprise & Government (18%), and Wholesale (23%). It has grown from a regional Gippsland provider into the fourth-largest national broadband retailer and third-largest NBN reseller, with over 1.1 million connections. Unlike infrastructure owners such as Telstra, ABB owns no network and buys wholesale access from NBN Co, competing purely on service quality and price. Four acquisitions completed in FY26, including the AGL Telco customer base, materially expanded scale without ABB building new physical infrastructure.

Recent Performance

Revenue grew 9.2% to $1,295 million in FY26, a slower pace than the prior year's acquisition-fuelled growth, as organic broadband additions moderated to roughly 11,000 per quarter. The EBITDA margin held at 12.8%, supported by employee costs growing just 1.4% against that revenue growth. The market has re-rated ABB toward peer multiples over the past year, pricing in the AGL Telco integration before its earnings benefit is fully proven in the accounts.

Outlook

Revenue growth is expected to accelerate sharply in FY27 as the AGL Telco migration adds a substantial block of incremental Residential revenue, with the EBITDA margin guided toward its peak for the current cycle. From FY28, growth is expected to decelerate materially as the acquisition benefit annualises, while the EBITDA margin is likely to fade as employee costs normalise and competitive pricing from TPG persists, a dynamic already visible in gross margin slipping from 35.9% toward the mid-34% range. The next two result periods will show whether the AGL customer base can be absorbed at close to group profitability or whether it remains a structurally lower-margin book of business.

Key Risks

The largest single risk is AGL Telco integration margin dilution. AGL operates at an 8.9% EBITDA margin against the group's 12.8%, and the acquired customer base has historically shown higher price sensitivity and higher churn than ABB's organically acquired subscribers. The migration involves moving more than 300,000 connections onto a different network and billing platform, a technically complex process with no direct precedent at this scale within ABB's own history. Second, sustained price aggression from TPG, which owns its own mobile network and can fund a prolonged price war, could push residential gross margin lower still; that margin has already fallen from 36.6% to 35.9% over the past year as ABB chose to defend share rather than let volumes slip. Third, the valuation is more sensitive to the prevailing discount rate than to most operating assumptions in the model, meaning the direction of interest rates over the next 12-18 months matters as much as execution.

What to Watch

The thesis-defining event is the FY27 half-year result in February 2027, the first period with a full AGL Telco contribution, which will confirm whether the EBITDA margin can hold near its guided peak with acquired-customer churn contained. A Reserve Bank rate cut in the first quarter of 2027 would ease the discount rate pressure embedded in most valuation approaches to this stock. The AGM trading update in October 2026 provides an earlier read on migration progress before the full-year numbers are known.

• Feb 2027 FY27 H1 results — first full AGL Telco contribution period; will confirm or break the margin convergence thesis.
• Q1 2027 RBA rate decision — a cut would ease the discount rate pressure on the current valuation debate.
• Oct 2026 AGM trading update — early read on AGL migration retention and progress.

Company Description

ABB operates three segments. Residential broadband and mobile, the largest at $760 million of FY26 revenue (59% of the total), sells NBN plans directly to households under the Aussie Broadband, More, and Tangerine brands, differentiated on service quality rather than price. Business, Enterprise & Government (BE&G) contributed $238 million, supplying data, cloud, and connectivity services to corporate and government customers, an area recently expanded through the Nexgen acquisition. Wholesale, at $297 million, sells network capacity and white-label services to other retailers, including partnerships with CBA and energy retailers. ABB owns no network infrastructure; it leases NBN Co's wholesale network alongside its own regional fibre and fixed-wireless assets built in Victoria and South Australia.

Where the Growth Is

The AGL Telco migration is the dominant earnings driver over the next 12 months. ABB is moving more than 300,000 broadband and mobile connections acquired from AGL onto its existing platform, adding an estimated $190 million of incremental Residential revenue in FY27 with minimal additional headcount or infrastructure. Because the connections load onto systems ABB already operates, the addition drives FY27 EBITDA to management's guided range, materially de-risking the next 12 months of earnings. The key uncertainty is how quickly AGL's lower 8.9% EBITDA margin converges toward the group's 12.8%.

Competitive Position

ABB has been ranked the most trusted telecommunications provider in Australia for five consecutive years, a distinction that translates into a lower cost of acquiring customers and a churn rate roughly 200 basis points better than peers in a market where broadband is otherwise a commodity. That advantage sits within a genuinely competitive market: ABB is the fourth-largest broadband retailer nationally and the third-largest NBN reseller, gaining share from Telstra and Optus but facing sustained price aggression from TPG, which owns its own mobile network and can undercut on price. The advantage is real but not structural in the way network ownership is; it depends on ABB continuing to out-service larger, better-capitalised rivals, and residential gross margin has already slipped from 36.6% to 35.9% as competitive pricing bites. We see this advantage lasting roughly four to six years before scale or price competition erodes it further.

Management & Capital Discipline

Management completed four acquisitions in six months during FY26, including the AGL Telco customer base at an implied purchase multiple of roughly six times EBITDA, a disciplined price relative to the group's own trading multiple. Alongside the acquisitions, the board committed to a $115 million buyback and divested non-core assets, signalling active portfolio management rather than simply accumulating connections. Management has been transparent in flagging both fierce residential pricing competition and softening wholesale volumes, rather than glossing over near-term pressure points. The less comfortable observation is governance: three board departures during FY26 raise succession and oversight questions at precisely the moment the company is absorbing its most complex integration to date.

Financial Position

Net debt sits at roughly 0.86 times EBITDA, low by telecom standards, with total liquidity of around $315 million including cash and undrawn facilities. Operating cash flow converted at over 100% of EBITDA in FY26, and forecast free cash flow is expected to grow steadily even as capital expenditure rises to fund the AGL integration and enterprise growth. This balance sheet comfortably absorbs the integration costs of four simultaneous acquisitions and provides headroom for further bolt-on M&A or continued buybacks without approaching covenant stress in a downturn.