Australian Broadband Services Pty Ltd

The Telco / ISP market will be redefined by the rollout of the NBN

Opportunities for smaller players to take substantial share in a shifting market

Technology has evolved allowing a high level of outsourcing by well managed RSPs

Partnered with the world’s largest direct sales company, Cobra Group to implement a proven subscriber growth strategy

Management bring over a 100 years in Telco, ISP and online media success to ensure the best in execution

Targeting 300K+ subscribers, AUD250M in revenues and top 10 ISP position within 5 years

Raising AUD2M in the lead up to an ASX listing in 2012

Overview

R2 – Sophisticated Investors

New Funds $2MEquity Share 30%

Share Price $0.25Cobra $500K

Post Cash Value $6.7M

R3 – ASX Listing (6 -12 mths)

New Funds $6MEquity Share / Dilution 31%

Share Price $0.50Value Post Listing $19M

IRR over 5 years 30%ROI year 5 180%

Deal Structure

Optical fibre to the home will shape the future of content

delivery and consumer behaviour

Opportunity to target millions of subscribers shifting to optical fibre or engaging for the first

time

Change of Government may lead to changes in implementation but

too expensive to scrap the NBN

For the first time smaller Telco’s and Aggregators will have access to non discriminatory wholesale pricing

The NBN

The ability to access wholesale supply through Aggregators and out sourced ISP solution

providers creates a low variable cost model suited to ABS

ABS will target areas due for connection to the NBN within 5 years and ensure a low cost NBN

transition without costs associated with incumbent legacy systems

Telstra and Optus wholesale DSL will continue to service the majority of fixed line broadband customers for some years

Other Networks

Preferred solution provider Utilibill is

proven in Telco sector.

ABS platform to manage product access, payment processing, billing and CRM.

Platform

*Market size forecast chart for internet subscribers in Australia (excluding internet connections through mobile handsets) based on Australian Bureau of statistics growth trends and premises connection forecasts provided by NBNCo.

Telco market has seen 20 years of strong growth no signs of slowing down

CY2012 CY2013 CY2014 CY2015 CY20160k

2,000k

4,000k

6,000k

8,000k

10,000k

12,000k

14,000k

16,000k

Market Size (Internet Subs)

NBN

Other Broadband

Market Size and Trends

Key wholesale rates negotiated and ready for integration

Platform Wholesale Data Phone VAS

Utilibill Nextgen Engin (VoIP) Aus Power and Gas

HarbourMSP Vocus Telcoinabox (Mobile) Get Covered / AVIVA

MCR NBN, Telstra, Optus Optus FetchTV

Key Suppliers

Partnered with Cobra - the World’s largest direct sales company

Extensive telecommunications sales experience

2M+ Telco accounts signed in Australia

7M+ Telco accounts signed in Europe

Success only fee structure ensuring cost base tied to sales

Proven partnership with Australian Power and Gas (ASX: APG)

Seed round investor

The Cobra Group

KPIs Year 1 Year 2 Year 3 Year 4 Year 5

New Subs per mth 3.5k 5.5k 7.5k 10.0k 12.5k

Churn per year 0k (3k) (20k) (44k) (70k)

NBN Subs 4k 21k 47k 87k 139k

DSL Subs 21k 68k 111k 147k 174k

Total Closing Subscribers 26k 89k 158k 234k 313k

NBN Market Share 1.22% 1.85% 2.09% 2.63% 3.18%

Total Market Share 0.22% 0.72% 1.22% 1.72% 2.20%

CY2012 CY2013 CY2014 CY2015 CY2016 0K

 50K

 100K

 150K

 200K

 250K

 300K

 350K

Closing Broadband Subscribers '000's

PAYG DSL

PAYG Optical

DSL

Optical

SIO Forecast

Variable cost model directly linked to sales;

Success only fees for new accounts to Cobra

Transaction based fees for billing, provisioning and customer service platform

Wholesale supply deals linked directly to consumption

Competitive pricing with an unprecedented level of flexibility;

