2024 Insights and Future Vision with CEO Mark Callander

Episode Transcript (computer-generated)

Paul Spain:
Hey folks, greetings and welcome along to the New Zealand Tech Podcast. I’m your host, Paul Spain and great to have Mark Callender, Chief Executive at 2degrees joining us again. How are you, Mark?

Mark Callander:
Good, Paul, thanks for having me.

Paul Spain:
Yeah, great to have you back. Well, lots has always going on when it comes to the tech world and the telecommunications world. You know what’s been keeping you busy since we last caught up?

Mark Callander:
Yes, obviously we’ve acquired the 2degrees business in that time, so we’re day 921. So not that I’m counting, but we’ve had a really good two and a half years in terms of bringing together two great businesses, two great challenger businesses with significant challenged DNA in New Zealand. It’s been a great opportunity, a privilege to essentially merge the cultures, the infrastructure, the technology, all still trying to grow the business at the same time. So it’s been a very busy two and a half years. We’re in a really, really good position. Had a great last 12 months of trading and growth in the market. So yeah, we’re just constantly obsessed with doing the right thing by the customer and making sure that we integrate these businesses along the way.

Paul Spain:
Yeah. What’s the biggest challenge at the moment in the current economic climate and so on? Does that make things better or worse for you? That maybe people are a little bit more cost sensitive and so on? Because as you say, you’ve often come from that challenger sort of perspective. Does it make it easier for you to win market share off competitors? Yeah.

Mark Callander:
So pros and cons, we’re not immune to tougher economic climates, but as a challenger brand and a value player, typically we’re very well positioned to thrive. So a good example of that is, you know, large enterprise customers during these times have a better and harder look at their cost lines than they’ve might have previously done when other aspects of the business are going well. The flip side to that is obviously households are struggling out there, so household spending is down. That naturally has a flow through to discretionary spend items when it comes to mobile or data top ups as well. So on the whole we are, I think we’re a net beneficiary of the current climate given the value proposition we have in market. So that’s very, very positive from our perspective. The other big flip side for us is the employment market has eased a lot. So if I’m to reflect back 12 to 18 months ago, very, very hard to get good technology staff, contact centre staff.

Mark Callander:
There was a wage war going on for people in market, so it’s nice to be through that and being able to choose from the great talent that’s out there to again help us build the technology journey we’re on for our customers.

Paul Spain:
And what are you now in terms of scale of people?

Mark Callander:
So about 1600 staff now. It’s slightly down on our peak. Obviously when you bring two businesses together there’s some natural fallout from that. So we’re well through that. We have overinvested in terms of people, in terms of our contact centres. So you may recall we outsourced some of our contact center operations to South Africa amidst the really tough times and it was really, really challenging to recruit staff. Very pleased to say we’re now recruiting in New Zealand again. So again that’s a really positive thing for us to be doing.

Mark Callander:
We announced that to staff the other week. Again we get buoyed by again creating jobs and creating employment in New Zealand. We’re officially fiercely passionate New Zealand based company. So yeah, pros and cons, but on the whole we’re doing really, really well.

Paul Spain:
And what can you share in terms of revenues?

Mark Callander:
Well, the good news is our financial results for FY24 will be out shortly, so they’ll be available for all to see. We’ve again, we’ve traded very well. We’ve previously reported we’re obviously north of a billion dollars in terms of turnover, north of 20% in terms of market share. We are experiencing strong growth. So those results will be out sometime this week. I won’t be all here. Yeah, yeah, yeah, we get in trouble, get in trouble. But no, we’ve had a really good FY24 and more importantly, really good momentum in the first quarter of this financial year as well.

Mark Callander:
So all to be said, so what’s.

Paul Spain:
Been your primary focus over this last period where you know, you’ve been bringing businesses together? You know, there’s, I guess there’s all sorts of things that’s been going on. Cell tower, you know, assets being divested on across the industry. You know, 5G obviously has kind of, you know, continued to roll out what have been the really big, you know, things for you to focus on in the Chief Executive Chair.

