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Brislen on Tech: Pasta with Tex

Paul Brislen, Editor. 26 March 2021, 1:57 pm

The journey of 2Degrees starts with the government's 3G spectrum auction and Tex Edwards threatening to sue me.

The government of the day (this is the early 2000s) had decided to auction off the 2100MHz spectrum which was deemed to be ideal for the newfangled 3G mobile networks that were being rolled out around the world.

With blistering speeds and a promise of video calling, 3G would revolutionise the telco sector and be a competitor to fixed line services, or so the headlines of the time read.

This was only the third time the government had auctioned off radio spectrum and it was keeping a close eye on international marketplaces where billions of pounds, euro and dollars were spent by telcos eager to corner the market.

New Zealand took a slightly different approach because of a Māori challenge under the Treaty of Waitangi. What about us, asked iwi, and the government said yeah, fair call. Let's put aside a chunk of spectrum and give you $5 million to find a commercial partner.

The spectrum wasn't free - it would be sold to the Māori Spectrum Trust for 95% of the average of the other auctions. The Trust, along with its $5 million, would find a commercial partner and that's where Tex came in.

Tex (he hates being called Simon) set to work and rounded up Econet Wireless, a company out of Zimbabwe that for some reason was interested in spending hundreds of millions of dollars on a network in New Zealand for a share of a commercial user base of no more than four million people.

I had questions about Econet's willingness to do that, given the same money spent at home could reach tens of millions of customers, and there was a disagreement over the wording of an article and an unwillingness to be interviewed. Tex agreed to settle matters over a bowl of pasta, gave me an interview and then… well, nothing much happened.

Nine years later, Econet had exited the relationship, the $5 million was gone, NZ Communications was born and after much negotiations relating to co-location of equipment and roaming rights, in 2009 2Degrees was launched.

Today the company is owned by Canadian investment company Trilogy Partners and Tex has departed for Waiheke Island where he keeps threatening to buy me lunch.

The company has indicated it would consider floating a large chunk of the company on the stock exchange both here and in Australia, with Trilogy indicating it would keep an indeterminate shareholding.

2degrees.jpg

This is an excellent result for the company which has done so much to rewrite the rules for New Zealand mobile phone customers.

Before 2Degrees, Vodafone and Telecom (later Spark) had settled into an uneasy truce of sorts, each one quite dominant in its own market segments. Vodafone had the youth market, the consumer, the pre-pay customers with their Nokias and their colourful clip on covers, while Telecom had the business market sewn up, with its on-account customers and their grey unsmiling Nokias that didn't even take a SIM card let alone have customisable covers.

What 2Degrees brought to the market was an unwillingness to sit on its hands and let the status quo continue.

By introducing unusual price points, not all of which worked it must be said, the company shook up the market and changed the dynamic hugely. Unused minutes would roll over to the next month. Data could be bought in huge bundles that could be used over a longer period of time. Telecom and Vodafone were forced to introduce plans and rates they would simply never have considered and prices have been driven down ever since.

Trilogy wasn't really interested in 2Degrees for the long haul, but the global financial crisis left them with an asset nobody else really wanted. Today, that's changed and telco stocks are much more interesting to investors. On the local market, Vodafone and Vocus have both seemingly avoided listings through private purchases at the 11th hour - but for 2Degrees I suspect the real benefit will be in making the company into a truly Kiwi-owned brand. There's a lot of good will towards the company - they'll be hoping it translates into money.

That's money the company says it doesn't need but which would be used to speed up deployment of 5G (how times have changed) and its move into the fixed line space.

New Zealand without 2Degrees would be a far more expensive proposition and certainly a lot less colourful. Now we'll see if the local appetite extends to ownership as well as patronage.


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