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Let's hear it for the little guy

While Telecom NZ is left red-faced with outages, the small fry, like fledgling operator 2degrees, seem to have it right.
Written by Darren Greenwood, Contributor on

While Telecom NZ is left red-faced with outages, the small fry, like fledgling operator 2degrees, seem to have it right.

I remember way back at the turn of the century, 2degrees was born in controversy, broken promises, an African connection and government questioning.

The whole affair, drawn out over eight years, was likened to a soap opera, and the many episodes provided much fodder for the tech media.

Even at the launch, the omens did not look good, with analysts and commentators ready to stick the boot in.

But just six months down the track, 2degrees has confounded the critics and supposedly surpassed its own expectations.

On Friday, just after Telecom New Zealand announced its own "solid" financials, 2degrees gave a six-month report trumpeting it had gained 206,000 customers.

Some analysts had claimed it would take them twice as long to get half as far.

So how did 2degrees enjoy such a successful start?

Well, it certainly did wonders for competition and pricing, with prepay charges well below Telecom and Vodafone. Among its milestones are half-price prepaid calling and texting (reducing calls from 89 cents a minute to 44 cents a minute and texts from 20 cents to 9 cents).

There were also "Magic top ups" which allow free texts and calls, further halving the cost of mobile phone calls and that includes calls to Australia, the US, the UK and now several Asian countries.

The New Zealand Commerce Commission has also highlighted the impact of the new entrant, saying before Christmas that finally, New Zealanders could now access prepay mobile phone rates below the OECD average.

I am sure we can thank 2degrees for inspiring Telecom and Vodafone for fighting back with new or improved offers like Best Mate, unlimited texting plans, $2 capped calling, and free calls on a weekend.

Yet, while Telecom and Vodafone have offshored some work, 2degrees has the novelty of a Kiwi-based call centre, open 24/7 and free for 2degrees customers to call.

It has also stressed its "Kiwiness" by marketing itself on the "Six Degrees of Separation" argument, noting that in the relatively sparsely populated New Zealand, two degrees of separation is more likely. This Kiwiness is emphasised in television ads featuring sheep and Kiwi comedian Rhys Darby whose humour focuses on the Kiwi way of life.

At the company's results, CEO Eric Hertz predicted further growth for his company, saying that "later this year" the company would launch a 3G network based on UTMS technology supplied by Huawei.

At present 2degrees uses existing EDGE 2.5G technology with cell sites focussed around Auckland, Wellington, Christchurch, plus Queenstown. That network cost $200 million to roll-out and has proved to be reliable, unlike Telecom's XT network, supplied by Alcatel-Lucent. Outside these centres, customers switch seamlessly to the Vodafone network.

Hertz believed that the statistic that two-thirds of the Kiwi mobile market is on prepay rather than contract, says much about the dissatisfaction users have with the main providers, which provides opportunity for vendors such as 2degrees.

Indeed, I say as a disgruntled user of Vodafone prepay, more power to the elbow of the little guy. I might not switch over to 2degrees full-time, but at the very least it will keep the big boys on their toes!

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