Mark Callander:
Yeah, so lots going on. First and foremost, the most important thing in terms of my role is the cultural alignment. So again we need to get people within the business that again share that challenge. DNA. I do say that the people really do make a difference in our business. So that Challenger DNA is really, really important to us. So again, getting the right minded people, getting aligned on company values and again we have a purpose which is fighting for fear. So it’s really important that people’s values are aligned to what we’re about as an organisation.

Mark Callander:
So a disproportionate amount of time on setting the cultural tone for the business and making sure we’ve got the right talent. Outside of that, if you get that small problem sorted, then we need to pivot in terms of again making sure that networks remain in equivalence for us. So when I say that, it’s really important that 2degrees maintains the same network equivalence as our competitors. And we’ve done an incredibly good job of that across both mobile and fixed assets. But as you’ve mentioned, we’ve got a big 5G build program going on. So, you know, we have our 5G population coverage sits at about 28, 29% now in all the main centers. You know, we’re close to 60%. We’re upgrading over 300 towers a year.

Mark Callander:
So. And we’re putting a modernized stack of 3, 4 and 5G Ericsson equipment on that technology stack as well. So it’s a big investment in terms of that technology component of what we do. And then the third part again is not losing sight of the customer. So again, while we talk around our infrastructure assets a lot, we really talk about ourselves as a software business internally. At the end of the day, people don’t buy networks, they buy outcomes. So again, we spend a lot of time in terms of both augmentation of our existing technology stacks, but also making sure that we’ve got a modern environment so we can compete and do things differently. We like to turn up differently as a telecommunications company.

Mark Callander:
And that for us starts with a great software environment and a customer first approach.

Paul Spain:
Now last time we caught up, you were telling this story that 2degrees coverage was up there and largely equivalent to the other players. And after we chatted, a 2 degree Simcoe came in my direction. Cause I hadn’t actually tried your network out for this.

Mark Callander:
Sounds dangerous for a little while.

Paul Spain:
Look, I gotta say I was really, I’ve been really impressed. And look, I didn’t go as far as kind of, you know, porting my number across to 2degrees. I guess that would be the next step in the challenge. But going around the country with, you know, with mobile devices across all three networks and in, you know, most places that I, that I was and tried out, did varying looks at coverage and speed tests, be it varying parts of the south island, across the North Island. We’ve got to say, in my experience, I wasn’t really seeing any Issues from that coverage perspective. Now, I guess everybody’s mileage varies and there are sometimes people will choose a particular network because of where they live, has a stronger, you know, coverage of that area. But yeah, bit of a pat on the back there that, you know, your fears can be allayed. In my experience, it was, you know, it was very good.

Paul Spain:
But yeah, I guess this is something that’s a continued investment. Right. And you know, there will be people that are like, oh, I can’t get, you know, whichever network in a particular place and that’ll impact their decision making.

Mark Callander:
Yeah. And a lot of that doesn’t come by chance. So again, if you were to look at kind of coverage maps of the main three operators. Yeah, we all have. We have a similar amount of mobile towers. We’ve got similar coverage. I think, as you’ve described, there’ll always be certain areas that are better for certain operators than others. And that’s just the nature of mobile networks.

Mark Callander:
And that changes over time as well. As you grow market share in regions, you invest in those regions where capacity starts to meet its limits, you invest more in those areas as well. So it’s a very good observation. We’ve actually, you may or may not have seen we’ve launched a blind network test, which is a very cool ad that we put out, which is essentially the old Pepsi Challenge, which is trying to has various scenes of people blindfolded and we’re obviously getting them to test different networks and to see if they can see the difference between the two networks. So again, for us, it’s a natural evolution of being on par with the larger incumbents and it’s really just breaking down perceptions for us now, the perception of the brand is our single biggest opportunity. And again, we’re having very good wins in some of those key market segments we’re targeting.

