Earnings turn positive for 2degrees

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.

By Pattrick Smellie - BusinessDesk