2degrees' revenues and operating profit up ahead of 5G test

Monday, 1 April 2019

2degrees is continuing to make money but there are challenges on the horizon.

2degrees grew its business slightly in 2018 and appears to have posted its third consecutive net profit, ahead of what may be an expensive few years for the mobile network and broadband business.

Majority-owner Trilogy International Partners reported that 2degrees grew its revenues by 7 per cent to US$556 million last year, with its operating profit rising 6 per cent to US$90m.

The figures released by Trilogy to the Toronto stock exchange suggest that 2degrees is likely to have achieved another small net profit for the year, adding to its net profit of $19m in 2017 and its maiden profit of $13m in 2016.

That should be confirmed when the company posts its statutory New Zealand accounts in a couple of months.

* 2degrees could face 'significant' costs if Huawei banned from 5G

* Tough calls ahead on 5G mobile roll-out**

The string of profits have been chipping away at the $397m in accumulated losses that 2degrees had built up by the end of 2015 during its start-up stage.

The company will have to pay just over $50m over five years to retain its 3G and 4G spectrum rights for the next 20 years, under a proposal put forward by the Government last month.

2degrees may also have to fork out tens of millions more, from next year, when the Government plans to auction spectrum suitable for the early deployment of the next generation of mobile technology, 5G.

The move to 5G could be especially expensive for 2degrees because of the threat of a government ban that is hovering over its key technology partner, China's Huawei.

2degrees chief technology officer Mike Davies warned in December that 2degrees could face 'significant costs' if it was unable to upgrade to 5G using equipment from Huawei, as it might then have to swap out or duplicate much of its existing network infrastructure.

Spokesman Mat Bolland said the newly-auctioned 5G spectrum rights would not be available for use until November 2022 so the company 'had time to get ready'.

Trilogy's results showed 2degrees' mobile service revenues declined 3 per cent in 2018 as mobile customer numbers dropped 2 per cent, but that was offset by an 8 per cent rise in its fixed-line broadband revenues.

By the end of the year 2degrees had 81,800 fixed-line broadband customers – up 19 per cent.

Trilogy forecast 2degrees' service revenues and operating profit would rise by about 3 per cent and 7 per cent, respectively, this year.

But it warned those gains would be wiped out by a continuing deterioration in its other mobile business in Bolivia where it is facing intense price competition.