The battle between Spark and Vodafone to lead the mobile market has never been closer. Photo / Bloomberg
The battle between Spark and Vodafone to be crowned king of New Zealand's mobile market has never been closer, but an unlikely third player is cutting swathes into their territory.
There are some 6.3 million mobile phone connections in New Zealand and providers are scrambling to boost their market share, by differentiating themselves from the competition.
Spark and Vodafone are neck-and-neck according to global market intelligence firm IDC, with about 38 per cent of the market apiece - though Vodafone says its share is slightly higher than that.
The now-entrenched third player, 2degrees, has lifted its market share steadily since it launched in 2009 to a more than credible 23-24 per cent.
IDC telecommunications research manager Shane Minogue says the battle for the top spot has never been closer.
"If you go back to 2010, Vodafone had about a 60 per cent share in the market whereas Spark were at about 37; now it's really neck-and-neck.
"In truth, depending how you quantify mobile revenue, you could actually argue that either of them is number one. I think if you said either one was ahead at the moment, you'd probably get a lot of anger from the other."
Spark has more of the sought-after post-paid (contract) connections, which Minogue says is due largely to its long-standing relationship with businesses. Vodafone continues to lead in the pre-paid market.
"The value of a pre-paid customer is far lower than the value of a post-paid one and that's why Vodafone are ahead in total connection numbers, but then with revenue numbers it's a lot closer," Minogue says.
Vodafone's and Spark's post-paid offerings are virtually identical: $39 a month for 1GB of data, 300 call minutes and unlimited texts; $59 for 4GB, unlimited minutes and texts; and $79 for 7.5GB and unlimited talk and texts. Their pre-paid deals are also the same: $19 for 750 megabytes, 150 minutes and unlimited texts.
Where they differ is in the perks they offer to lure and retain customers, such as Spark offering Spotify and free WiFi, or Vodafone's My Flex Prepay or Fantastic Fridays schemes.
Minogue says 2degrees attempts to appeal to a broader range of customers with $30, $40, $50, $60 and $80 accounts.
If you look at the key market offerings today, text is pretty much unlimited on most bundles now, or as good as. Minutes is approaching that, too.
"There's a wider variety and they do try to push better value. So they can offer less of those additional services, but for the $40 mark you get 1.5GB from 2degrees and only 1GB off the other two. While that might not seem like such a difference, increasingly for customers the first thing they're looking at is that data number."
However, 2degrees recently launched its "data clock", which allows customers to buy data by the minute or hour rather than the megabyte, indicating that it, too, may be looking to use sweeteners to attract customers.
"We've moved away from a voice-text-data conversation," says Minogue. "If you look at the key market offerings today, text is pretty much unlimited on most bundles now, or as good as. Minutes is approaching that, too."
New Zealand also has a handful of mobile virtual network operators, which do not own their own network infrastructure but enter into agreements with the three main providers. They command only a small fraction of the mobile market.
2degrees provided a graph showing a sharp increase in total subscriber market share, from about 14 per cent in 2011 to about 22 per cent in 2013. The trend remained relatively steady until late last year when it picked up to 23.1 per cent.
It says it had 1.38 million mobile users in May 2016 and 1.45m this month, with its total revenue rising from $397.6m in 2014, to $538.4m in 2015, and $638.1m last year.
The company says in a statement that it has seen increased voice usage replacing fixed-line services and experienced "impressive" growth in on-account users.
It has also seen an "explosion" in data use, a trend it expects to continue.
We are seeing enormous growth in data consumption off the back of those higher speeds, and as connectivity becomes more essential in our customers' everyday lives.
And even though New Zealand now has far more mobile phone accounts than people, 2degrees says the market has not reached saturation point, with ample opportunity for mobile, 4G and other technologies that allow people to do more on their phones, particularly as "the internet of things" becomes a reality.
The telco recorded its maiden profit of $13.4m this year.
Spark provided data showing that its market share (which includes Skinny) has fluctuated between 42 per cent and 38.3 per cent over the three years to December 2016.
A company spokesman says the 141,000 increase in its mobile connections this year (up 6.4 per cent) has been driven by multi-brand offerings and digital services including Spotify and Lightbox.
Its year-on-year weekly voice traffic is up 16.2 per cent on last year; weekly texts have declined by 4.8 per cent; while data traffic has shot up by 38 per cent on last year.
Vodafone says it is the market leader in mobile and 4G connections, having added 80,000 new connections over the past year. It estimates that its market share is actually about 40 per cent, and says its share of revenue is higher than that.
It says it had 2.36m customers in March 2015, 2.4m in 2016, and 2.48m this year.
"We are seeing enormous growth in data consumption off the back of those higher speeds, and as connectivity becomes more essential in our customers' everyday lives," says spokesman Matt Williams.
According to the Commerce Commission's recent Telecommunications Monitoring Report, mobile users continued to make more mobile calls in 2016, clocking up an average of 118 minutes per month.
The amount of mobile data consumed by New Zealanders also continued to rise sharply, reaching 638MB per connection last year - up 79 per cent since the commission began monitoring it in 2009-10.
The year ahead will continue to see fierce competition between Vodafone and Spark, which will be good for consumers, says IDC's Shane Minogue.
The telco expert anticipates that prices will stay roughly the same for the foreseeable future, but customers will get more data for their money.
The big three companies will also keep trying to differentiate themselves through the perks they offer to customers.
"Spark are pushing Lightbox and Spotify and we're going to see more and more of that, maybe Vodafone with Neon or something like that," Minogue says.
Looking further into the future, the competition is likely be around the implementation of 5G, which is expected to be showcased first at the 2020 Olympics.
This technology, which will provide faster speeds and better meet the needs of the internet of things, will require significant investment by New Zealand's telcos. That means prices are not likely to fall any time soon, although the technology will continue to advance at an astounding rate.
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