2degrees may have rung up first profit
2degrees may finally be generating a profit, eight years after taking on Vodafone and Spark in the mobile market, accounts filed in Canada suggest.
Financial information on 2degrees had previously been limited to its annual filings with New Zealand's Companies Office. Those accounts show 2degrees had racked up losses of almost $400 million by the end of 2015.
But Trilogy International Partners, which owns just over 70 per cent of 2degrees, is now obliged to provide more up-to-date information on the business after reverse-listing on the Toronto stock exchange this year.
Accounts Trilogy filed with the exchange overnight show 2degrees grew its revenues 24 per cent to US$487m (NZ$695m) in the year to December 31. Revenues in the final quarter were up 30 per cent, year on year.
More significantly for Kiwi policy-makers, its adjusted operating profit (Ebitda) rose 43 per cent to US$79m.
The accounts do not break out a net profit or loss for 2degrees.
But interest charges, depreciation and amortisation are recorded at US$70m and Trilogy's total tax expense in the final quarter was US$2m, suggesting 2degrees could have finally scraped a tiny profit, or at least moved into the black towards the end of the reporting period.
2degrees has yet to file its audited accounts with the Companies Office and spokesman Mat Bolland said he could not comment.
The timing would be ironic. The Commerce Commerce rejected the proposed merger of Sky Television and Vodafone New Zealand last month in part out of concern about the impact the merger could have had on 2degrees, and the knock-on effect on competition in the $2 billion mobile market.
Another irony is that 2degrees has had a horror start to 2017 after problems with a new software system made it difficult for customers to top-up their pre-pay accounts and add services. The customer-service woes clogged 2degrees' contact centres, forcing it to take on 80 temporary staff.
Telecommunications analyst Paul Budde said it was hard to get a good view on the business.
"Growing subscribers in such a competitive market means that you only see marginal increases," he said.
Forsyth Barr analyst Blair Galpin said Trilogy's new reporting requirements meant people could now accurately compare the relative success of New Zealand's three mobile providers.
He said 2degrees had a 23 per cent share of the mobile market by connections, versus Vodafone's 39 per cent and Spark's 38 per cent, but Spark "took the prize" because it had a higher proportion of post-paid customers who spent more.
Although Trilogy's largest asset is its stake in 2degrees, it also owns a 71 per cent stake in Bolivian mobile phone company NuevaTel. Trilogy faced a big interest bill of its own from junk bonds that it used to finance the business prior to its reverse-listing on the Toronto exchange.
Trilogy's overall annual loss was barely changed at US$41m.
2degrees' mobile service revenues grew 13 per cent over the year, Trilogy's accounts show, while its fixed-line revenues more than doubled – reflecting its purchase of Christchurch's Snap Internet part way through the 2015 financial year.