MENU Ltd takes NBN to the bargain basement

Entrepreneurial retailer Ltd (ASX: KGN) continues to diversify into other sectors after announcing that it has officially launched Kogan Internet, with a flagship plan of unlimited data NBN at 50 megabit per second download speeds for $58.90 per month.

It’s also offering slower 12 megabit per second download plans at the same price, both with $69 upfront modem charges.

This compares to established rivals such as TPG Telecom Ltd (ASX: TPM) that is offering 50 megabit unlimited data plans at $69.99 per month, while Telstra Corporation Ltd (ASX: TLS) is offering NBN 50 plans with free Telstra TV and Foxtel Now for $99.99 per month. Notably though all the plans have different connection fees and are complicated which means consumers will be left to weigh up what suits them best.

Clearly though Kogan is targeting consumers on tight household budgets and as such is more of a competitor to the likes of TPG, Vocus Group Ltd’s (ASX: VOC) Dodo Internet and Singaporean usurper My Republic.

The government-planned NBN has wreaked havoc on the profit margins and outlooks for listed telcos with TPG, Telstra and Vocus all tumbling in price over the past 18 months.

Margins are also coming pressure in the mobile space with the only saving grace being that consumer demand for mobile or residential data is rising exponentially as video explodes in popularity.

Kogan has also recently launched a virtual mobile network by piggybacking off Vodafone Australia‘s network and is launching its home internet in partnership with Vodafone, which itself is tipped as an entrant into the NBN home broadband market.

No surprise then that investors are staying away from the competitive home broadband space for now, with TPG being the only investment grade business across the sector.

TPG’s share price has been whacked as it invests heavily to build out a 5G mobile network which may provide an opportunity for investors with a 3-year time horizon to buy shares on the cheap.

Still given the rising competition TPG carries plenty of risk, while Kogan itself is also widely fancied by investors to grow nicely thanks to its dominant position as a discount retailer despite the wafer thin margins on which it operates.

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Motley Fool contributor Tom Richardson owns shares of TPG Telecom Limited and Vocus Communications Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of and has recommended Telstra Limited, TPG Telecom Limited, and Vocus Communications Limited. The Motley Fool Australia has recommended ltd. 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 Scott Phillips.

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