2degrees merger discussions confirmed by its majority-owner

Thursday, 7 October 2021

2degrees has been tipped as a merger partner for Vocus for many years – now that may come about.

2degrees has effectively confirmed reports it may merge with the New Zealand arm of Australian telco Vocus.

The country’s third-largest mobile company released a statement from its majority-owner, Trilogy International Partners, stating it had paused work on an initial public offering of 2degrees “in order to consider a possible alternative transaction with another party”.

Trilogy said it expected to provide additional details “in the next several days” indicating that would either be to provide more details on the transaction or say it was resuming activity on its IPO.

2degrees spokeswoman Andrea Brady said earlier that its planned IPO was on hold but said she could not make further comment.

Vocus is best known in New Zealand as the owner of internet provider Orcon, whose name its New Zealand arm is taking on.

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Trading in the shares of Trilogy International Partners was suspended on the Toronto Stock Exchange because of “pending news”, with its shares spiking by more than 20 per cent in the few hours leading up to the trading halt.

Vocus has been separately progressing a possible listing of Vocus NZ, which owns the Orcon and Slingshot brands, raising the prospect that a merged business could still list on the NZX.

A merger between Vocus and 2degrees has long been considered a possibility, with rumours of a tie-up circulating as long ago as in 2016.

2degrees and Vocus NZ – which was being rebranded as Orcon in preparation for its IPO – are the country’s third and fourth largest telecommunications firms respectively.

The Australian Financial Review, citing a Goldman Sachs presentation, reported that the companies would have an 18 per cent share of retail broadband subscriptions, if merged, compared to Spark’s 58 per cent share and Vodafone NZ’s 24 per cent.

A merger would appear unlikely to raise significant competition concerns as there are few barriers to entry in the fixed-line broadband market – in which Vocus is the country’s third largest player – and could create a strong competitor to Spark and Vodafone in mobile, which is 2degrees’ main business.