Speculation is mounting that the $1.1bn telecommunication...

Speculation is mounting that the $1.1bn telecommunication service provider Aussie Broadband is in talks to buy Over The Wire.

The target has a market value of about $300m and offers telecommunication and IT solutions, specialising in converged voice and data networks and data centres.

Sources say Aussie Broadband was looking at the business earlier this year and is now in exclusive discussions.

Shares in Aussie Broadband have soared since it listed last year. It is keen to capitalise on lockdowns from the Covid-19 pandemic.

The situation is typical of online and technology stocks across the market, which have seen their valuations soar on the back of Covid-19 lockdowns and are probably keen to take advantage of their elevated share prices before conditions return to normal.

Aussie Broadband is currently trading on about 30 times its earnings before interest, tax, depreciation and amortisation.

Over The Wire is trading at about 10 times, and some believe a deal makes sense for this reason.

The target is said to have a strong management team led by chief executive Michael Omeros.

The other co-founder is director Brent Paddon, and both hold a significant stake of the business.

Aussie Broadband raised funds in September for an acquisition, securing $114m through an institutional placement and a further $20m through a share purchase plan.

Another market analyst says a purchase of Over the Wire by Aussie Broadband is not be an obvious move, because Over the Wire has a customer focus whereas Aussie Broadband is more of a reseller of the National Broadband Network.

The $158m listed Spirit Technology Solutions is a logical target for Aussie Broadband, sources say.

Spirit provides fast internet, managed IT support, cyber-security and voice and cloud storage to businesses, hospitals, schools and aged-care providers.

Aussie Broadband issued a trading update on Wednesday, saying that it continues to progress its mergers and acquisitions strategy.

Revenue increased by $11.3m to $111.4m up 11.3 per cent for the first quarter of the 2022 financial year.

This came as broadband connections increased 11 per cent in the first quarter of the 2022 financial year and business broadband connections increased 13 per cent on the previous quarter.

The company says demand for broadband has been strong during lockdowns in NSW and Victoria and is expected to return to normal levels.

But there are opportunities for broadband growth.

Aussie Broadband expects marketing and promotional costs to remain higher during the second quarter for the remainder of the 2022 financial year, if the growth opportunities continue.

Last year Aussie Broadband, which offers NBN, mobile and phone services, raised about $40m with a market value of about $190m to float on the Australian Securities Exchange.

The pricing equated to 12.3 times forecast EBITDA.

It is Australia’s fifth-largest services provider for the National Broadband Network, with more than 250,000 customers.

Based in Melbourne, it was founded in 2008. It main focus is NBN subscription plans and bundles to residential homes, small businesses, not-for-profits, corporate enterprises and managed service providers.