Categories
telecommunications

How ten years of 2degrees changed the mobile market

2degrees launched New Zealand’s third mobile network almost ten years ago in August 2009. Today it accounts for roughly one in five mobile connections.

Last week 2degrees reported a modest net profit of $19.6 million on revenue of $805 million.

The company says a highlight of the year was a nine percent increase in contract mobile customers. A six percent drop in prepay customers went some way to offsetting that. It says many of these closed accounts when 2degrees switched off its 2G mobile network.

Still a minnow

It remains a minnow compared to Spark and Vodafone. The two big mobile companies each have around 2.5 million connections, while 2degrees trails with 1.4 million. Spark has almost 700,000 fixed-line broadband connections compared with 87,000 for 2degrees.

Spark’s annual revenue is in the region of $3.5 billion, while Vodafone’s is $2 billion.

2degrees plays an important role in New Zealand’s mobile sector. It makes the market more competitive. Before the company started, New Zealanders paid well over international average prices for mobile phone services.

Today the Commerce Commission reports “New Zealand mobile plan prices are well below the OECD average”. It says:

The price of a New Zealand entry-level mobile plan giving 30 calls and 500MB of data at $16 per month was 36 percent below the OECD average and well below Australia.

Higher use plans showed big price decreases and are well below the OECD averages.

Commerce Commission Annual Telecommunications Monitoring Report 2018

The report goes on to say NZ higher use plans are still more expensive than in Australia.

The flip side of this good news for consumers is that 2degrees has eaten into Spark and Vodafone profit margins. A clear sign of competitive pressure.

Some success

While 2degrees has been a success on some levels, it has yet to break through in the fixed-line and broadband markets.

It is the number five broadband service provider. 2degrees has about five percent of the market compared with Spark’s 43 percent and Vodafone’s 26 percent. Vocus, 13 percent, is also much bigger.

New Zealand broadband market share by connections

Another measure of the relative size of New Zealand telcos is the size of their contribution to the Telecommunications Development Levy. This is an annual tax on the industry. The government uses it pay for providing services to deaf and hearing-impaired people. Some of the money subsidises broadband for rural areas and upgrading the 111 emergency service.

2degrees pays the fourth highest contribution behind Spark, Vodafone and Chorus.

Telecommunications Development Levy

One of the biggest problems facing 2degrees is access to investment capital. It doesn’t have Spark’s deep pockets.

When the government auctioned 4G mobile spectrum in 2013, 2degrees didn’t buy its full allocation even though the price was deliberately kept low.

The challenge for 2degrees will be to find the money for further investment. To put this in perspective; Each of those first blocks of 4G spectrum went for $22 million apiece. That’s more than a year’s profit for 2degrees.

Categories
telecommunications

Vocus Group back in play with private equity bid

EQT Infrastructure’s A$3.3 billion takeover bid for Vocus Communications could see a new owner for the New Zealand business.

Vocus Group New Zealand includes the Orcon, Slingshot and CallPlus brands along with other assets. It is the third largest telco behind Spark and Vodafone.

The potential buyer, EQT Infrastructure, is a Swedish private equity investor.

Vocus commands good price

EQT’s bid, which became public on Monday, put a 35 percent premium on Vocus Communications’ trading price at the time.

Insiders say the bid is likely to succeed. Although there are other potential bidders waiting in the wings should EQT’s offer fall through. Either way, Vocus is likely to find a new owner soon.

The EQT bid comes only days after Infratil and Brookfield’s successful bid for Vodafone New Zealand. It suggests other telco sector mergers and acquisitions could be on the way.

This is not the first time investors have attempted to buy Vocus Communications. In 2017, private equity firms Kohlberg Kravis Roberts and Affinity Equity Partners, made a bid for the company. That was later withdrawn.

According to the Australian Financial Review, the key to renewed interest in the business is Vocus’s fibre assets.

Fibre infrastructure

Infrastructure is an increasingly popular investment class. The returns are relatively high and, in many cases, it faces little direct competition. Fibre assets of particular interest to infrastructure investors at present, they feel that its owners don’t always maximise its value.

The Australian Financial Review goes on to report it’s likely the buy will sell Vocus Communications’s retail business.

Presumably, this would also include Vocus’s New Zealand retail brands.

Vocus has New Zealand local fibre assets. It picked them up from the former FX Networks business now wrapped into the Vocus Group.

One interesting angle is that after 2022 regulated UFB wholesale prices will be based on network asset values. If fibre becomes a sought after asset for investors, that could put pressure on the regulated price.

