Aussie Broadband Ltd (ASX: ABB) shares are starting the week in a disappointing fashion.
In morning trade, the ASX 200 share is down over 4% to $5.30.
This compares unfavourably to a 1.3% gain by the ASX 200 Index early on Monday.
Image source: Getty Images
Why is this ASX 200 share falling?
Investors have been selling the broadband provider's shares following the release of an update on its performance and transactions.
According to the release, the ASX 200 share has completed the acquisition of the telecommunications business of AGL Energy Limited (ASX: AGL). Management believes this adds significant scale to its customer base and provides material earnings growth potential through its long-term strategic partnership with AGL.
In exchange, AGL has been issued $115 million in Aussie Broadband shares under a share subscription agreement. This represents approximately 22 million fully paid ordinary shares, which is approximately 7% of the issued capital.
The migration of AGL's combined 350,000 NBN services and mobile connections will complete in the second quarter of FY 2027. Management expects this to deliver a step change in connections on the Aussie Broadband network.
The AGL telco business is expected to deliver $21 million in underlying EBITDA in the first 12 months post migration. However, it notes that there is upside potential from further growth in connections through AGL's existing marketing channels and bundled energy offerings, as well as from margin expansion through scale and efficiency gains.
Management is ultimately targeting 500,000 subscribers from AGL's 4.5 million customer base.
Elsewhere, the More and Tangerine Telecom customer migrations are on track, the acquisition of Nexgen has completed, and the divestment of Digital Sense Hosting has settled.
Trading update
The ASX 200 share also provided the market with a trading update this morning.
It revealed that it surpassed 1 million broadband connections in mid-May and is on track to become the third largest NBN service provider with more than 1.3 million NBN connections at the completion of the large-scale connection migrations and AGL telco acquisition.
In light of this, management expects to report earnings for FY 2026 in the middle of the previously announced underlying EBITDA guidance range of $162 million to $167 million. However, capital expenditure is expected to be at the upper end of the previously provided guidance range of $55 million to $60 million.
It is possible that this performance is softer than the market was expecting, putting pressure on the Aussie Broadband share price today.
The company's chief executive, Brian Maher, commented:
I'm immensely proud of the effort delivered by the team. Completing one transaction is significant but completing four transactions within six months, while delivering the largest migration of connections on the NBN network to date and continuing to grow the business organically, is exceptional. These transactions are central to our upgraded Look‑to‑28 ambitions, repositioning the Company to deliver higher‑quality and more sustainable earnings streams.
While competition remains strong, our FY27 pricing plans, continued focus on Australian‑based customer service, and high-quality network performance position us well to continue winning new customers, particularly those migrating from legacy technologies and lower‑speed services. The operational leverage from increased scale is expected to improve capital efficiency and support stronger returns over time.
