Superloop Warns of Margin Pressure Amid AGL’s Telecom Business Sale
Superloop warns of a potential $4 million annual gross margin impact following AGL Energy's decision to divest its telecommunications business, with subscriber migration expected in early 2027.
- AGL Energy announces intent to divest its telecommunications business
- Superloop's wholesale agreement with AGL subsidiary Southern Phone runs until June 2029
- Subscriber migration from AGL's network anticipated in first half of 2027
- Potential annual gross margin impact of up to $4 million for Superloop
- Impact depends on extent of AGL's reduction in wholesale service usage
AGL's Telecom Divestment Signals Change for Superloop
Superloop Limited (ASX – SLC) has publicly acknowledged the recent announcement by AGL Energy Limited regarding its plan to divest its telecommunications business. This strategic move by AGL is set to reshape the wholesale telecommunications landscape, with direct implications for Superloop’s operations and financial outlook.
Wholesale Agreement and Subscriber Migration
Currently, Superloop maintains a wholesale agreement with Southern Phone Company Limited, a subsidiary of AGL, providing network and backhaul transit services. This contract is valid until June 2029. However, with AGL’s divestment plans, a migration of subscribers away from AGL’s network is expected to commence in the first half of 2027. This migration could significantly reduce the volume of wholesale services Superloop provides to Southern Phone.
Financial Impact and Market Implications
Superloop estimates that if AGL fully reduces its usage under the existing wholesale agreement following subscriber migration, the company could face a gross margin impact of up to $4 million on an annualised basis. While this figure represents a material hit, it is important to note that the exact timing and scale of the impact remain uncertain and will depend on how quickly and extensively AGL executes its divestment and subscriber migration.
Superloop’s business model, which leverages its Infrastructure-on-Demand platform and extensive fibre and wireless assets, has positioned it as a key player in the wholesale telecommunications market. The potential loss of revenue from AGL’s subsidiary underscores the risks inherent in reliance on major wholesale customers but also highlights Superloop’s exposure to shifts in the broader telecom sector.
Looking Ahead
As the telecommunications industry continues to evolve, Superloop will need to navigate the challenges posed by AGL’s exit while seeking new opportunities to offset the anticipated margin pressure. Investors will be watching closely for updates on subscriber migration progress and any strategic responses from Superloop to mitigate the financial impact.
Bottom Line?
Superloop’s upcoming financial results will reveal how well it weathers the fallout from AGL’s telecom divestment.
Questions in the middle?
- How quickly will AGL’s subscriber migration proceed and what is the exact timeline?
- Will Superloop secure new wholesale customers to replace lost revenue from Southern Phone?
- Could Superloop renegotiate terms or extend contracts to soften the margin impact?
