Aussie Broadband’s Scale-Up Potential

Small Caps | 10:00 AM

A miss on net subscriber additions in the latest 2H26 updated has not deterred analysts from an upbeat growth outlook as acquisitions boost growth in FY27.

• Aussie Boradband management boosted confidence by reiterating FY26 guidance
• Sooner than expected migrations and re-platforming augurs well for FY27
• Weaker consumer backdrop already reflected in the share price
• Upside risks to FY28 earnings forecasts 

By Danielle Ecuyer

Looking through a near-term miss

Fast growing telco challenger Aussie Broadband ((ABB)) reiterated its FY26 earnings (EBITDA) guidance of $162m-$167m, while highlighting more granularity to the outlook.

FY26 guidance aligns with most analysts' forecast.

Capex for FY26 was guided to the top end of prior guidance at -$55m-$60m and net debt/EBITDA was 0.72x at the end of May.

Analysts concurred subscriber growth to the end of May of 28k, or a run rate of circa 33.5k-34k for 2H26, was weaker than expected.

Canaccord’s forecast for 2H26 stood at 39k-plus. UBS emphasises net adds of around 33.6k over the second half were well below expectations of 40.8k net adds and consensus at circa 36k.

UBS is nevertheless encouraged by FY26 earnings guidance being reiterated.

Ord Minnett continues to anticipate NBN market share rising to around 8.9% by the end of FY26.

Acquisitions diversify the earnings composition

Aussie Broadband is in a transition process, with the circa -5% decline in More & Tangerine wholesale customers noted as a near-term factor attached to the 4Q26 migration.

The More/Tangerine and Buddy migration was highlighted by management as being finished ahead of June 30. Canaccord, for example, had penciled in 1Q27.

The pull-forward does not alter Canaccord’s FY26 forecasts materially, except for More/Tangerine, with 275k subs versus around 250k subs at the time of the announcement in August 2025 and the forecast 290k from the 1H26 update.

This represents a 95% retention rate on migration.

Taking a step back, Jarden believes the market should look through the short-term miss in subscriber growth as the telco continues to migrate and consolidate its recent transactions.

Management is in the process of transforming Aussie Broadband into a “multi-channel scale platform” with more diversified exposure across consumer, wholesale, SME and enterprise markets, moving beyond its origins as a residential challenger growing organically.

The company has undertaken four transactions in six months with a strategy, or as Jarden states, a “pathway”, to achieving more than 1.3m NBN connections.

Over 1H26, Aussie Broadband acquired AGL Telco and NexGen, while also completing transactions involving More/Tangerine, Buddy, Digital Sense and Symbio. Management has expanded customer scale, strengthened business communications capabilities and increased exposure to higher-margin recurring revenue streams, Jarden believes.

AGL Telco is the largest transaction, with around 350k broadband and mobile connections anticipated to move to the network, with completion over 1H27. Earnings (EBITDA) contribution is estimated to generate additional growth of circa $21m at the first full-year run rate.

NexGen is bringing around 6k SME customers on four-to-five-year contracts, with circa $2m-$4m in cost synergies flagged. Recurring revenue should boost earnings (EBITDA) by around $12m in FY28.

The sale of the Buddy retail brand to Tangerine in 2H26 is expected to contribute a cumulative $9m earnings benefit as Aussie Broadband retains wholesale revenue while exiting a loss-making retail operation.

Offsetting these gains are a cumulative -$8m EBITDA headwind from the divestment of Digital Sense and a cumulative -$6m impact from ACCC-mandated wholesale voice pricing reductions affecting Symbio.

Importantly, as emphasised by Canaccord, the More/Tangerine and AGL deals will boost Aussie Broadband to more than 1.3m subscribers, making it the third-largest NBN service provider in the country.

At this point, the telco achieves a “point of real scale”, with underlying opportunities across the acquired subscriber bases by virtue of their characteristics and profiles. Canaccord believes there is potential medium-term upside risk to earnings forecasts as management implements measures designed to expand margins.

UBS points out More/Tangerine has not been insulated from aggressive competition, highlighting active users (subs) at the end of June of 275k, some -5% below previous expectations.

Positively, management’s confirmation of underlying earnings (EBITDA) for FY27 implies (confidence in) an improvement in margins.

The analyst stresses management teams at both More/Tangerine and Aussie Broadband would have been focused on completing the migration in FY26. Net subscriber additions have scope to gain momentum from FY27 onwards as focus shifts back to customer growth.

Also, as the market absorbs price changes put in place by the ISP ahead of the July NBN wholesale price increases, Aussie Broadband was one of the first movers to adjust price. As such, the analyst believes this factor may have contributed to the churn during the latter part of May.

Pricing is expected to stablise across the industry and the UBS analyst believes suscriber momentum will pick up to levels before the price increase. Notably, industry feedback suggests the cheapest ISP providers are not necessarily gaining market share, with subscribers opting for an increase in quality.

The targeted upgrade program announced by NBN two months ago for the transition of specific homes and businesses from the copper network to full fibre network starting in July 2027 is expected to result in a rise in industry churn.

In turn, it is believed this will support more customers moving to higher speed plans.

UBS believes the telco’s track record in migrating subscribers positions the company well for AGL Telco, with contributions potentially flowing through sooner than previously anticipated in FY27.

Equally, forecast FY27 subscriber growth is above the 1.3m target. Applying historical annual net-add momentum across all segments, Aussie Broadband could achieve around 1.5m connextions by FY28.

This is one of management's Look-to-28 strategic goals.

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