Why the Service Stream (ASX:SSM) share price is surging 14% higher today

The Service Stream Limited (ASX:SSM) share price is zooming higher on Wednesday. Here’s why its shares are storming higher…

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The best performer on the S&P/ASX 200 Index (ASX: XJO) on Wednesday has been the Service Stream Limited (ASX: SSM) share price by some distance.

In afternoon trade the essential network services provider’s shares are up 14% to $2.03.

Why is the Service Stream share price zooming higher?

Investors have been buying Service Stream’s shares on Wednesday after the Federal Government revealed plans to spend upwards of $4.5 billion to upgrade the NBN over the next three years.

According to the media release, this upgrade will mean around eight million Australian homes will have access to ultra-fast broadband speeds of up to 1 gigabit per second. This compares to the current mandatory minimum speed of 25 megabits per second.

Minister for Communications, Cyber Safety, and the Arts, the Hon Paul Fletcher MP, commented: “The 2013 decision by the Coalition to roll out the NBN quickly, then phase upgrades around emerging demand, has served Australia well. It meant the NBN was available to almost all Australians when COVID-19 hit, giving us high speed home connectivity when we needed it most.”

“And it means NBN Co is now well placed to invest in Australia’s broadband infrastructure to meet Australians’ growing appetite for faster speeds,” Minister Fletcher said.

Why is this good news for Service Stream?

This could be a major positive for Service Stream as it has been generating significant revenues by supporting the rollout of the NBN in recent years.

In addition to this, just last month it announced a long‐term agreement with NBN Co for the provision of network operations, maintenance, and optimisation services to the network.

This is likely to put Service Stream in a strong position to support the upgrade of the network over the coming years and generate further meaningful revenues.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Service Stream Limited. 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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