2degrees investor blows deadline
Like 2degrees? Got $20 million?
Brian Leighs wants to hear from you.
Mr Leighs is chairman of the Hautaki Trust, which holds a 20% stake in new mobile operator 2degrees.
In the trust’s annual report, issued last month, Mr Leighs said Hautaki need $20 million, and quick-smart. "We have until October 31 to raise these funds, otherwise our shareholding will be diluted," he wrote.
Trilogy International partners (US): 52%
Communications Venture Partners (UK): 26%
Hautaki Trust: 20%
Money for expansion
In July, the board of privately-held 2degrees voted to raise capital from its existing shareholders, primarily to fund expansion of its network, which had cost around $250 million by its August 14 launch. Cell sites and other infrastructure already built in Auckland, Wellington, Christchurch and Queenstown are being upgraded to 3G ahead of upgraded services to be launched in the New Year, and the company recently put out an RFP for a nationwide network (read 2degrees' great leap forward).
The trust’s two representatives on 2degrees board - Mr Leighs and Bill Osborne, 2degrees’ chair - voted against the one-to-one rights issue (which valued the telco at $US177 million) and the associated capital restructure, which saw Seattle-based Trilogy International Partners take over the stake held by Hong Kong-based GEMS. However, Mr Leighs said the trust agreed that more capital needed to be raised.
The October 31 deadline has whistled by but, speaking yesterday, Mr Leighs was unworried, telling NBR that there was “no absolute deadline,” and that 2degrees other shareholders were happy to give the trust more time.
Mr Leighs freely admits that, so far, his quest for $20 million has been hard yards.
Since July he has approached six large iwi plus a number of smaller Maori interests, but has encountered a number of roadblocks.
The recession has been an obstacle. Also, large iwi take a while to make big decisions, said Mr Leighs. The chairman told NBR that iwi had traditionally focussed investments in areas such as fishing, farming and forestry. Lack of familiarity with high tech infrastructure had slowed the process.
Another issue: lacking a prospectus, Hautaki has set the minimum investment at $500,000 - a threshold that potential smaller Maori investors are struggling with.
Mr Leighs said that if the trust fails to raise capital from Maori sources, he will look to other avenues - but he does have a strong preference that the investors at least be from New Zealand.
Keallhauled’s take is that 2degrees majority owner, Seattle-based Trilogy International Partners, will give Mr Leighs all the time he needs.
In the politically-fraught, regulation-heavy telecommunications industry, it would be a brave board that diluted 2degrees already slim local ownership.
More so, the government is angling to turn off analogue TV sometime after 2011 (likely around 2013). That’s not because the government wants us all to enjoy crystal clear digital TV via Freeview or Sky TV so much as its salivating over auctioning off the surplus analogue spectrum - which is in frequencies coveted by mobile network operators and companies looking to provide next-generation wireless internet technologies such as WiMax.
Based on spectrum auctions that have already taken place in the US (which switched off analogue TV earlier this year), the freed up spectrum could raise as much as $250 million for the government (and operators would have to bid every few years to retain their spectrum rights).
The Hautaki Trust was set up by the government in 2000 to manage state-granted spectrum rights on behalf of all Maori.
The trust owns 20% of 2degrees, or 10 million shares - bought for $6 million in cash, plus a deal that saw it hand Econet (2degrees’ precursor company) rights to its government-granted 3G spectrum, worth $5 million at the time. The Trust injected another $14 million earlier this year, and owns another 10 million that it holds in custody for other tribal interests.
After analogue TV is turned, the trust may well gain another slice of spectrum, suitable for LTE or so-called 4G cellphone networks. For 2degrees’ owners, that’s a prospect worth hanging out for.