Why I’m not investing in the Aussie Broadband IPO

Aussie Broadband, an Australian internet provider will be listed on the ASX. To begin with, they’re offering their shares to customers. But is investing in Aussie Broadband a good idea?

Here are some of the reasons why I think it could be “yikes”.

• NBN is a Commodity — NBN, the product that Aussie Broadband resells is provided by the NBN Co. Aussie doesn’t own the infrastructure. That means they are simply a reseller. They can’t compete by offering better tech. You can compete on customer service to a degree, but price will always be a motivating factor.
• How does Aussie Differentiate? Aussie is selling the same product as every other ISP. So how do they differentiate their product? Why would you choose them over another provider? Well Aussie Broadband has relied on having really good customer service. If Aussie Broadband wants to keep growing, can they keep that level of service? Or will it be squeezed in an effort to continuously push the stock price higher.
• The 5G threat — In my opinion this could be the biggest risk for Aussie Broadband. Optus and Telstra, who own their own 5G networks are beginning to roll out 5G home internet connections. It is possible that 5G h take over a serious marketshare of home internet connections. Because Optus and Telstra own their own networks (unlike the NBN network) they will have a larger margins. Some experts believe most people will connect to the internet via 5G and other future mobile networks.
• Aussie Broadband isn’t a profitable company — Aussie Broadband hasn’t posted a profit since 2017. Unprofitable companies do IPO. But generally these are considered “high growth” companies. Investors believe these companies will post considerable profits in the future. Aussie Broadband isn’t a high growth company. I believe it to be an established player with moderate growth.
• Aussie is building a fibre backhaul — Infrastructure is usually a reasonable investment. Australia doesn’t have an excess of backhaul fibre. This could be valuable.

Overall I can’t see Aussie Broadband exciting the ASX. If you had invested in TPG 5 years ago, you would have lost money. And I’m worried the same thing will happen with Aussie. The space is too competitive and you’re always at risk of the next “aussie broadband” starting up and stealing your customers.

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