Leighton’s $334 million win

Leighton subsidiary scores fibre optic contract.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company charged with overseeing the National Broadband Network (NBN) rollout, NBN Co, has announced the award of a $334 million contract to Leighton Holdings (ASX: LEI) subsidiary Visionstream to roll out fibre optic broadband in VIC, QLD, and southern NSW.

This covers the initial stage but once extensions are included the potential revenue to Leighton from this contract could reach $1 billion.

Competitive field

Leighton is not the only company to be benefiting from the enormous infrastructure build, with NBN Co sharing the money around amongst multiple Australian and overseas companies. Sytheo, the joint venture between Service Stream (ASX: SSM) and Lend Lease (ASX: LLC) was established to combine their skills and bid for work on the NBN.

Sytheo currently has contracts for rolling out the NBN through WA, SA and NT. Separately, Service Stream was recently awarded a remediation contract from Telstra (ASX: TLS), while Lend Lease has partnered with Telstra to “make ready” over 10,000 buildings across Australia for the arrival of the NBN.

Downer EDI (ASX: DOW) is also a recent beneficiary of an NBN contract. Downer was awarded a $94 million contract to rollout high speed broadband to locations across northern NSW. This win in February followed on closely from a previous contract awarded in December valued at $66 million for connecting residences in NSW, VIC, and the ACT.

Transfield Services (ASX: TSE) is another major contractor to NBN Co, holding a contract for the roll out of the NBN in VIC . This contract was awarded in 2011 and interestingly Transfield doesn’t appear to have been overly active or perhaps successful in tenders since then for further services.

Foolish takeaway

Contracting for the most part is a low margin business. While opinions differ vastly regarding the government’s NBN policy, generally speaking, governments do get good pricing when they put contracts out for tender. This means the suppliers and contractors to the NBN may be receiving even slimmer margins than normal. Suffice to say, while headlines of big contract wins often sound fantastic, investors need to consider the profits, not revenues that the contractors will earn.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free.

More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »