Operating earnings turn positive for 2degrees in third year

Mobile operator Two Degrees has turned in its first positive earnings before interest, tax, depreciation and amortisation since it entered the market three years ago in a challenge to Telecom and Vodafone.

Ebitda was $4.4 million in calendar 2012, compared to a loss of $38 million on the same basis a year earlier. The company's net loss fell to $45.2 million from $86.6 million in 2011 as revenue rose about 40 percent to $213.6 million, according to accounts lodged today with the Companies Office.

Cost of service was little changed at $120 million, from $119.2 million in the previous year, the accounts show. Staff costs rose to $58.3 million from $43.7 million as the company started moving from its established position as a pre-paid operator to seek a chunk of the more lucrative post-paid business market.

2degrees, which began offering mobile services in New Zealand in late 2009, now employs some 780 staff and committed about $104 million in new capital expenditure last year.

The company suffered the shock loss of its popular American chief executive, Eric Hertz, in a plane crash in April and is currently seeking a new chief executive.

Last week it announced a $165 million funding deal allowing it to repay some $78.3 million of loans from telecommunications equipment supplier Huawei and to help fund the roll-out of 4G technology for the next generation of mobile services.

Accounts for Huawei's New Zealand operation for 2012 show the company's tax-paid profit for the year rose 136 percent to $3.3 million, on a 43 percent rise in revenue to $114.1 million, in part reflecting the 2degrees' investment in 3G technology.

Interest costs rose to $3.7 million in 2012, compared with $511,000 in the previous year, while total equity rose to $449.4 million, from $329.6 million the previous year.

Well-known for its cheeky advertising, often starring comic Rhys Darby, 2degrees spent $39.7 million on sales and marketing, compared with $36.8 million the previous year.

Provision for doubtful debts jumped to $4.7 million from $812,000 during the year, relating to "overdue subscriber and international carrier balances", according to notes to the accounts.


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4 Comments & Questions

Commenter icon key: Subscriber Verified

I rang 2degrees the other day and had to listen to several minutes of ads and apologies before getting to select an option.
The pseudo-cool 'keep it simple' guy they use on hold is only less annoying than Vodafone's smarmy 'cat with the cream' woman.
Sadly, the longer they go the more they become like Vodafone - treating their customers like cattle.
2degrees used to treat their customers with respect. That market niche is open again.

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Hi there, we're very sorry if you have had a bad experience with us as we hate to keep customers waiting. Please be assured that we still pride ourselves on providing customers with the same high level of care we always have – our customers are important to us. Most calls are answered within 2 minutes but can sometimes be longer, depending on the service you require. The recorded message may contain info on our latest products that many customers and potential customers are calling us about, as well as pointing to our website where most questions can be answered - http://www.2degreesmobile.co.nz/.
To skip this and get through to a real person as soon as possible you can press ‘0’. You can also contact us by email at care@2degreesmobile.co.nz or by following us on Facebook – (https://www.facebook.com/2degreesmobile) - or Twitter (@2degreesmobile) and sending us a personal message. Sorry again for the bad experience – hopefully, we can make it up to you in the future.

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Such a silly comment, they can't offer within the minute answering. Its expensive to run a call center.

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Why are the media fixating on 2degrees? Take a look at the train wreck that is Skinny. It's over-priced, doesn't roam and has all but been hobbled by people at Telecom who have managed to keep their jobs.

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