Why the Aussie Broadband (ASX:ABB) share price rose 8% to a new high

The 10-month old ASX company has a new wholesale agreement with Telstra.

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The Aussie Broadband Ltd (ASX: ABB) share price has a new record high. It comes after shares in the company rocketed an eye-watering 7.78% to hit a new landmark price of $3.60 at market close on Wednesday.

One possible reason for today’s noticeable price rise could be Aussie Broadband’s new 5-year deal with the Telstra Corporation Ltd (ASX: TLS) wholesale division.

Let’s take a closer look at today’s news.

Aussie Broadband share price rises with new Telstra deal

In a statement to the ASX, Aussie Broadband announced a new 5-year deal with Telstra Wholesale “to provide backhaul capacity between 42 [National Broadband Network] NBN [point of interconnects] POIs and data centres” for areas not already covered by Aussie Broadband’s own fibre network.

According to the company, the new deal will bring forward a combined saving of $1 million per year for FY22 and $15 million per year from FY23 onwards.

All of Aussie Broadband’s POIs will be upgraded from 10GB and 20GB connections to a “minimum” 100GB. The company says the new deal will also provide more certainty for customers as the potential for internet disruptions should be diminished.

This news may be inspiring investors, judging by the surging Aussie Broadband share price.

The additional network capacity will accelerate growth in the business segment and underpins the company’s plans to increasingly target the enterprise and business market, according to Aussie Broadband. The telco also says the deal will facilitate additional growth in its residential and white label segments.

Management commentary

Aussie Broadband Managing Director Phillip Britt said that over the next six months, Aussie Broadband intends to release a range of new products into the Carbon platform, specifically suited to larger businesses.

Carbon has been a game-changer for many of our larger corporate customers; helping them to fully customise, design and order telecommunication services rather than prescribing strict, predetermined service packages.

Aussie Broadband share price snapshot

Over the past 12 months, the Aussie Broadband share price has increased 88.5%. The S&P/ASX 200 Index (ASX: XJO) has only increased 23.5% by comparison.

Only yesterday, Aussie Broadband broke its previous all-time high. The relatively young telco will release its full-year results on 30 August. Given its current valuation, Aussie Broadband has a market capitalisation of $685 million

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Aussie Broadband Limited. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Aussie Broadband Limited. 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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