$165m BNZ facility boost for 2degrees

By Anthony Doesburg

Chairman says the funding arrangement is a major milestone as it pursues rivals.

Stewart Sherriff says the BNZ funding arrangement is a major milestone.
Stewart Sherriff says the BNZ funding arrangement is a major milestone.

2 degrees has negotiated a $165 million credit facility from the Bank of New Zealand and is immediately handing over $120 million to clear a debt owed to equipment provider Huawei.

That will leave the mobile network operator $45 million to spend on its 3G network this year before setting off in 2014 in pursuit of rivals Telecom and Vodafone in the 4G stakes.

4G services can deliver data downloads to mobile devices at up to 100Mbit/s, which is ample for video streaming.

The company's Huawei-supplied 3G network can be readily upgraded to 4G, according to Stewart Sherriff, who has been acting chief executive since 2degrees head Eric Hertz and his wife, Kathy, died in a plane crash in March.

Sherriff, who also chairs the 2degrees board, says the BNZ funding arrangement is a major milestone.

"We now know we have enough money to be completely competitive," he said. "The shareholders are happy with our performance so far and they expect us to continue to execute in accordance with the plan."

US-based Trilogy International Partners, of which Sherriff is a senior executive, owns 58.7 per cent of 2degrees and Dutch company Tesbrit has a 27 per cent stake. The Hautaki Trust, whose allocation of 3G spectrum by the Waitangi Tribunal underpins 2degrees' network, is the next biggest shareholder with 10 per cent.

Sherriff would not detail 2degrees' performance other than to say the business is cash-flow positive and has a million customers. Australian analyst Paul Budde puts its market share at about 20 per cent as it approaches its fourth birthday in August.

All eyes in the mobile market are on the Government's upcoming auction of rights for 18 years to 700MHz spectrum freed up by the switchover from analogue to digital TV - the so-called digital dividend. Potential bidders have until Monday to make submissions on the sales process.

2degrees is putting a case for getting 20MHz of the available 45MHz because it has a smaller existing share of 4G-capable spectrum than Telecom or Vodafone. Although 4G services can operate in other frequencies, there is a premium on the 700MHz band because of its signal range and ability to penetrate buildings.

Most estimates of how much the Government is counting on from the sale are in the low hundreds of millions of dollars range. Sherriff will not be drawn on 2degrees' price expectations.

"I can't talk about that. Obviously, if we have a business plan, we've made some assumptions about what we think the cost of that spectrum is going to be," he said. "It's a finite resource - there is only 45MHz of it - and if we don't pick it up on this round it's another 18 years before you get a second bite at the cherry. That's an awfully long way away."

Even if it was outbid, the company had existing spectrum for 4G services, he said.

Meanwhile, the company continues to look for a permanent CEO.

- NZ Herald

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