2Degrees eats into Vodafone's market share

Vodafone New Zealand, the local subsidiary of the UK phone operator, saw its market share of connections sink below 50 percent last year as new kid on the block 2Degrees mobile entered the market after a lengthy lead-in time.

The country’s biggest mobile phone company had an estimated 49.6 percent of connections as at December 31, according to the Commerce Commission’s annual telecommunications monitoring report out today, as 2Degrees tempted some 206,000 mobile phone users, or 3.8 percent of the market, from the dominant players Vodafone and Telecom.

Mobile connections grew 20 percent to 4.9 million between 2005/06 and 2008/09.

That’s a penetration rate of 114 percent of the population.

Telecom’s market share fell to 46.6 percent from 47.9 percent.

Voice calls made on mobiles rose “strongly” over the period, mainly due to the “popularity of restricted on-net calling offers,” according to the report.

Vodafone’s latest offering, where users pay $12 a month to call other Vodafone mobiles or any landlines, prompted Communications Minister Steven Joyce to query whether that should have a bearing on his decision on whether to regulate mobile termination rates, the fees charged for terminating calls on a rival network.

Telecommunications Commissioner Ross Patterson told Joyce that it should probably be taken into account as it could have a material impact on competition.

"In the mobile market, the entrance of a new network operator, 2Degrees, has had an immediate impact in terms of consumer choice and competitive offering," Patterson said in a statement.

"Although there is evidence that competition in the mobile market is increasing following the launch of 2degrees, mobile voice usage remains low by international standards."

The Commerce Commission’s report suggested increased competition in the sector hadn’t broken the concentration of market share among a "few large firms" and said New Zealand lagged behind other countries such as the UK and Australia.

Telecom invested some $1.2 billion into telecommunications over the past three years, making up about 71 per cent of the total investment.

This came after the previous administration began implementing a tougher regulatory regime for the country’s largest phone company.

Shares of Telecom rose 0.9 percent to $2.20 on the NZX today.

Though broadband performance has improved since 2005/06, with 78 percent of connections able to deliver faster speeds, “many consumers have demonstrated a preference for purchasing cheaper plans offering lower speed and/or lower data caps,” the report said.

Retail revenues across the telecommunications sector shrank to about $4.74 billion last year, from $4.92 billion three years earlier, led by a 3 percent decline in last year’s voice calling revenue.

- BusinessDesk