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Why the Superloop Ltd share price is soaring today

The Superloop Ltd (ASX: SLC) share price is 7% higher at $2.46 today after the Asia-focused dark fibre internet services business announced it has moved a step closer to getting its construction of a submarine internet connectivity cable between Australia and Singapore off the ground.

The company announced that a “system supply agreement” between the consortium wanting to finance the project and the company hired to construct it in Alcatel Submarine Networks was now at “Contract in Force” status.

Superloop and its consortium of partners that reportedly includes A-listers Google-owner Alphabet Inc and Telstra Corporation Ltd (ASX: TLS) are aiming to compete with rival fibre optic internet services provider Vocus Group Ltd (ASX: VOC) in providing a submarine internet traffic route between Australia and Asia.

Unfortunately, for Superloop its project has been widely reported as being around one year behind that of Vocus, which means Vocus should have a big first mover advantage in winning clients and turning profits.

However, the growing demand for data and internet traffic capacity means they’ll probably be sufficient demand to make both projects economically viable over the long term.

Superloop is also investing in the construction of fibre-optic cable networks under the streets of Singapore and Hong Kong in order to put commercial premises on-net and on sell the internet services to enterprise clients. This is a lucrative business model the likes of Vocus and TPG Telecom Ltd (ASX: TPM) have made big profits from thanks to their ownership of these fibre-optic networks whether built themselves or acquired as in the case with TPG’s Pipe Networks.

Investors looking to take on more risk may consider Superloop due to its growth potential, although I think the far superior risk-adjusted returns are offered by TPG and Vocus based on their current valuations.

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Motley Fool contributor Tom Richardson owns shares of Google, TPG Telecom Limited and Vocus Communications Limited. The Motley Fool Australia has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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