Service Stream (ASX:SSM) share price falls despite NBN agreement

The Service Stream Limited (ASX: SSM) share price is edging lower today despite the company announcing a new multi-year agreement with nbn.

| More on:
A man holds his hands out and shrugs.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Service Stream Limited (ASX: SSM) shares are falling lower today despite the company announcing a new, multi-year agreement with NBN Co. At the time of writing, the Service Stream share price is down 2.1% to $2.35.

What did Service Stream announce?

This morning, investors seem ambivalent about the company's long-term contract, sending the Service Stream share price lower.

According to its release, Service Stream has secured a significant contract with nbn under a unified field operations agreement. The contract will see the company provide service activations, operations and maintenance activities to the national broadband network. This will include working with fibre to the node (FTTN), fibre to the premise (FTTP), fibre to the basement (FTTB), fibre to the curb (FTTC), and hybrid fibre coax (HFC).

Terms of the deal

Under the contract, Service Stream and nbn will work together for a period of 4 years. This can be extended on nbn's behalf for an additional two 2-year options.

The new deal will take over the existing operations and maintenance master agreement (OMMA) that was in place since December 2015. It is anticipated the swap over will be completed around March 2021.

Furthermore, nbn has permitted Service Stream to operate in regional areas across Queensland, South Australia, Northern Territory, and Western Australia. Service Stream noted that additional regions will be allocated at nbn's discretion.

In the first year, the contract is estimated to generate roughly $70 million of revenue for Service Stream. For the following years, revenue will depend on actual work volumes carried out.

What did management say?

Service Stream managing director Mr Leigh Mackender commented on the milestone achievement, saying:

As a leading provider of operations and maintenance services to the telecommunications industry, we are pleased to secure another long-term maintenance agreement with nbn and to continue providing vital support to its customers.

Following the recent signing of the Unify Networks agreement in August across a similar term, Service Stream will effectively be providing nbn with operations and maintenance support across all mainland states and territories under either the Unify Networks or Services agreements.

Service Stream share price summary

The Service Stream share price is relatively flat over the past 12 months' trading, offering shareholders meek returns.

The company's shares reached a 52-week high of $2.85 in January, before falling to a multi-year low of $1.54 in March.

Based on the current Service Stream share price, the company has a market capitalisation of around $970 million and a price-to-earnings (P/E) ratio of 19.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Service Stream Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Man with rocket wings which have flames coming out of them.
Broker Notes

These ASX 200 shares could rise 40%+

Big returns could be on offer from these shares according to analysts.

Read more »

a man in a business suite throws his arms open wide above his head and raises his face with his mouth open in celebration in front of a background of an illuminated board tracking stock market movements.
Broker Notes

Analysts say these ASX shares are top buys in June

Brokers are urging investors to buy these shares. Let's find out why.

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors finished the trading week on a high note this Friday.

Read more »

A man in trendy clothing sits on a bench in a shopping mall looking at his phone with interest and a surprised look on his face.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Brainchip, Findi, Lottery Corp, and REA shares are falling today

These shares are ending the week in the red. But why?

Read more »

Happy teen friends jumping in front of a wall.
Share Gainers

4 ASX 200 shares leading the charge higher this week

Investors have been piling into these four ASX 200 shares this week. But why?

Read more »

Woman and man calculating a dividend yield.
REITs

What price target does Macquarie have on Goodman Group shares?

Goodman Group posted an interesting set of numbers in Q3. Here's Macquarie's take.

Read more »

A happy investor sits at his desk in front of his laptop and does the mexican wave with his arms to celebrate the returns from his ASX dividend shares
Share Gainers

Why Catapult, Champion Iron, Healthco, and Meeka Metals shares are pushing higher today

These shares are ending the week on a high. But why?

Read more »