I believe Vaughan Bowen is one of Australia’s great telecommunications entrepreneurs. Vaughan was the founder of M2 Telecommunications, which proved exceptionally rewarding for its long-term shareholders. After floating on the ASX in October 2004 for $0.25, it proceeded to rally to $11.00 – whilst paying out an aggregate $1.23 in dividends – over the ensuing ten-and-a-half year period.
Uniti Wireless (ASX: UWL) floated on the ASX in mid-February 2019 with a market capitalisation of $32.75 million, comprising 131 million shares at $0.25 each. And following the recent FuzeNet acquisition, the expanded business plans are to deliver super-fast, high quality, fixed-line and fixed-wireless broadband internet and other telecommunications services to residential, business, government and enterprise customers over most access networks in Australia.
Uniti Wireless installs its own antennae on existing high structures such as roof tops, water towers and TV towers and possibly street light poles. Fixed wireless transmission using radio waves and “small cell” technology – which is part of the 5G technology – is to add antennae on the rooftops of buildings or residences, from where data travels through fixed lines to the customers’ modems (as opposed to fixed-line fibre, which is laid underground).
Uniti Wireless business currently comprises 70 per cent consumers and 30 per cent businesses. Around 25 per cent of the revenue – forecast at $23 million for FY2019 – comes from fixed wireless services and most of the balance comes from reselling fibre alternatives to the NBN. A small amount comes from selling NBN plans.
Within a few days of the float, CEO Michael Simmons, who had worked closely with Vaughan at M2 Telecommunications, gave two of the company’s founders and significant shareholders, Che Metcalfe and Sasha Baranikow, their marching orders. As at yesterday, they were effectively replaced by Vaughan Bowen.
One of Vaughan’s priorities is to pick customers off the national broadband network with an expanded fixed wireless product. The company will look to grow a fixed line fibre retail business in residential complexes and business premises. Among the company’s acquisition targets will be several small NBN retailers, many of which are struggling.
There is a belief that with time and with scale, reselling the NBN could generate acceptable margins. Meanwhile, the fixed wireless bypass market, while not a systematic threat to the NBN, is offering “some reasonably compelling opportunities.”
While the company is forecasting an EBITDA figure of only $2 million for FY2019, sometimes it’s sensible to be patient and back human capital. And to that end, I’d be happy to back Vaughan Bowen and Michael Simmons.
