Investors sour on Aussie Broadband's new challenger brand Buddy Telco with $10m marketing cost

After rival Superloop (ASX: SLC) scooped up its white labelling agreement with Origin Energy (ASX: ORG) in March, telco Aussie Broadband (ASX: ABB) has responded with a new value market challenger brand called 'Buddy Telco', led by a canine mascot who is hoping to fetch four million households as new customers.

To start with Aussie Broadband is targeting 100,000 customers for Buddy within three years of launch, which would offset a substantial chunk of the 145,402 Origin broadband services the company today revealed it would lose over the coming four months. 

Despite forecasts that Aussie Broadband would hit the top end of its $116-121 million EBITDA guidance and the leadership's optimism around Buddy, investors were no friends to Aussie Broadband today with shares down 16.5 per cent at the time of writing at $2.98.

This price is down 31 per cent on its level of $4.33 prior to Superloop's competitive blow to its erstwhile suitor.

Aussie Broadband revealed an EBITDA guidance of $125-135 million for FY25, but this range would be $10 million higher if not for the marketing, branding and set-up costs of Buddy.

The company says the self service-only offering Buddy launched today with a simple and seamless digital-first experience where users can manage their connection, upgrades, outages and usage through an app, website or live chat.

The service will be supported by Aussie Broadband's fibre infrastructure with connection to all 121 POIs (points of interconnect), and is expected to provide a positive earnings contribution from FY27 onwards.

"Aussie is thrilled to launch Buddy Telco, a truly digital-first offering that provides value and ease of use to the consumer,” says Aussie Broadband group managing director and co-founder Phillip Britt.

"Our strategic investment in Buddy allows the group to compete in both the premium and value-led broadband sectors, further diversifying the markets we operate in. We look forward to continuing to change the game through Buddy’s success."

The company has also emphasised it will not be reducing its main brand marketing activity and will continue to focus on driving growth across both brands.