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  • 2degrees $52 million loss 'in line with plan'

    Cellphone firm 2degrees has revealed it lost more than $52 million in the last nine months of 2009.
    Auckland-based 2degrees, which sells pre-pay cellphones through electronics stores and supermarkets, said the loss was "expected and in line with our plan".
    The results represent a loss of almost $190,000 a day.
    After years in planning, 2degrees launched its service in August, and quickly picked up thousands of customers from Telecom and Vodafone.
    Mathew Bolland, the company's director of corporate affairs, said the loss reflected the cost of setting up a mobile network and shareholders, including United States private equity group Trilogy International, which owns a majority stake, were comfortable with its progress.
    "These losses are completely in line with what you would expect to enter a market that's got revenues in the billions of dollars. You have to invest to get in," Mr Bolland said.
    "The shareholders understand the size of the market, the size of the opportunity and are very pleased with the way it's going."
    Two Degrees Mobile Ltd's accounts received an unqualified signoff from auditors Grant Thornton. The commentary accompanying the results included an assurance that the company's two largest shareholders would provide more equity or loans if required for "the foreseeable future", although they have not guaranteed its liabilities.
    As well as Trilogy, 2degrees' shareholders include British private equity group Communication Venture Partners, Maori Hautaki Trust and unnamed "associated interests".
    In February the company said it had attracted 206,000 customers in its first six months since its launch, including 85,000 who had transferred their existing numbers from other providers. Yesterday it declined to comment on how many customers it had picked up since.
    2degrees has said it plans to roll out its own retail network over the next 12 months and is thought to be on the verge of launching a 3G network, moves which would allow it to attract higher-value term-contract customers.
    The results for the nine months to December 31 included revenue of $27.3m as well as a gain on currency movements of $2.1m. The $52m loss compared to an $8.2m loss in the year to March 31, 2009, before it launched its retail service.
    During the period covered in the accounts, which have just been published by the Companies Office, it spent $8.5m on advertising and marketing, including a campaign fronted by comedian Rhys Darby.
    2degrees also incurred a liability of $9.7m to Trilogy and saw its cash at hand fall from $14.7m to $6m. It has since received an $11.1m cash injection from its shareholders in a share placement.
    Guy Hallwright, telecommunications analyst at Forsyth Barr, said he was not surprised by the loss, which was inevitable whenever a new telecommunications network was established.
    "That's what it costs to set up mobile operations, you lose money. These operations would lose money for at least three years, although you hope those losses would diminish," Mr Hallwright said.
    "The guys that invest in this, Trilogy and the like, have done this in a number of markets and they will be fully aware of what the losses are in the early part of the operation."

  • Regulate MTRs, say Labour and 2 Degrees

    Regulate MTRs, say Labour and 2 Degrees
    Third mobile network operator 2 Degrees has swung behind calls to regulate mobile termination rates.
    The telco calls mobile termination rates “toll charges” and say New Zealand has some of the most expensive ones in the world.
    Pointing to Vodafone’s recent retail offer that provides low calling rates to on-net mobile customers, 2 Degrees chief operating officer Bill McCabe says that this appeared as soon as the Commerce Commission recommended to the minister voluntary undertakings to lower termination rates by the UK-owned telco and Telecom.
    McCabe says the Commission must feel gamed by “the incumbent operator”.
    According to McCabe, UK termination rates will be cut to around 1¢ by 2014, or roughly 1/6 of the rate that Vodafone and Telecom proposed in their voluntary undertakings.
    2 Degrees says lower termination rates means lower retail prices, which is why they are falling around the world.
    The controversial Talk plan in question costs $12 a month and gives pre-pay customers 200 minutes of talk-time for calls to landlines and Vodafone mobiles.
    Labour ICT spokeswoman Clare Curran issued a statement saying the new offer appears to undercut Vodafone’s termination rate undertakings. She says the telco has essentially increased prices for non-Vodafone customers to call its customers.
    This is not a sign of a healthy marketplace, Curran says. She calls on Joyce to regulate termination rates.
    A Vodafone spokesperson says Curran “hasn’t read the offer clearly” and says the plans are popular with customers. Furthermore, there are very similar offers in the market today, the spokesperson says.
    In 2007, the then Labour minister of Economic Development, Trevor Mallard, rejected the Commerce Commission’s second recommendation to regulate termination rates. Mallard favoured a deal offered by Vodafone and Telecom that would see termination rates drop to 14.4¢/minute and 12¢/minute respectively by 2012, with the telcos promising that all of cuts would be passed on to customers.
    The telecommunications commissioner, Dr Ross Patterson, has since then revisited this decision and asked Vodafone and Telecom to improve the offer. Both telcos did so, but Patterson wrote to Minister Joyce after Vodafone’s retail on-net/off-net plan was released, saying it was material.

  • Use of mobile phone as SatNav driving aid to be banned

    The Transport Ministry has clarified the terms of a new law that restricts the use of cellphones in cars, saying that from November it will be illegal to use a mobile phone as a satellite navigation aid while driving.
    2degrees chief executive Eric Hertz admitted rear-ending another vehicle at an intersection in Auckland a few weeks ago while glancing at directions on his iPhone, which was mounted on a hands-free kit in his car.
    Under the new law, that would be illegal, Transport Ministry spokesman John Summers confirmed. "The Road User Amendment Rule 2009 means drivers will not be able to look at a navigation aid on a mobile phone when driving, even if it is mounted on the dashboard.
    "You can use a mobile phone held in a cradle while driving, but only to make, receive or terminate a phone call. You cannot use them in any other way, such as reading a GPS map, reading email or consulting an electronic diary."
    The restriction does not apply to navigation systems that do not have a mobile phone function, he says. Mr Hertz expressed surprise at a media report that claimed the other vehicle involved in the accident had been a write-off and that its driver had suffered back injuries requiring weeks off work.
    He was not aware of any injuries and the crash was not reported to police.
    "We had a chat and exchanged licence plate numbers and insurance details. We both drove off. It was, from my perspective, a relatively minor fender-bender."

  • Air New Zealand, Tex Edwards collect major TUANZ awards

    The Telecommunications Users Association of New Zealand has delivered its annual awards, with Air New Zealand the big winner and 2 Degrees' founder Tex Edwards collecting the chairman's award.
    If there was a theme of the awards, held in partnership with IDC and major sponsor Voco, this year it was that while broadband and telecommunications infrastructure are vital, it's the applications that use such infrastructure that deliver real economic benefits.

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