2degrees edges toward profit as revenue and market share rise

In this edition:

• 2degrees results and CEO Mark Callander on growth, market share
• Spark launches MVNO-as-a-service with Compax
• Southern Cross advances Tasman Express cable

Revenue growth lifts 2degrees despite headline loss

2degrees reported a net loss before tax of $22.6 million for its 2025 financial year. This compares with a $4.8m loss the year before.

Much of the loss is attributable to the impact of valuations. The company says changes in the value of energy contracts and loan hedging reduced the net profit before tax (NPBT) figure by $45.9 million.

A further $10m reduction in NPBT came from one-off integration costs.

Revenue climbed 3.2 percent year-on-year to $1.385 billion. Service revenue was up 3.9 percent while mobile revenue was up 4.8 percent to $581.5 million. Broadband revenue rose 3.9 percent to $432.3m and energy revenue leapt 8.7 percent to $133.4m.

A 11.5 percent rise in EBITDA suggests there is a strong, healthy business behind the headline loss. This is underlined by the cash flow jumping from $169.4m to $237.3m.

Mark Callander on 2degrees growth, merger and innovation

As a non-listed company, there’s no legal requirement for 2degrees to publish comprehensive annual results. Chief executive Mark Callander says as a large and growing business, the telco needs to show a strong voice in the industry.

“It's part of our corporate profile and corporate reputation we're building. It’s also positive for our employment brand and our internal staff. We see it as part of the maturing of what we're about as an organisation.”

If 2degrees was a listed company, the result may have been presented in terms of underlying profit. That wasn’t done despite the full set of numbers suggesting things are healthier than they might look.

Health of the business

Callander says: “We tried to provide enough flavour through the report to look at the health of business.”

He says the report answers key questions such as: “Are you growing in a tough market?” The EBITDA figure was up 11.5 percent, which is a strong indicator. Likewise the strong cash flow from operating activities. “It’s just the non-cash stuff that makes it a loss”.

Aside from the growth, the result answers two other interesting questions about the state of 2degrees three years on from the merger: How is the merger working and how has the competition landscape changed?

Fully integrated

First, the integration is complete and comprehensive. The operations of the former 2degrees and Vocus or Orcon operations now seamlessly weave together. This is important in an industry where some mergers have left legacy issues for more than a decade.

“We've finished integration. We've got everyone in a single stack in a new, modern technology platform.

“Three years ago, we had people, different app experiences, different platforms, different customer care environments. We sit here today with everyone on a new, modern, hyper scale stack that we built ourselves.”

Customer experience

Integration is central to getting the best customer experience. Among other things, it means customer service staff get a complete view of each individual account holder’s activity and can resolve issues faster.

“Now we're putting all our focus in terms of, how do we now create great customer experience and great customer advocacy. It's always been on our agenda, but we haven't diverted resources onto it because we've been focused on integration.

“We'll continue to focus on those experiences that customers love at all ends of all ends of the segment. And then we're going to have a great big call this year to move from integration to innovation.”

2degrees impact on competition

Soon after the merger that formed today’s 2degrees completed, Callander told Download Weekly that 2degrees will push into a range of market segments and that he expects the company to take a greater market share.

This week’s annual report suggests that is now happening. 2degrees is the only large retail telco showing significant growth in a relatively flat market. This suggests it is winning market share from the incumbents.

The most obvious example of this is in the broadband sector where between the Commerce Commission’s 2023 and 2024 telecommunications monitoring reports, 2degrees moved from third place with a 18 percent market share behind One NZ on 21 and Spark on 35 percent to second place with 20 percent, just ahead of One NZ on 19 percent. 2degrees’ broadband market share growth is even more apparent in urban areas.

The Commerce Commission data on mobile sector market share is harder to read, but, again, suggests 2degrees is winning share from the incumbents. Clearly the direction of travel shows the merged business is gaining market share.

Innovation

Callander says with the integration complete, the technology behind the company can now be used to focus on developing new products and services. “You're going to see more new things from us. You're going to see better customer experiences, more investment in software and all that's going to be critical to growing our success.

“AI is going to feature, just like with everyone else, but for us, AI is just one of the tools that will deliver either productivity enhancements internally for our staff and our business or better outcomes for our customers.

“We've set the goal of being the number one player by value, growth and innovation. Number one by value means making sure that we offer the best value in the market. Number one by innovation is about new products, new services, new product releases, new software releases. And number one by growth, is making sure that we have the highest organic customer share growth over the next three years.”

Spark to sell MVNO-as-a-service

From next year businesses will be able to build their own virtual mobile networks using Spark’s infrastructure and software from Vienna-based Compax.

The two companies have combined to launch a white-label Mobile Virtual Network Operator (MVNO) platform.

Spark network and operations director Renee Mateparae says:
“Our partnership with Compax makes it faster and easier for MVNO customers to access Spark’s network and provide their own telecom services, with the flexibility to scale with demand”.

Compax’s cloud-based billing and operations system lets providers manage customers and services in real time. Offered as a subscription, it removes the need to build or maintain in-house systems. Several companies can use the same system, each running independently but more efficiently

New Zealand’s MVNO market is tiny by international standards, but there are signs of growth. Today, independent MVNOs account for between one and two percent of all mobile subscribers. That’s well below levels in other OECD countries. Fierce competition between the three dominant carriers, Spark, One NZ and 2degrees leaves little room for MVNOs to compete on price.

This may now be changing with technology from companies like Compax and the One NZ deal with Advanti reducing the barriers to market entry.

Southern Cross advances Tasman Express cable project

Southern Cross Cables has ticked off key items on its Tasman Express submarine cable project. The system design is complete and finance arrangements are in place.

The company says it has executed open system and marine supply contracts with full costings and deployment timelines. It has also secured landing party agreements and associated backhaul connectivity on both sides of the Tasman.

CEO Laurie Miller says Southern Cross is seeing: “strong demand from hyper-scalers, telcos and enterprise customers who recognise the strategic value of direct, low-latency connectivity between Sydney and Auckland.”

The new cable is due to begin operation in 2028 and will complement Southern Cross’s existing capacity between new Zealand and Australia.

In other news...

• Farmers are not happy with rural connectivity - Farmers Weekly
• One New Zealand customers will get satellite data service this summer - Interest
• The latest iPhone has largely sold out - NZ Herald
• Australia thinks about extending under-16 social media ban - The Guardian

Reannz completes four-year backbone upgrade

Reannz has finished a four-year backbone upgrade. The upgrade replaces the core optical infrastructure, refreshes core routing and upgrade managed edge hardware.

Chief executive Amber McEwen describes what this means in practice for the research and academic network's members. It brings higher port density and speeds, a lower cost per power and a 40 percent reduction in power consumption.

She says: “The procurement benefits also enabled REANNZ to reduce its membership fees in 2024, giving value back to the sector in times of high inflation and stretched budgets.

Oppo renews Wellington Phoenix sponsorship

Mobile phone maker Oppo’s brand name and logo will appear on the Phoenix women’s kit this season as the phone maker renews its sponsorship of the Wellington football club. The brand will also be on the away kit for the men’s team.

Oppo has a broad relationship with the game, it is the official Smartphone & Smart Device Partner of New Zealand Football. This includes supporting the All Whites and the Football Ferns as they gear up for the 2026 and 2027 FIFA World Cups.

Five years ago

Australia’s government decided to make the nation’s NBN network more like New Zealand’s UFB network. At the time Australian consumers were mainly stuck with a top speed of 25 Mbps while New Zealanders could buy gigabit fibre.

This time last year Spark turned in a good result from Opensignal’s first New Zealand Reliability Experience comparison.

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