Is the glass half-full or half-empty?
In a May 2021 presentation to an industry conference, 2degrees owner Trilogy International Partners - quoting figures from market tracker IDC - said its NZ telco had just 4 per cent of New Zealand's $1.2 billion of telco revenue generated from business customers.
On another slide, 2degrees' broadband market share was also pegged at single digits.
Some would say that 12 years after 2degrees' launch, that's a half-empty scenario.
But for chief executive Mark Aue, who is gearing up for a possible IPO before the end of this year, it's glass half-full. Low business and broadband share means lots of room for growth.
"There are large areas for growth and markets that were underpenetrated," Aue says.
"Specifically, looking at broadband, and in the b2b [business-to-business] space, we're still at low single-digit market share at the moment.
"But at the same time, we're the fastest-growing provider in the country, and providing that genuine alternative. So we think there's significant growth there that we're already demonstrating. And likewise, that continued growth in consumer mobile as well."
On 2degrees' possible IPO, Aue will only say that it's "possible by the end of the year". Detail on whether it will pay a dividend (as Spark and Chorus do, along with Vodafone NZ's half-owner Infratil), a rumoured $1.5b valuation and whether it will be lumbered by any of the substantial debt accumulated by its parent Trilogy will have to wait for another day.
We do know, at least, that Jarden, Macquarie and Craigs have been retained to manage the possible float. And 2degrees has confirmed that if the listing does go ahead, long-time Port of Tauranga boss turned professional director Mark Cairns will become its new chairman (replacing Trilogy's US-based Brad Horowitz).
The listing timing could depend, in part, on events elsewhere in the world. Trilogy also owns a mobile phone company in Bolivia called Viva. But while 2degrees has made an ebitda profit for the past five years straight, the loss-making Viva has been a drag, and recent political chaos in its home country has not improved its prospects. The Seattle-based Trilogy put Viva up for trade-sale earlier this year, but so far there have been no takers.
After Vodafone NZ's trade sale, CEO Jason Paris waxed lyrically about the advantages of becoming a locally owned company (or at least a lot closer to it) and being far more in direct control of its own destiny.
Aue is far too diplomatic to say it, but another senior 2degrees figure told the Herald that life for the telco will be a lot more straightforward if it loses its troublesome sibling.
As the Herald talked to Aue in mid-August, his company was in the process of moving into a brand new office building in Fanshaw St in the Auckland CBD, which will house 820 staff formerly spread across two locations.
Where its old digs could be politely described as "very straightforward", 2degrees' new HQ is high-tech - you can swipe in with your phone to find an available desk in a hot-desking setup, and every desk features a single, huge curved screen rather than a twin-monitor setup. It's expansive, too. The company has taken 5406sq m - or more than half a hectare - on a 12-year lease.
There's a huge kitchen and dining area with free fruit to snack on, a living moss wall and a multidenominational prayer room that can double as a pilates space.
Quirky touches abound from high-end architectural firm Warren and Mahoney, who managed the fit-out. Some, like a pour of blue paint down the stairs, are uniquely 2degrees. Others, like plant walls and Kiwiana-themed meeting walls, are motifs that also featured in another Warren and Mahoney project - Google's new Auckland office.
Aue explains that there are only 500 desks for the 820 staff. That's partly in a nod that with the pandemic, most staff have switched to hybrid working, usually on a mix of three days in the office and two at home.
The new office happens to be next-door to Spark's headquarters (the two telcos share a common property developer, Mansons TCLM.
Does it feel weird or intimidating being beside Spark's building?
"No," Aue says. "Ours is newer."
The 2degrees boss adds that his company's network is newer, too.
Here we come to another glass-half-full/glass-half-empty scenario.
Aue pulls out an investor presentation, recently showed to fund managers and other potential investors as part of a non-deal investor roadshow that extended to some 32 Zoom meetings.
It includes independent benchmarks that rate 2degrees' 4G mobile network as New Zealand's fastest.
Leaving aside that telcos often spruik clashing benchmarks, Vodafone and Spark have long ago moved the conversation to spruiking their 5G network upgrades that are already well under way, and Samsung, Apple and other phone makers are actively pushing the technology. 2degrees' 5G build is not due to begin until later this year.
The building of 2degrees' mobile network has been a colourful story.
"Eleven years after the birth of 2degrees, and a billion dollars later, we've finally completed our network," chief technology officer Martin Sharrock pronounced in June last year.
The telco - which formerly had a roaming agreement with Vodafone to fill in the gaps - finally has its own network in place to cover 98.5 per cent of the country by population.
Vodafone is still in the picture, a smidge. For the remaining 1.5 per cent of the population (or 20 per cent of the country by geography), 2degrees has an agreement with Vodafone that involves around 200 cell towers. But Sharrock emphasises that 2degrees is no longer paying to use Vodafone's network. Rather the final 1.5 per cent is covered by Vodafone cell sites fitted with "MoRAN" (Multi Operator Radio Access Network) gear that uses 2degrees' own 4G spectrum.
The bottom line is that, although it took nearly a dozen years, 2degrees now has its own major physical asset: a national mobile network.
There's another complication, however. When 2degrees launched in 2009, it was a nearly all-Huawei shop, using the Chinese telecommunications gear for both the core (or "brains") of its network and the edge (that is, gear on cellsites). Founder Tex Edwards saw the Huawei's low-cost gear as a competitive advantage (and at the time - which now seems a very different geopolitical era - Prime Minister John Key actively encouraged NZ firms to adopt the Chinese company's kit, too).
But in early 2019, the GCSB blocked Spark from using Huawei for the edge of its network, and only hardened its opposition over time. Spark turned to Nokia Networks (which handles all of Vodafone NZ's network), and kept Cisco and Ericsson for its core.
After initially standing by Huawei, and saying 5G upgrades would take years, meaning lots of time for the situation to resolve, 2degrees announced in April this year that it was dropping the Chinese giant in favour of Sweden's Ericsson.
And in a twist, 2degrees is not just using the Swedish company for its 5G network upgrade, but ripping out Huawei 4G gear and replacing that with Ericsson kit too, as towers are upgraded to 5G.
Sharrock says tearing out the Huawei gear means 2degrees will have a newer, shinier network than its rivals. And being all-Ericsson across its 4G and 5G gear will make it easier for 2degrees to finely control traffic on its network, he says.
The network upgrade will also allow 2degrees to push a lot harder with fixed-wireless, which has been such a hot market segment for Spark and Vodafone - and which their investors covet because it uses a mobile network to deliver a home or office, cutting Chorus and its wholesale charges out of the loop.
While Spark and Vodafone have sparred with Chorus over fixed-wireless to the degree that the Commerce Commission recently sent a letter to all parties warning them to dial down their marketing, 2degrees has been much more low-key about the technology.
"We'll offer what ever broadband plan is best for the customer. We work well with Chorus," Sharrock says.
Neverthless, in the investor deck that Aue shared with the Herald, there's a target to move 20 per cent of 2degrees' broadband base to fixed-wireless. That's not as aggressive as Vodafone (20 to 25 per cent) or Spark (35 to 40 per cent), but Aue's telco will not be so near the top of Chorus's Christmas card list.
For Aue, at the end of the day his pitch to both potential customers and investors is the same: We've lifted our game.
"If you're a customer that hasn't been with us for several years, I'd encourage you to really take another look. The investment that we've put into the network, particularly over the last 18 months - to the point we were actually winning external network awards as the top-ranked network - is fantastic. And I'd really encourage people to try again, because the network experience will be very different than what they'd seen perhaps a few years ago."