2degrees' growth makes waves

Eric Hertz, 2degrees chief executive. Photo / Dean Purcell

Mobile operator 2degrees' unprecedented growth in customer numbers could have a major effect on Telecom, industry observers say.

Craigs Investment Partners broker Chris Timms said that in the six months to December, Telecom and Vodafone grew their customer bases by 21,000 to 2.2 million (61.9 per cent prepaid) and 2.5 million (68.4 per cent prepaid) respectively.

"But Telecom revenue growth remains anaemic. Telecom's connection growth may partly be a timing issue due to its XT migration as customers churn off CDMA and reconnect on XT," he said.

Vodafone now has 47 per cent of market share of connections, Telecom 42 per cent and 2degrees 11 per cent. That equals New Zealand mobile penetration of 119 per cent based on the 4.4 million population.

2degrees says it has 580,112 customers.

Timms wants more insight on 2degrees' infrastructure plans after it advised it would invest in a $100 million extension of its network this year and next using vendor financing from network partner Huawei.

"We assume the network build will be focused on major metro areas."

The combination of infrastructure building, mobile termination rates regulation from July and a good brand campaign left 2degrees well positioned to grow its customer base, creating headwinds for Telecom, he said.

Telecommunications Users Association chief executive Paul Brislen said 2degrees could eventually take a third of the market.

He said estimating 2degrees' market share was difficult because the information released by Telecom and Vodafone was not necessarily comparable, but the company was doing "exceedingly well".

"They've come into the market with a very simple proposition - they have complicated it somewhat over the months since they launched. But when they launched I think it was quite a breath of fresh air."

Other telcos' pricing plans were deliberately confusing and there were too many plans, he said.

But Telecom had quietly rejigged some on-account plans to mimic 2degrees' approach and Vodafone had introduced "anynet" texts for customers wanting to text other networks.

"I think the others are sitting up and taking notice, if nothing else."

2degrees chief executive Eric Hertz said the company had 10 stores and planned to open another 30 by the end of the year.

Data demand was doubling every two months and the company's investors saw long-term growth potential in the business and the country's mobile market.

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