Eric Hertz's legacy will survive and prosper

Even before his body was recovered over the weekend, analysts were already pondering the future of 2degrees, following the death of its CEO Eric Hertz.

That such a tragedy could significantly alter the direction of New Zealand's third mobile network was a reflection of the impact that the US-born businessman had on his company before his plane crashed in the seas off New Zealand during the Easter holidays.

Hertz, who died in the accident along with his wife Kathy, won many plaudits for the way he steered 2degrees from being a minor mobile operator to one having more than 1 million customers that transformed the state of competition in the New Zealand telephony marketplace.

True, some of the legwork had been done by the time he joined 2degrees, with former governments laying the groundwork for his company to acquire some of the mobile spectrum more than 10 years previously.

But certainly, the tributes paid by rival telcos, the IT community, and politicians of all persuasions highlighted the calibre of this distinguished and powerful individual. That the American fitted so well into New Zealand life added to the country's sense of sorrow.

Among the tributes, Telecom acknowledged that Hertz had created a "respected competitor". Vodafone credited 2degrees for what "must be the most successful new mobile entrant that the world has ever seen". IT Minister Amy Adams declared that Hertz was "an integral part of the creation and growth of 2degrees".

Indeed, Telecom and Vodafone previously operated New Zealand's telco market as a cosy duopoly, with the country noted for high charges, which were blamed on a lack of effective competition.

Competition is certainly what 2degrees delivered under Hertz, with it helping to reduce mobile calling rates along with bringing cheaper mobile broadband, too, something I am enjoying as a new 2degrees mobile broadband customer (sorry, Vodafone).

Here's what Paul Brislen, CEO of the Telecommunications Users Association of New Zealand had to say when the death of Hertz was first reported.

"It's not overblown to say that Eric has lead 2degrees to make dramatic changes to the New Zealand telecommunications space. Without 2degrees, we would be facing a duopoly in mobile telecommunications and wouldn't have rollover minutes, shared data, or any of the other innovations 2degrees has brought to market.

"The company has changed the landscape of competition for the New Zealand telecommunications market in an incredibly positive way, and we as an industry are all the more poorer for today's news," Brislen said.

Now, after just three or so years, 2degrees has more than 1 million customers and just over a fifth of the New Zealand mobile market.

It's not just through lower prices; 2degrees has even outshone the marketing prowess of Vodafone.

Its name itself reflects its Kiwiness, there being 2 degrees of separation between people in New Zealand's much smaller population, compared to the 6 degrees of separation globally. People see 2degrees as a plucky little Kiwi battler, up against the big boys, even though much of the company's ownership is foreign.

Hertz is credited with the company recruiting comedian Rhys Darby to front 2degrees campaigns, and his popular Kiwi humour has endeared the telco to the country.

However, to date, the company has yet to report profit, though it now claims to be making an operating profit.

On Friday, The New Zealand Herald reported that even though 2degrees has performed better than expected, its business model, which has seen it pick up the least profitable customers, might not be sustainable, and the company might be ripe for takeover. It quoted several analysts who claimed that the future for 2degrees is uncertain.

However, we have been here before. The National Business Review, also on Friday, recalled previous comments from so-called industry experts who predicted very slow growth for 2degrees.

In some cases, 2degrees did in one year what the pessimists predicted would take three.

The owners of 2degrees may well have blown off a reported NZ$500 million in setting up the operation to date, but the telco is moving into profit, if it is not already there. A prospective move into the fixed-line market also promises new opportunities.

No doubt the company will face battles ahead, but the positive legacy of Eric Hertz is so strong that despite a few naysayers, 2degrees will most certainly survive and prosper.