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NetComm Wireless reports AU$2m profit on the back of NBN rollout

Contracts with NBN have led to NetComm Wireless reporting a net profit of AU$2 million on revenue of AU$74.3 million and EBITDA of AU$6.23 million.
Written by Corinne Reichert, Contributor

Australian broadband equipment company NetComm Wireless has announced its financial results for 2015-16, reporting a net profit of AU$2.03 million, down 17.7 percent from the AU$2.5 million reported last year as it invests in infrastructure and staff skilling.

Revenue was up by 14.9 percent year on year, from AU$74.3 million to AU$85.3 million thanks to the company's role in the Australian government's National Broadband Network (NBN) rollout.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) were AU$6.23 million, down 14.6 percent from AU$7.3 million. The loss was also attributed to investments in infrastructure and staff skills to enable the company to pursue global machine-to-machine (M2M), fixed-wireless, and network terminating devices contracts worldwide.

Losses in its base broadband business were offset by growth in M2M and fixed wireless; a breakdown of its revenue saw broadband add AU$26.4 million, down 34.8 percent, while M2M and fixed wireless contributed AU$58.7 million, up 73.9 percent, thanks to "substantial growth" in the NBN-Ericsson fixed-wireless project plus other M2M projects the company is working on.

"We have continued to successfully execute our global growth strategy, with M2M and fixed-wireless revenues up 74 percent over the past 12 months," NetComm Wireless CEO David Stewart said.

"NetComm Wireless' strong performance in FY16 reflected the continued ramp-up of the Ericsson/NBN contract rollout, which gained pace and is expected to experience a continued volume increase in FY17. Our M2M and fixed-wireless business now accounts for the majority of our revenue, making up close to 70 percent of group sales in FY16, up from 45 percent in FY15."

Net assets were AU$77.3 million, up 214.3 percent from AU$24.6 million, as of June 30, while cash and cash equivalents stood at AU$36.5 million, up 973.8 percent from AU$3.4 million last year.

NetComm Wireless is chasing fixed-wireless in rural areas -- saying there is a $80 billion global opportunity for fixed-wireless globally for connecting the 10 percent of people who live in regional and rural areas -- and fibre to the distribution point (FttDP) in more populated areas as legacy copper networks are being replaced globally.

"With the replacement of copper networks with fibre and HFC [hybrid fibre-coaxial] cable, there is a large opportunity to deploy fibre to the distribution point and cable to the distribution point (CttDP)," NetComm Wireless said in its results presentation.

"This requires a device that 'connects' fibre or cable which is deployed down a street to the copper line that enters the customers' premises. This type of technology provides high-speed connectivity at an affordable price and can be deployed much faster than fibre all the way to the home."

In Australia, fixed-wireless services are expected to cover 0.6 million Australian premises by FY18, according to NBN's Corporate Plan 2017, and FttDP is being eyed for "several hundred thousand" premises.

The company is also focusing on the global M2M market by continuing to "actively pursue" contracts in the M2M space primarily in the United States, Europe, Australia, and Japan.

"The Ericsson-NBN fixed-wireless contract is a key Australian M2M contract. FY16 saw a significant growth of 90 percent in rollout volumes and revenues," the company said.

"A key component of our strategy is to leverage 'coat tail' relationships. This is where we form relationships with key suppliers or ecosystem players and leverage their knowledge, contacts, and reputation within key verticals.

"Volumes from the Ericsson-NBN contract are expected to accelerate, our M2M business has very good planned growth, and we will begin to receive some small revenues from the USA fixed-wireless contract."

NetComm Wireless signed a master purchase agreement during the year to deploy a fixed-wireless solution for "one of the two largest US-based telecommunications carriers", and also signed a frame purchase agreement with Nokia in July to supply fixed-wireless devices for the latter's global rural broadband internet initiative, known as "FastMile".

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