The Bank of New Zealand has provided 2degrees with a $165 million credit facility towards funding a 4G rollout in 2014 with Huawei technology.
2degrees acting chief executive Stewart Sherriff says that in addition to paying for the 4G deployment, the BNZ financing will enable the company to pay back the vendor finance that Huawei provided in February 2011.
“Having been cash flow positive for almost a year, 2degreees is able to fund its own operations without shareholder funding. Bank funding will accelerate the business,” Sheriff says.
Sherriff says after paying back Huawei, it will leave around $45 million to invest in the 4G deployment. That funding includes money set aside for the purchase of 700MHz spectrum, which comes available at the end of the year following the digital switchover. The company is working on a submission to the spectrum auction process, which is due later this month.
2degrees will initially roll out 4G technology using the 1800MHz spectrum it bought for $15 million following Vodafone’s purchase of TelstraClear last year.
Sherriff says the 2degrees network has been built specifically to upgrade to 4G technology. The roll out would involve a software upgrade and a new network card, which Sheriff estimates would take a technician 3-4 hours to install at each cellsite. He wouldn’t be drawn on where 2degrees is likely to deploy 4G technology first.
Huawei has been 2degrees’ main technology partner since 2005, building its 2G and 3G network. The Chinese vendor recently struck a deal to roll out Telecom’s 4G technology.
Sherriff says he isn’t concerned that there would be a conflict, as Huawei is used to working on competing networks in other countries.
BNZ head of institutional banking Paul Blair says the bank is providing finance for 2degrees because it believes it has a strong business case.
“2degrees has made a great start, proving there is room for a third mobile operator. Having reviewed their future plans we see a growing business that we want to be a part of,” says Blair.
Sherriff, who has been acting CEO since Eric Hertz died in a plane crash in April, says the company is conducting an international search for a new chief executive.