‘pay as you go’ data plans increasing customer control over the billing

simple tiered data plans with unlimited switching

bundled VoIP, mobile, wireless broadband and energy

Partnerships with entertainment and media providers to cross promote and bundle media products as the optical fibre subscriber base expands

Business Strategy

At launch the ABS product offering;

Optical Fibre Cap and Pay As You Go Plans

ADSL2+ Cap and Pay As you Go Plans

VoIP phone plans (over the Internet or by dedicated fibre for NBN connected households)

Mobile Broadband Cap Plans

Mobile Phone Cap Plans

In home technology and data insurance

Year 2 product offering for expanded NBN market;

IPTV and VOD

Online Backup

Virtual Desktop

Power and Gas

Product Offering

100+ years of combined experience in senior roles with Telco and online media companies

Chairman - Ian McGregorB. BS, CA, FICS. (Chairman: APG , CFO: OzEmail, Unwired)

CEO - Rob Appel B. A., LLB. (CEO: Chaos Group, Microview, Production Manager: OzEmail)

CTO Services - Andrew Kent B. Sc, Elec Engineering (CTO: OzEmail, Webcentral, MD: Uunet A Pac Operations)

CFO - Andrew Cowling CA., B. Econ, Accounting (CFO: OzEmail Interline, iSOFT, Group Manager: Bigpond)

Dir Marketing & Sales - Geoff IsaacB. A. (Dir of Marketing: OzEmail, Unwired, Engin)

Management

KPIs Year 1 Year 2 Year 3 Year 4 Year 5New Subs per mth 3.5k 5.5k 7.5k 10.0k 12.5kChurn per year 0k (3k) (20k) (44k) (70k)

NBN Subs 4k 21k 47k 87k 139kDSL Subs 21k 68k 111k 147k 174kTotal Closing Subscribers 26k 89k 158k 234k 313k

NBN Market Share 1.22% 1.85% 2.09% 2.63% 3.18%Total Market Share 0.22% 0.72% 1.22% 1.72% 2.20%

NBN Market Size (premises connected/covered) 358k 1,129k 2,229k 3,306k 4,369k

Total Market Size 11,731k 12,318k 12,934k 13,580k 14,259k

ARPU (Service Revenue) $ 76.52 $ 81.00 $ 83.28 $ 86.44 $ 89.77 ARPU Incr 6% 3% 4% 4%

EPS -$ 0.12 -$ 0.03 $ 0.19 $ 0.30 $ 0.44 Shares on Issue $38,667k $40,987k $44,467k $49,107k $52,973k

Share Capital $7,541k $7,541k $7,541k $7,541k $7,541kNet Cash (excl Share Capital) ($5,876k) ($287k) $12,544k $15,112k $4,089k

IRR 30%ROI -68% -71% 39% 153% 180%

Headcount 13 18 23 28 33

KPI’s

CY2012

CY2013

CY2014

CY2015

CY2016

$500

0000

0.0

$0.0

$50.

0M

$100

.0M

$150

.0M

$200

.0M

$250

.0M

$300

.0M

$350

.0M

Total Revenue (EBITDA + NPAT Contribution) $m

RevenuesEBITDA

CY2012 CY2013 CY2014 CY2015 CY2016Revenues $13.1M $70.8M $121.9M $185.1M $256.6M

EBITDA -$4.8M -$1.1M $9.8M $21.5M $34.0M

NPAT -$4.8M -$1.2M $8.6M $15.0M $23.7M

EBITDA + NPAT

CY2012

CY2013

CY2014

CY2015

CY2016

$-0.20 $-0.10 $- $0.10 $0.20 $0.30 $0.40 $0.50

$-0.12

$-0.03

$0.19

$0.30

$0.44

Underlying EPS

CY2012 CY2013 CY2014 CY2015 CY2016

Underlying EPS $ -0.12 $ -0.03 $ 0.19 $ 0.30 $ 0.44

Underlying EPS

CY2012 CY2013 CY2014 CY2015 CY2016

-100%

-50%

0%

50%

100%

150%

200%

-68% -71%

39%

153%

180%

Return On Investment

CY2012 CY2013 CY2014 CY2015 CY2016

Return On Investment -68% -71% 39% 153% 180%

ROI

P&L Year 1 Year 2 Year 3 Year 4 Year 5

Total Services Revenue $7,566k $57,293k $125,677k $205,996k $297,933kHardware Revenue $3,357k $8,383k $9,280k $10,311k $11,207kSetup Fees $2,209k $5,161k $5,328k $5,292k $5,165kTotal Revenue $13,132k $70,837k $140,286k $221,599k $314,304kRevenue incr % $0k $0k $0k $0k $0k

