Aussie Broadband in "preliminary discussions" for potential merger with Over The Wire

Aussie Broadband has revealed it has approached fellow ASX-listed telco Over The Wire on a potential merger between the two firms.

In an ASX announcement responding to an article published by The Australian overnight, the company said it had preliminary “discussions” with OTW, but said they were “incomplete” and denied the article’s claim of them already in “exclusive discussions”.

The discussions are preliminary and incomplete, and no agreement has been reached in relation to any transaction. There is no guarantee that any agreement will be reached or that a transaction will eventuate,” the announcement read.

“Aussie Broadband will keep the market informed in the event of any material developments.”

Over The Wire has also commenced a trading halt on its shares and is set to make a separate announcement to respond to the rumours.

In The Australian’s story, its sources are reported to have said Aussie Broadband “was looking at” Over The Wire earlier this year and that the two companies had now started “exclusive discussions”.

The article cited both companies’ “soaring” share prices since the COVID-19 pandemic as a reason for a potential merger, with Aussie Broadband trading on around 30 times its EBITDA and OTW trading on 10 times its EBITDA.

Aussie Broadband in September revealed it had raised $114 million to help fund its growth plans, including new business product and technology development, more fibre and network builds and potential mergers and acquisitions.

The company reiterated its plans for the capital raise in a trading update released yesterday, and said its mergers and acquisitions strategy continues to progress.

In the trading update, Aussie Broadband reported quarter on quarter revenue growth of 11.3 percent to $111.4 million for the period, citing customer growth. Overall broadband connections increased 11 percent, or 44,932, quarter on quarter.

Aussie Broadband managing director Phil Britt said, “We’re extremely pleased with performance across all segments for the quarter.”

“Momentum with residential connections increased due to updated marketing and promotional campaigns. We are continuing to see significant demand for our services, even though the migration onto the NBN is largely complete, demonstrating the appeal for our high-quality network with award-winning customer service.”