As Australians seek better value-for-money amid the cost of living crunch, internet provider Aussie Broadband (ASX: ABB) is set to offer a low-cost alternative to standard internet services with the launch of Buddy Telco, a no-frills digital-only internet service provider that will offer NBN services.
The new Buddy brand aims to capture a significant share of the approximately 4 million Australian households seeking affordable and straightforward internet solutions without the added costs of premium services and call centre support that are factored into premium providers like Telstra and Optus brands.
Officially launched today with a functioning website that takes inbound registrations for the new service Buddy allows users to manage their internet connections, upgrades, outages, and usage entirely through the Buddy Telco app, website, and Live Chat. This self-service model leverages Aussie Broadband’s extensive expertise in automation and incorporates machine learning techniques to provide network updates and technical support.
Aussie Broadband’s network infrastructure will underpin Buddy Telco, ensuring reliable connections across all 121 NBN Points of Interconnect and utilising the Aussie Fibre backbone.
$10 million has been allocated by Aussie Broadband towards the launch of Buddy to support marketing, brand development, and initial operational expenditures. Despite this considerable investment, the Company does not expect Buddy to contribute positively to EBITDA until FY27 onwards due to the low operating margins in delivering the service. This is common in the low-cost alternative space where airline operators such as Qantas make minimal margins on their low-cost carriers (Jetstar) but can offer them as vertically integrated supply chains.
Aussie Broadband has set a goal to attract 100,000 customers within three years.
“Aussie is thrilled to launch Buddy Telco, a truly digital-first offering that provides value and ease of use to the consumer,” said Aussie Broadband Managing Director, Phillip Britt.
“Our strategic investment in Buddy allows the Group to compete in both the premium and value-led broadband sectors, further diversifying the markets we operate in. We look forward to continuing to Change The Game through Buddy’s success.”
Aussie Broadband has assured that the launch of Buddy Telco will not detract from its main brand marketing activities with the telco provider to drive growth across both brands, ensuring that it remains a strong player in both the premium and value-driven sectors of the broadband market.
The NBN market in Australia is estimated to encompass approximately 8.3 million households with Buddy Telco’s internet plans starting from $65 per month compared to the same comparable plan offered by Aussie Broadband’s flagship brand for $79 per month.
Shortly after announcing the launch of Buddy Telco, Aussie Broadband issued a trading update to confirm it expected it’s FY24 EBITDA to be at the top end of the $116m to $121m previously issued guidance.
At the same time they also flagged that FY25 EBITDA is forecast to be in the range of guidance range of $125m to $135m which will account for costs budgeted into the launch of Buddy.
ABB shares responded poorly to the news to hit a low of $2.85 in early morning trade having last closed at $3.57 on Friday afternoon.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, bloodstock enthusiast and former Analyst.
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