NBN rival Uniti Wireless plans to expand nationally
During 2018 Uniti has added approximately 300 customers per month, surpassing 6,000 installed active wireless customers. Successful expansion into Australia’s metropolitan areas with an increased network footprint has the potential to accelerate customer
Adelaide based telecommunications company Uniti Wireless will hit the ASX boards this week as it concludes a capital raising to expand its fixed wireless broadband technology across Australia, to fund the acquisition of FuzeNet and challenge the national broadband network - NBN.
Uniti Wireless provides connections over its own wireless access network to residential and business premises via telecommunication towers. The technology is seen as a alternative to the NBN network and ADSL connections. Currently operating in Adelaide, the company plans to invest up to $6.8 million to deploy its network across Sydney, Brisbane, Melbourne and Perth.
The listing is conditional on completion of the $8.1 million acquisition of FuzeNet, Pty Ltd, a broadband and data connectivity company. The merged entity forecasts pro-forma revenues of $23.1 million and EBITDA of $2 million.
With a market cap of $37.9 million and enterprise value (EV) of $29.9 million, the IPO is valued at 14.5 times forecasted earnings.
During 2018 Uniti has added approximately 300 customers per month, surpassing 6,000 installed active wireless customers. Successful expansion into Australia’s metropolitan areas with an increased network footprint has the potential to accelerate customer acquisition and growth rates.
However, the telecommunications sector is a highly competitive market as traditional fixed line providers including Telstra or Optus as well as the NBN and other ‘disruptors’ will compete for market share.
The $51 billion NBN rollout – Australia’s largest ever infrastructure project - is highly controversial, not least because of its outdated technology and poor connection speeds in some areas. With the continuing evolution of wireless technology, it is expected that speed and performance will soon surpass some of the existing fixed broadband services, thus creating additional demand for alternative services.
Uniti has decided it is time to leave its comfort zone: the company has established a strong presence in Adelaide, but as it expands its network into other areas the risk of cost overruns will increase. Expansion strategies typically involve increased expenditure, and cost overruns are a common occurrence in project management. While failure to deliver ongoing growth could adversely impact the company’s financial forecasts and future shareholder returns, IPO investors will put their trust in the board and executive management, which have a strong track record in the telco space.
Uniti Wireless Limited
ASX Code: UWL
Shares on Offer: 72m
Listing Price: $0.25
Market Capitalisation: $37.9m
Listing Date: 13th February
Author: Simon Herrmann
Feb 12, 2019
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.