Network & Carrier Costs ($11,228k) ($55,882k)($107,963k

)($170,328k

)($243,089k

)Gross Margin $1,904k $14,955k $32,323k $51,272k $71,215kOther Income $33k $13k $96k $379k $823kCustomer Acquisition & Service ($4,592k) ($11,473k) ($15,643k) ($20,498k) ($25,500k)Network, Billing & Hosting ($151k) ($106k) ($121k) ($136k) ($151k)Employee expenses ($1,285k) ($2,334k) ($3,349k) ($4,413k) ($5,642k)Marketing expenses ($184k) ($600k) ($738k) ($926k) ($987k)Office costs ($131k) ($195k) ($235k) ($315k) ($372k)Administrative expenses ($214k) ($325k) ($371k) ($423k) ($480k)Finance costs ($166k) ($1,052k) ($2,153k) ($3,439k) ($4,910k)Total Expenses ($6,690k) ($16,072k) ($22,514k) ($29,771k) ($37,219k)EBITDA ($4,786k) ($1,117k) $9,809k $21,501k $33,996kDepreciation and amortisation expense ($20k) ($40k) ($57k) ($73k) ($89k)Profit before income tax ($4,806k) ($1,157k) $9,752k $21,428k $33,906kIncome tax expense $0k $0k ($1,137k) ($6,428k) ($10,172k)Net Profit/Loss after Tax ($4,806k) ($1,157k) $8,615k $15,000k $23,734k

P&L

Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5

ASSETS Cash $1,665k $1,378k $13,922k $36,574k $48,204k Inventory $1,312k $1,522k $1,671k $1,790k $1,833kAccounts Receivable, net $2,785k $6,085k $8,137k $8,835k $29,496kTotal Current Assets $5,762k $8,986k $23,730k $47,200k $79,533kPlant & Equipment, net $133k $173k $197k $204k $195kTotal assets $5,894k $9,158k $23,927k $47,404k $79,729k

LIABLITIES AND SHAREHOLDERS EQUITY Accounts Payable $3,261k $7,682k $12,698k $18,642k $25,331k Income Taxes payable $0k $0k $1,137k $3,672k $5,572kTotal Current Liabilities $3,261k $7,682k $13,835k $22,313k $30,904kTotal Liabilities $3,261k $7,682k $13,835k $22,313k $30,904k

COMMITMENTS AND CONTINGENCIESShareholders Equity Additional paid up capital $7,541k $7,541k $7,541k $7,541k $7,541k Accumulated profit/(deficit) ($4,907k) ($6,065k) $2,551k $17,550k $41,285kTotal Shareholders equity $2,634k $1,476k $10,091k $25,091k $48,825k

Total Liabilities & Shareholders Equity $5,894k $9,158k $23,927k $47,404k $79,729k

Balance Sheet

Cash Flow Year 1 Year 2 Year 3 Year 4 Year 5Cash flows from Operating Activities ($4,839k) ($1,170k) $9,656k $21,049k $33,083kAdjustments to reconcile net profit/(loss) to net cash used in operating activitiesDepreciation $20k $41k $57k $73k $89kHardware COS $3,498k $8,595k $9,471k $10,301k $10,847kAllowance for Bad & Doubtful Debts $153k $981k $2,013k $3,217k $4,596kLoss/(Gain) on disposal of Plant & Equipment $0k $0k $0k $0k $0kChanges in assets and liabilitiesInventory ($4,810k) ($8,805k) ($9,620k) ($10,421k) ($10,890k)Accounts Receivable ($2,938k) ($4,281k) ($4,065k) ($3,915k) ($25,256k)Accounts Payable $3,261k $4,422k $5,016k $5,943k $6,690kAccrued Expense $0k $0k $0k $0k $0kincr/(decr) in income taxes payable/receivable, net $0k $0k $0k ($3,894k) ($8,271k) increase in deferred income taxes $0k $0k $0k $0k $0kNet cash used in operating activities ($5,655k) ($219k) $12,528k $22,354k $10,888k

