Retail, Innovation and Manufacturing reporter for the NZ Herald

2degrees posts loss despite expansion

Chief executive Stewart Sheriff said the company had experienced a small growth in its customer base for the year ending 2015.
Chief executive Stewart Sheriff said the company had experienced a small growth in its customer base for the year ending 2015.

Telecommunications business 2degrees is keeping tight-lipped on the possibility of a takeover after Australian media speculated it could be being eyed up for an acquisition.

At the company's results briefing in Auckland yesterday chief executive Stewart Sheriff headed off any questions on the issue, saying it wasn't something he would be commenting on.

"You can read anything you want about [various companies] going to buy us, we won't be commenting on that - that is something the shareholders deal with," he said.

The company's shareholders include US-based telco Trilogy International Partners which owns 61.6 per cent.

Australian-listed telcos TPG, Vocus and M2 have been suggested as eyeing up the company, however, analysts were cautious, saying it was an option but unclear whether likely or not to happen.

2degrees posted a narrower loss for the 2015 year in a period that saw it expand to a full-service provider after it acquired Snap internet for an undisclosed sum in March last year, and invested heavily in network expansion.

The privately-owned company posted a $33.1 million loss for the year, 6 per cent better than the previous year, and earnings before interest, tax, depreciation and amortisation of $78.5 million, up from $54 million the year before. Revenue lifted 43.1 per cent to $569.1 million, which analysts said was in line with expectations.

"We were expecting [a loss] somewhere around there, it's a pretty tough market they're working in," said Tuanz chief executive Craig Young. "It was nice to see they have increased some of their post-paid numbers but we don't actually know their subscriber numbers so we're assuming they're managing to stay steady in the market."

"It looks to be a steady result ... not a big move from last year although they have got an increase in revenue."

First NZ Capital's Arie Dekker said the result was positive and 2degrees would likely be happy with top-line revenue growth but the challenge would be whether they were growing as fast as they would like.

Sheriff said 2015 had been focused on growing revenue market share, capability and building a platform for the company to grow from.

"Now we have that capability it's just about moving forward as a total telco and there's huge opportunity there," Sheriff said. "I think the biggest challenge is breaking into the business environment but it's also the biggest opportunity so we really see that as an area of focus for growth."

Sheriff wouldn't disclose customer numbers but said the company had experienced a small growth in its customer base and in higher-value clients. "Our network has been expanded to reach 95 per cent population coverage and we've reduced costs without compromising the quality of our highly regarded customer service."

Prior to the launch of 2degrees in 2009, the mobile market was a duopoly between Spark and Vodafone which Young said had not helped the market.

"In our view it's really important to the New Zealand mobile market that [2degrees] are successful. We would want to see them continue to build their market share, particularly in that post-paid market - that's critical for a competitive market."

- NZ Herald

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