Orcon won't say if IPO still an option after merger with 2degrees

Thursday, 13 January 2022

2degrees employs about twice as many staff as Orcon in New Zealand and appears the more complex of the two businesses.

The country’s third largest internet provider, Orcon, is declining public comment on whether it still expects to list on the NZX after its planned merger with 2degrees.

There is as yet no word either on who will head the combined 1700-employee business.

Orcon’s Australian owner, Voyage Digital, announced on New Year’s Eve after months of negotiations that it had agreed to buy 2degrees, in a deal that values 2degrees at $1.7 billion.

The combined company would have about a 20 per cent share of both the fixed-line broadband market and the mobile market according to Commerce Commission figures.

* 2degrees merger discussions confirmed by its majority-owner

Three benefits of 5G technology (video first published in 2019).

Voyage Digital and 2degrees’ owners had both been preparing to list the two businesses separately on the NZX and ASX exchanges prior to the merger negotiations.

Documents lodged with the Commerce Commission seeking clearance for the takeover indicated that would remain their plan in the event the merger did not go ahead for any reason.

But Orcon chief executive Mark Callander would not comment publicly on whether the combined business might still be spun off and listed after a merger.

It is understood there is unlikely to be any word on a share market IPO soon, with the focus for now expected to be on integrating the two businesses.

Callander also declined to comment on who might head the merged company, or on what it would be called.

Although it is Voyage Digital that is buying 2degrees, the mobile company employs about twice as many staff as Orcon which has gone through a series of ownership changes over the past decade.

2degrees appears the more complex of the two New Zealand businesses and is in the early stages of building a brand new 5G-capable mobile network with Ericsson – which might be expected to make members of its management team more difficult to replace during any competition for roles.

The merger is widely expected to be cleared by the Commerce Commission, given the very low barriers to entry in the fixed-line broadband retail market.

The watchdog would be able under its mandate to consider whether – in the absence of a merger – Orcon might develop or provide custom for a fourth mobile phone network and help bring extra competition to that market.

But Voyage Digital did not appear to see the need to address that hypothetical in its clearance application, which described Orcon and 2degrees as complementary businesses.

Correction: an earlier version of this story incorrectly reported that 2degrees was partnering with Nokia rather than Ericsson for its 5G network. (Amended at 12.42pm, January 13, 2022)