Cash flows from Investing Activities Miscellaneous Income $0k $0k $0k $0k $0k Sale of Plant & Equipment $0k $0k $0k $0k $0k Purchase of Plant & Equipment ($153k) ($81k) ($81k) ($81k) ($81k) Interest Income $33k $13k $96k $379k $823kNet cash used in investing activities ($120k) ($67k) $16k $299k $742k

Cash flows from financing Activities Payments under finance lease obligations $0k $0k $0k $0k $0k Payments of dividends $0k $0k $0k $0k $0k Interest Expense $0k $0k $0k $0k $0k Proceeds from Bank Overdraft $0k $0k $0k $0k $0kFund Raising Expense ($560k) $0k $0k $0k $0k Proceeds from Common Stock issued $8,000k $0k $0k $0k $0k

Net cash provided by/(used in) financing activities $7,440k $0k $0k $0k $0k

Incr/(decrease) in cash $1,665k ($287k) $12,544k $22,652k $11,630kopening cash $0k $1,665k $1,378k $13,922k $36,574kClosing Cash $1,665k $1,378k $13,922k $36,574k $48,204k

Cash Flow

IRR YR 0 YR 1 YR 2 YR 3 YR 4 YR 5

30% ($7,541k) ($5,876k) ($287k) $12,544k $15,112k $4,089k

NPV of cashflows $13,595k

Cost of capital 15% YR 1 YR 2 YR 3 YR 4 YR 5

Discounted Cashflow $7,541k ($5,110k) ($217k) $8,248k $8,640k $2,033k

ROI -68% -71% 39% 153% 180%

EPS YR 0 YR 1 YR 2 YR 3 YR 4 YR 5

Net Profit after tax ($4,806k) ($1,157k) $8,615k $15,000k $23,734k

Shares On Issue $39,827k $42,147k $45,627k $50,267k $54,133k

EPS $ -0.12 $ -0.03 $ 0.19 $ 0.30 $ 0.44

Valuation Guide Per SIO YR 0 YR 1 YR 2 YR 3 YR 4 YR 5

Ausbbs Market Cap $41,793k $144,482k $257,640k $380,718k $510,318k

Value Per Share $ 1.05 $ 3.43 $ 5.65 $ 7.57 $ 9.43

Market Guide Per SIO Subs at Dec 2010 Market Cap Value per Sub

Iinet $650k $425,000k $654

TPG $516k $1,344,000k $2,605

Average $1,629

* As at Sep 2011

Valuation Models

Application of Funds - Cash Flow to Listing 6 months to 30 June 12

R2 Funding $2,000k

Cash flows from Operating Activities ($1,084k)

Inventory ($918k)Accounts Receivable ($864k)Accounts Payable $1,290k

incr/(decr) in income taxes payable/receivable, net $0k

increase in deferred income taxes $0kNet cash used in operating activities ($1,575k)

Cash flows from Investing ActivitiesPurchase of Plant & Equipment ($136k)Interest Income $9kNet cash used in investing activities ($127k)

Cash flows from financing ActivitiesInterest Expense $0k

Net cash provided by/(used in) financing activities $0k

Incr/(decrease) in cash ($1,702k)

Closing Cash $298k

Application of Funds

R2 – Sophisticated Investors

New Funds $2MEquity Share 30%

Share Price $0.25Cobra $500K

Post Cash Value $6.7M

R3 – ASX Listing (6 -12 mths)

New Funds $6MEquity Share / Dilution 31%

Share Price $0.50Value Post Listing $19M

IRR over 5 years 30%ROI year 5 180%

Deal Structure

Question