2degrees taps Chinese giant to fund $US100m upgrade

2degrees currently only has its own celltowers in Auckland, Wellington, Christchurch and Queenstown. 

The practical consequence that 2degrees' keenest 3G broadband deals are confined to those four centres. People who roam outside them pay more.

For voice calls, 2degrees customers roam (invisibly, to them) on Vodafone's network - but charges for this "domestic roaming" have been a point of contention between the two carriers.

This morning, 2degrees announced a $US100 million upgrade to its network, to be carried out over the next two years.

Chief executive Eric Hertz told NBR that the specifics of where, and when, the expansion would take place would remain secret, for competitive reasons.

Beyond geographic expansion, 2degrees has yet to "turboboost" its 3G network with HSPA+, an upgrade that Telecom and Vodafone have already applied to their networks.

The carrier has previously promised an HSPA+ upgrade will begin later this year.

Tapping Huawei
2degrees will continue to work with its primary technology supplier, Huawei, with the "4G-ready" network extension.

The company recently raised $US4.5 million ($NZ5.8 million) from its existing private equity shareholders, who include US-based Trilogy International Partners (which has a 57% holding, UK company CVP (28%), the Hautaki Trust (13%) and Hong Kong's KLR (2%). KLR is the family investment vehicle of 2degrees co-founder Tex Edwards, who works for the company in Auckland.

Mr Hertz told NBR that 2degrees was in its early stages as a start-up, and still made an operating loss (in its first annual result, to July last year, the company lost $52 million).

The injection of shareholder funds would go toward day-to-day operations, and 2degrees retail expansion, among other items.

The lion's share of the $100 million for network expansion will be delivered through a new debt facility with Huawei (the deal could be seen as the Chinese giant - still a relative newcomer against more established  rivals Alcatel-Lucent, Nokia-Siemens and Ericsson - trying to guy market share. But such vendor funding is commonplace with such large ICT infrastructure projects.

Big league
The company said the extra $100 million will take its total network investment to $400 million, getting it into the same ballpark as Telecom and Vodafone's mobile infrastructure spend.

Ready to co-locate
Asked to comment on the government's $300 million rural broadband initiative, Mr Hertz said he was inherently wary of any deal that saw government subsidies going to competitiors.

However, 2degrees was willing to co-locate its gear on the 183 celltowers the Telecom-Vodafone consortium has pledged to build, subject to the open access terms and pricing terms, still being finalised with the government.