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2degrees claims 1 million customers, reveals new target

The latest phone company standings:

Chris Keall
Tue, 07 Aug 2012

UPDATE: 2degrees claimed one million customers this morning, as expected.

The carrier did not not issue a specific update on how many were on contract, but CEO Eric Hertz told NBR ONLINE the number was "a bit over 100,000".



August 2009: launches
February 2010: 209,000
March 2011: 580,000 
February 2012: 876,000
June 2012: 950,000
August 2012: 1,000,000


Mr Hertz told NBR his company was gunning for one third of the NZ market, which he said would equate to 1.5 to 2 million 2degrees customer connections (allowing for the fact many customers now have more than one SIM card, or connection, in the age of USB sticks, tablets and other cell-capable gadgets).

But while it gained its first million customers – around 18% of the market – in just three years, Mr Hertz said the second million would be much harder going.

To grow from the million mark, 2degrees would have to fight harder as the battle moved from the low hanging fruit of relatively low-spending pre-pay customers to contract and business customers.

Mr Hertz expected Telecom and Vodafone to fight harder to defend that turf.



Vodafone: 2,370,000 | 44.24%*
Telecom:  1,987,000 | 37.09% **
2degrees: 1,000,000 |17.73% ***
TelstraClear/MVNOs: 50,000 | 0.93% ****


2degrees was only in the early days of attacking the small-to-medium business market, the CEO said.

And there was no new investor, as had been rumoured.

The company recently reported an $81.9 million operating loss for calendar 2011, its second full year of operation.

Mr Hertz says it is onc course. break even on an earnings before interest and tax (ebit) basis this year, chief executive Eric Hertz says.

The company lodged its accounts for calendar 2011 with the Companies Office today, showing 72% revenue growth to $185.4 million as the company heads for its millionth customer at some stage this year.

"We're pleased with progress," Mr Hertz told BusinessDesk. "These results show a 56% decline in operating losses as a proportion of operating revenues. We've become a $185 million [turnover] company in two years,"

The operating loss for calendar 2010 was $73.4 million, on revenues of $107.8 million.

Unlike publicaly listed Telecom and Vodafone, 2degrees does not break out metrics as as average revenue per customers on different types of plans, and other detailed metrics.

2degrees says it has now spent $450 million its network. Money has come from investors, including majority shareholder Seattle-based Trilogy, and a $100 million credit line from Huawei, 2degrees' main network infrastructure partner.

Asked if it was a bittersweet moment to celebrate the million mark without 2degrees' founder Tex Edwards, Mr Hertz quipped "next question".

At its most recent quarterly update, Vodafone said it has lost a net 41,000 customers (see below).

Telecom, which had a net loss of 182,000 mobile customers at its last six-month report in February, is due to next report on or around August 24.

Mr Hertz said part of his company's focus would be on keeping costs low and "not spending too much on offices" (his company has a meat-and-potatotoes office in unfashionable Upper Queen St; Mr Hertz spoke to NBR on the Viaduct, in sight of Telecom and Vodafone's respective headquarters).

The announcement was also no-fuss. A handful of staff waved polystyrene numbers in the air for a brief photo op. Then it was back to work.

Vodafone loses 41,000 more mobile customers – blames World Cup

July 23: Vodafone NZ has again lost mobile customers, according to figures reported by its UK parent company overnight.

In its latest quarter, Vodafone NZ lost a net 41,000 customers.

It was the sixth straight quarter the carrier had shed customers.

Q4 FY 10/11: 2,484,000
Q1 11/12: 2,458,000
Q2 11/12: 2,434,000
Q3: 11/12: 2,420,000
Q4: 11/12:  2,411,000
Q1: 12/13: 2,370,000 

IDC senior market analyst Glen Saunders told NBR ONLINE, "It's interesting times with much more price competition going on – Telecom to 44c [for mobile voice calls], 2degrees with 5000 text [for $10] and of course Skinny getting a bit more coverage now.

"I imagine that Paul Taylor will create a bit of extra 'excitement' within the Skinny brand over the next few months, too."

Telecom recently moved Mr Taylor, it's head of mobile marketing, across to head its Skinny budget/youth brand.

Ironically, the number of customers Vodafone has lost in the past six months (50,000) is roughly the same as it will gain if the TelstraClear takeover is approved (TelstraClear's 50,000 mobile customers use a re-badged version of Vodafone's service. Such wholesale customers are not included in Vodafone's total).

"The results saw a decline in prepay customer numbers with a smaller drop in customers on account," a Vodafone spokeswoman told NBR.

The new customer count reflected the Commerce Commission’s latest market monitoring report, which said competition between phone companies was increasing, she said.

"Since October 2009, the cost of making a call to another mobile network has come down 35% and sending a txt has reduced by 66%. [But] while customers are enjoying lower than ever prices, calling volumes are continuing to decline."

The World Cup effect
 "Prepay customer churn in the quarter can in part be attributed to the Rugby World Cup, which saw large numbers of inbound tourists buy prepay SIM cards," the Vodafone spokeswoman said.

"Vodafone’s policy is to disconnect SIM cards after six months of inactivity, which saw a large number of prepay disconnections in the quarter."

She pointed out Vodafone continues to upgrade its sites which support Dual Carrier HSPA+ technology "which delivers the fastest speeds currently available in New Zealand" (a claim borne out by NBR tests on the new iPad; Telecom, for its part, is pushing a 4G trial underway for a handful of business customers).

2degrees growing
The drop came at a time that 2degrees continues to surge.

On June 28, CEO Eric Hertz said his company now has 950,000 customers - including 100,000 on contract (a figure never previously broken out). 

Telecom falling?
Telecom was hurting at its last mobile update, back in February 24, when it revealed a net loss of 187,000 customers in its half year to December.

2degrees continued gains indicated that it, too, will report another dip in customers at its next six monthly report (expected in August, an exact date has yet to be set).

Telecom's old CDMA network will close on July 31. On February 24, Telecom said 639,000 were on CDMA.

On July 11, Telecom refused to say how many had yet to migrate to XT (or have been lured to a rival), but did introduce new carrots and sticks to get hold-outs to move.

Telecom has so far declined to provide any customer numbers for Skinny. It says it will provide Skinny numbers at its August six-month update or with its annual report due late August or early September.

Vodafone pre-pay vs contract
The percentage of Vodafone NZ customes on pre-pay - which has fallen quarter after quarter since 2degrees' launch - was down another 0.3% to 66.5%. Pre-pay customers spend much less than those on contract plans, according to Vodafone and Telecom financial reports (privately-held 2degrees does not release detailed user figures).

Vodafone does not release quarterly financials for its NZ operation  (in its year to March 31, 2011, Vodafone saw net profit jump 20% to $151.5 million on revenue that increased 6% to $1.69 billion).

Globally, the company had a flat result first quarter blamed on the Eurozone crisis. The company does not report profit/loss figures by quarter, but did say its global revenue was £10,767 a 7.7% fall, or a 1% gain on an "organic" basis (stripping out acquisitions and other one-offs). The companies shares were down 2.5% in early trading.

All carriers count each connection as a "customer", so a person with separate SIM card accounts for, say, a mobile phone, data stick and iPad, counts as three customers. MVNOs or mobile virtual network operators resell service. TelstraClear; easily the largest MVNO, offers a rebadged version of Vodafone's service.

* Vodafone PLC quarterly financial report, May 23 2012
** Telecom half-year financial report, February 24, 2012
*** 2degrees CEO statement June 28, 2012
**** TelstraClear statement May 2012

Chris Keall
Tue, 07 Aug 2012
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2degrees claims 1 million customers, reveals new target