Categories
computing

Hacking the Treasury, or not

New Zealand’s media enjoyed a day where computer, or maybe cyber, hacking made the headlines.

Here’s the RNZ take:

National Party ‘Budget leak’: Treasury ‘deliberately hacked’ — RNZ website

There is a lot to unpack in the story. You can find that elsewhere. One thing that needs clarification is what is meant by the word ‘hacking’.

Hacking is a term that’s meaning changes depending on who uses it.

Hacking once meant one thing…

It means one thing to old school computer programmers — kids note that’s what people who wrote computer software were called before the job description was upgraded to developer.

For those people a hacker can be someone who cuts a piece of code.

It can mean someone who writes good code or it can mean someone who writes bodged code. I never quite caught the nuance there but definitely heard it used both ways in different contexts.

You may argue, but for most people this meaning of hacker is now archaic.

… it then meant another thing

It means another thing to people who work in and around computer security. Most of the time they take care not to use the word hacker. I assume that’s a least in part because there can be slightly glamorous connotations.

Or it could be they are lanugage pedants who don’t want to get in a fitght.

Many modern computer security folk prefer terms like bad actor, which makes me think of Tom Cruise.

Or maybe they talk about attackers. At one industry event, some high flying US security experts kept referring to hostiles.

Whatever. The key here is that in some security and enterprise system circles the word hacker can, but doesn’t always, refer to a person who manages to breach a system’s perimeter security and get inside.

Once again there are nuances.

Media see hacker another way

For the more excitable parts of the media, a hacker is someone who wears a balaclava while using a computer. They might also wear military fatigues.

You don’t often get to see the computer, but if you do, it’s often an old fashioned-looking computer, never a tablet or a phone, which seems odd to me, but there you go.

Another feature of this kind of hacker is they ofter work with green, text-based screens. What they do may be advanced and scary, but their computer hardware seems to come from the cold war era. More Trabant than Tesla.

Much of the media and the general public think of hackers as people who do bad things with computers. It’s not just newspapers, radio and TV journalists. When you see computer crime in movies or TV shows, the bad guys are hackers.

Far be it for me to cast aspersions on my colleagues, but there is something a tad click-baity about hacker.

As an aside, I’ve written before about how the word cyber now seems to be related to hacker. In a nutshell when something computery is good, the prefix is computer. When it’s bad the prefix is cyber.

See, “Cyber” is a bad thing…

Which explains why the great unwashed now understands the term hacker in this context.

Guilty your honour

I’ve found myself using the term, most likely incorrectly in your eyes, on TV and radio precisely because it is a shortcut to explaining things to the audience.

You might only have 120 seconds to explain something complicated. If you spend that qualifying terms defining the attack like a crusty old classics academic deconstructing Ancient Greek texts you’ve lost the audience.

It’s all Greek to them anyway.

Treasury hack

So, was this week’s Treasury Hack actually a hacking attack or was it something else? It appears that someone found some data that was stored on a web page or series of pages that had not yet been made public.

You can, I sometimes do, stumble over things like this by accident.

Now that’s not necessary hacking as we know it in 2019. It might well have been described as hacking in 1999.

You can sometimes get to these pages using spiders. This is something Google does every day. No-one thinks of that as hacking.

Dozens, even hundreds of pages on this site are spidered every day. This can include deleted pages, draft posts and posts that will never formally see the light of day,

Hostiles everywhere

If I look at the weblogs there are also thousands of probs every day where people — let’s call them hostiles, after all, it starts with an H — are looking for ways to compromise my security.

Some are easy to spot as they are calling URLs that don’t exist on my site, but might exist on some sites and can contain known vulnerabilities.

I just checked. This site, that’s little old me, had 1486 let’s say, dubious, calls in the last 24 hours.

If I’m getting that. And trust me, there is no information on here worth stealing, then a government system like Treasury will be getting an order of magnitude more probes. At least.

Another aside: There might not be anything worth stealing, but it could be worth gaining access to launch a bot attack or other mischief.

Is that hacking? Not in the sense computer professionals and geeks use the term. But it is in the sense that the media use the term and the sense the general public has come to understand the word.

You don’t have to like seeing the word used this way, but you don’t have any control over it. Those people speak a different language to you. They know what it means to them.

Categories
telecommunications

A Huawei thought

Navigating the Huawei story is one of the toughest jobs in technology journalism at the moment.

