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2degrees reports positive operating earnings for the first time

Friday 28th June 2013

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Mobile operator Two Degrees has turned in its first positive earnings before interest, tax, depreciation and amortisation since it entered the market three years ago in a challenge to Telecom and Vodafone.

Ebitda was $4.4 million in calendar 2012, compared to a loss of $38 million on the same basis a year earlier. The company's net loss fell to $45.2 million from $86.6 million in 2011 as revenue rose about 40 percent to $213.6 million, according to accounts lodged today with the Companies Office.

Cost of service was little changed at $120 million, from $119.2 million in the previous year, the accounts show. Staff costs rose to $58.3 million from $43.7 million as the company started moving from its established position as a pre-paid operator to seek a chunk of the more lucrative post-paid business market.

2degrees, which began offering mobile services in New Zealand in late 2009, now employs some 780 staff and committed about $104 million in new capital expenditure last year.

The company suffered the shock loss of its popular American chief executive, Eric Hertz, in a plane crash in April and is currently seeking a new chief executive.

Last week it announced a $165 million funding deal allowing it to repay some $78.3 million of loans from telecommunications equipment supplier Huawei and to help fund the roll-out of 4G technology for the next generation of mobile services.

Accounts for Huawei's New Zealand operation for 2012 show the company's tax-paid profit for the year rose 136 percent to $3.3 million, on a 43 percent rise in revenue to $114.1 million, in part reflecting the 2degrees' investment in 3G technology.

Interest costs rose to $3.7 million in 2012, compared with $511,000 in the previous year, while total equity rose to $449.4 million, from $329.6 million the previous year.

Well-known for its cheeky advertising, often starring comic Rhys Darby, 2degrees spent $39.7 million on sales and marketing, compared with $36.8 million the previous year.

Provision for doubtful debts jumped to $4.7 million from $812,000 during the year, relating to "overdue subscriber and international carrier balances", according to notes to the accounts.

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