Behind 2degrees’ Ministry for Primary Industries win

A press release from 2degrees says the phone company has won a contract to supply a wide range of telecommunications services to the Ministry for Primary Industries.

There’s no figure on the size of the deal, nor are there enough details to estimate its value. As a rule of thumb, managing telephone services for 2300 staff could be worth in the region of $50 to $100 per person per month depending on use patterns.

However you cut the numbers, it’s a big deal for 2degrees.

From the press release:

The agreement is 2degrees’ first key contract under TaaS (Telecommunications as a Service) and involves WAN, LAN and Wi-Fi connectivity services at more than 120 MPI locations throughout New Zealand including main offices, border facilities, laboratories and fisheries offices.

2degrees will support and manage MPI’s site and user connectivity via its extensive national data network, while its national mobile network will serve the Ministry’s mobile connections. Effectively 2degrees will be responsible for connecting the 2300 strong workforce.

What the press release doesn’t say is that this is the kind of commercial deal 2degrees couldn’t win when it was a mobile-only business. It bought Snap to broaden it’s scope so it could offer landline and data services.

On the surface the MPI contract vindicates that strategy, although you might equally argue that 2degrees should have stuck to its knitting offering low-cost prepay mobile plans. There are heavy management overheads operating a full-service telco. And there’s a need for significant capital expenditure. That has been a long-term struggle for 2degrees.

Last month rumours swirled Australia’s TPG Telecom was on the brink of buying 2degrees. If there was a deal on the table, it seems to have fallen through.

Price would have been the stumbling block. At the time of the Sky deal, Vodafone was valued at around $3.5 billion. So a cash buyer could expect to pay in the region of $500 million for 2degrees. Reports elsewhere suggest the owners wanted $900 million.

Plans to float 2degrees in Australia have also been shelved.

It’s not all over. Two months ago there were reliable stories about foreign telcos, including one from Indonesia, running a ruler over the 2degrees business. At least one other Asian company has also looked at 2degrees this year.

Behind 2degrees’ Ministry for Primary Industries win was first posted at billbennett.co.nz.