There are many facts and statements, lots of suppositions swirling around, but no smoking guns, no hard evidence of wrong doing. 

Huawei may have a case to answer, but that question is almost submerged now.

A lot of damage is already done, not just to Huawei but to supply chains as well. I can’t ever remember seeing a company taken down like this before.

One danger is that it could have created a precedent. Who might be next?

Categories
mobile telecommunications

Huawei blacklist – A guide for everyday users

The US government has blacklisted Huawei. As a result Google has stopped providing and supporting the Android software used on Huawei phones. American chip makers can no long supply technology to Huawei. The Huawei blacklist is part of a wider trade dispute between the US and China. 

Does the Huawei blacklist mean I have to stop using my phone?

No. If you already have a Huawei it will carry on working as normal for now.

Could China be spying on me through my Huawei phone?

Don’t be silly. If you’re like the average Android phone user you already let Facebook, Google and others spy on you. They make money that way.

If China wanted to casually spy on you it could buy data from one of those companies. If you’re a serious intelligence target for Chinese agents they’re probably able to spy on you regardless of your phone’s brand.

Is my Huawei phone a security risk?

No more than any other Android phone. Android is more prone to malware and nasty stuff than other phones, but this changes nothing in that department.

Huawei has not always been the best at providing necessary software updates and security patches in the past. The company says it will go on supporting existing customers.

I was thinking of buying a Huawei phone…

That’s probably not a great idea although if sales slump you may be able to pick up a bargain.

If you buy a Huawei phone today you’ll get updates for the current version of Android. It’s most likely you’ll get upgrades for the next version. After that things start to get tricky.

At the moment we’re on Android Pie. The next version, Android Q is due in a few months. Huawei has had all the code for both of these.

The next version, R, should turn up in about 14 months. The way things stand today Huawei won’t get that code.

Without official support, you could be cut adrift from the Android mothership in as little as 14 months. Huawei says it will continue with security upgrades, but you may struggle to run some apps once R is mainstream.

What about other Chinese Android phone brands?

How much of a gambler are you? The recent Huawei blacklist is specific to one company, but it’s part of an escalating trade war between the US and China. If you count yourself as cautious, then wait to see how the dust settles before buying an alternative Chinese brand.

Isn’t Android supposed to be open source?

Only up to a point.

Android has a number of layers. At the top there’s Huawei’s own software overlay, that’s EMUI on the premium phones. There’s a service layer which connects to things like the Google Play store, Maps and Gmail.

There’s a low level layer that connects the operating system to the hardware. The underlying Android operating system, AOSP is open source. Huawei will still be able to use that. It will be updated as normal.

However, Google usually shares this code with favoured phone makers months before the code is made public. Phone makers pay vast sums for this.

The blockade means Huawei will now get the code on release day, so users may wait months for upgrades.

This is how AOSP works for many smaller Chinese phone makers. If you’ve tried one of those phones you’ll know the customer experience often leaves much to be desired.

Yet it’s also how Huawei’s Chinese phone business works, so the company already knows how to deal with the restrictions.

The real problem is with those services or those of us living in western countries. If Google makes changes there could be problems for existing phone users.

Will I be cut off from Google services?

No. At least not for the foreseeable future. You might not get any new services introduced from next year on.

Is any of this covered by the Commerce Act?

That’s a good question. The simple answer is you probably won’t be able to use the Commerce Act as a way of getting your money back if the phone goes on working as normal. Although there’s an interesting precedent that suggests otherwise.

In the longer term you may have a case if a lack of software updates means the phone is, in effect, rendered useless before a reasonable period of time. 

If this happens, it won’t matter if Huawei is no longer active in New Zealand (see below). The phone retailer is liable, not the manufacturer.

What does this mean for Huawei’s phone business in New Zealand?

It’s possible the spat between the US and China blows over in a few weeks and things will return to normal. If not, it will soon be hard for Huawei to sell phones here. Anecdotal evidence says customers are already avoiding the brand.

That’s a shame because Huawei makes some of the best Android phones. It is the number three phone brand here. While it may not always look like it, Huawei acts to keep Samsung and Apple competitive.

Phones account for about half of Huawei’s revenue worldwide. Half of its sales are in China where losing Google isn’t a problem. So a quarter of the company’s revenue is at risk.

On the other hand, no-one knows if Huawei make much, if any, profit from phone sales. The Huawei blacklist could lead to the company exiting the phone market outside of China. If that’s the case, it could be doing Huawei a favour.