2degrees returns to pre-tax profit after merger push

2degrees returned to pre-tax profit and lifted annual revenue after four consecutive years of growth since its merger with Vocus.

Revenue rose 5.5% to $1.46 billion and trading EBITDA increased 6.5% to $421.1 million. Profit before tax was $27.4 million, a $50 million turnaround as one-off integration costs and non-cash effects seen in recent years eased.

The result marks a shift after the multi-year integration programme that followed the 2022 merger with Vocus. Growth came across consumer, business and wholesale operations despite challenging market conditions.

Chief Executive Officer Mark Callander said the latest result reflected both the integration work and underlying trading progress.

"Four years ago, we brought together two outstanding businesses with a clear ambition to build a stronger platform for growth. Since then, we have successfully completed that integration, delivered record trading EBITDA and returned the business to pre-tax profitability, while continuing to deliver for our customers.

"Achieving this while navigating a challenging economic environment reflects the strength of our business, the resilience of our strategy and the dedication of our people," Callander said.

Business growth

Beyond the headline financials, 2degrees recorded continued growth in mobile, broadband and energy. It also highlighted further progress in its business division, winning several large contracts from enterprise and public-sector customers during the year.

That segment has become a central part of the group's growth plan as it looks to expand beyond the retail telecoms market. Those contract wins, 2degrees said, show it can compete for large organisations across New Zealand.

"We are consistently winning business and building momentum with enterprise and government customers. This is a significant growth opportunity for 2degrees, and one where we are already delivering results.

"Organisations are looking for a partner that makes technology easier to navigate and more valuable to their business. They are choosing 2degrees because we bring together connectivity, technology, infrastructure and service, backed by our people who take the time to understand their needs and work alongside them," Callander said.

Technology focus

2degrees also broadened its as-a-service portfolio over the year and increased the use of artificial intelligence in its in-house development team. It said this helped shorten product development cycles and supported the launch of new services.

Management said control over key parts of its technology stack gave the company more flexibility in how it develops products and responds to customer demand. It added that AI is playing a larger role in internal processes tied to development and customer service improvements.

"Our technology capabilities give us more scope to move quickly, simplify how we work and improve the customer experience. AI is becoming an increasingly important part of how we do that, helping our teams turn ideas into practical improvements faster," Callander said.

During the year, the group also advanced its partnership with AST SpaceMobile, opening a ground station in Marton as part of preparations for direct-to-mobile satellite connectivity in New Zealand.

Strategy phase

Chair Liz Coutts said the results reflected the strength of the business as it moves through its three-year 2d28 strategy, which is centred on growth, innovation, value creation and customer experience.

The results suggest 2degrees is moving from a period dominated by integration to one focused more directly on expanding revenue streams and improving returns. They also indicate the benefits of the Vocus merger are beginning to show more clearly in reported profit.

"2degrees has continued to grow through a challenging economic cycle while successfully completing a complex integration programme and strengthening the foundations of the business for the future.

"These results demonstrate the progress we have made over recent years and provide a strong foundation for the next phase of our strategy," Coutts said.

Callander said the company is now concentrating on execution, customer growth and expanding its business portfolio.

"We have a strong network, modern platforms and a clear strategy for sustainable growth. Our focus is on winning customers, growing our business portfolio and using technology to deliver better service and value.

"We have built a strong platform for growth. Now we are focused on realising its full potential while continuing to challenge the market and fight for fair for New Zealanders," Callander said.