2Degrees future?

In the last 24 hours 2 stories have broken that cause me to pause and look a bit closer at 2Degrees, from a TUANZ perspective we have encouraged the competitive impact of having a 3rd mobile network and we have walked much of the journey with 2Degrees.

So here are the stories, the first is a blog post by Australian (Global?) telco commentator Paul Budde which asks a number of hard questions about 2Degrees and challenges a number of key assumptions about their performance and their future prospects.

Five years on and to a certain extent it is a bit of a wonder that the company still exists.

Most operations launched, similar to 2Degrees but in other parts of the world, have since been gobbled-up by others or have simply disappeared.

Of their one million or so customers perhaps as much as 80% are people visiting the country, many only for a few weeks or months.

if the country believes it is in the national interest to have effective competition in the mobile market the only way to achieve that is to change the market structure through regulatory intervention.

Over all the years we have discussed these issues nothing has happened at a regulatory level to improve the market structure in New Zealand, and this would indicate that it is most unlikely the government will step in any time soon to address the situation. That being the case, it is with considerable certainty that we predict very little future for 2Degrees, and this is a very sad story indeed – from the perspective of economic development, competition and jobs.

— Paul Budde – Buddeblog

The second story broke in this morning’s edition of industry newsletter TechDay about Indonesia’s largest telco being about to buy a 27% stake in 2Degrees as the second largest shareholder in 2Degrees after Trilogy Partners looks to sell out.

Indonesia’s largest telco is reportedly about to buy a 27% stake in 2degrees.

Earlier this week, Syarif Syarial Ahmad, the chief executive of Telekomunikasi Indonesia International, or Telin – a subisidiary of Telekomunikasi Indonesia, or Telkom – was reported in Indonesian media as saying the company was negotiating with an unnamed New Zealand telecommunications operator.

Sources within 2degrees have confirmed to Techday that the Kiwi telco is in negotiations with Telin and Telkom.

Meanwhile, Netherlands-based Tresbrit BV owns 27.07% of 2degrees, according to Companies Office Records, sparking speculation that it could be the party exiting 2degrees. Tresbit took over the shares of UK-based Communications Ventures Partners in 2011.

Speculation has been running high for a while that 2degrees was likely to be sold. The company was a late entrant to the Kiwi mobile market, entering a market that was a duopoly between Telecom – now Spark – and Vodafone, and despite some positive inroads, has largely struggled to compete alongside the two, much larger players.

— Techday NZ


Read together both stories are in sharp contrast to the quite celebratory piece that appeared in the print edition of last weeks NBR, its not online but I’ve got a scan of the articles here. and here.

This is a story that is going to develop so I’m not going to speculate much further about what’s happening at 2Degrees, what I want to quickly reflect on is what this means for our overall market structure and system.

There have been 2 really big telco issues this parliamentary term beyond those set in train by the 2011 Telco Act (ie UFB, RBI, Copper Wars & the Chorus Crisis) and they have been the Vodafone purchase of Telstra Clear and the 700Mhz spectrum auction.

In both cases we have seen light handed approaches from the political and official realms often citing the success of 2Degrees as proof of a robust competitive market. The Vodafone / Telstra Clear deal has created a seriously capable, vertically integrated telco with no regulatory constraints or oversight and the spectrum auction again has taken the cash over the wider needs for a balanced mobile market moving forward.

There are additional issues around the long term success of the Maori spectrum and subsequent investment in 2Degrees. 

Personally I’ve been a 2Degrees customer for the last 5 years and I want to see them prosper, we need agile and innovative challengers, I hope the new investor shares this desire.