Paul Spain:
Yep. Now, technology is always transitioning. You know, it won’t be too long before 6G becomes the next topic that we’re all talking about. But part of that is older networks have to get turned off. So, you know, 2degrees, I think, turned off 2G, you know, quite a number of years ago, 3G’s next to get turned off. Is there a date for that as yet? It’s 2025, I believe. Yeah.

Mark Callander:
So we’re targeting end of 2025, which is aligns with again our competitors. That’s quite good from an industry perspective because again, it’s a turning off energy is a big coordination effort. So the activity starts now. So we’re already out speaking with customers Communicating with customers, making sure they’re ready for the 3G switch off. The great news from a customer’s perspective is once we switch it off, we get to refarm the spectrum, which enables us to again use that spectrum in other areas of the network to deliver enhanced experience. It’s also they’ve started switching off 3G in Australia as well. So again, little things like that are quite important to know that when you’re traveling to Australia, for example, which obviously it’s our most travelled destination, you’ve got to be aware of that. So it’s good.

Mark Callander:
We’re closely aligned. We’re working towards the end of 2025, we’ve got a very good plan to get there. So yeah, that’s the plan as it currently stands.

Paul Spain:
Yeah, that’s important, isn’t it, the roaming aspect. If someone’s got a phone that’s not 4G capable and they’re off travelling, they might be in for a little bit of a shock. I don’t know how many people there would be in that boat, but there must be. You guys must have a little bit of data on again across some of those sorts of things.

Mark Callander:
Across all the operators, there’s hundreds of thousands of connections still, which is not uncommon. We’ve obviously looked at the data from our 2G journey and shut down compared to where we’re at now. And so you don’t panic at the numbers at this point, but you do have to educate certain groups and again, that business traveler group, for example, and typically they have more modern handsets so it’s less of an issue, but it’s a big education part at this point. And then we need to get down to the nuts and bolts of actually how we get customers off old phones and give them a solution to make sure that they’re ready for the switch off.

Paul Spain:
And so what’s your approach? What do you expect to do on that front to help nudge people along?

Mark Callander:
So at the moment it starts with education. So again, making sure that people are aware of it. As an industry we work quite well together because again, it’s a non competitive issue and it’s really important, again from an operator perspective and even from a government’s perspective that we’re aligned in terms of those outcomes. You go into a retail store, we make sure that staff are trained to have the conversation. If they’ve got a handset that might not be 3G capable, how can we help them getting into an alternative handset? We’ve got some really very, very low priced handsets out there. For those that are cost conscious as well. So you can get a sub$100 handset now as well. And as you get closer to that time, again, the activity will increase, the offers will obviously be aligned to what we’re all trying to achieve and hopefully we get everyone off.

Paul Spain:
Yep. Now let’s talk about satellite. This has been an interesting area, 2degrees with the first in the market to announce that you were doing something on the satellite front or it was all very close, I think, with your partnership with Link. What can you tell us about that? What’s the picture look like? I realise it’s not an easy thing to get lots of satellites up, but you guys were quite early in on testing. What does that look like?

Mark Callander:
So firstly, space is incredibly exciting. So again, having been in this industry for 20 odd years, you know, to be in the industry when the emergence of space, as it refers to either fixed broadband or mobile, to sell broadband is really exciting to be a part of and it’s going to play a big part of the industry and it’s just a matter of when and kind of what gets delivered. So the whole ecosystem has got a lot to play out here. Now you’ve obviously got SpaceX who are in market, trying to get their approvals with the fcc, so they’ve got a little bit of work to do there. You’ve got Link, who’s got a few satellites up that need to get more satellites up. You’ve got players like ASD, Space Mobile, who again recently made some pretty good announcements, even got lots of Amazon Kuiper as well. So there’s going to be lots of activity in this space. I think it’s very hard to pick winners this early.

Mark Callander:
I know that’s what everyone tries to do, but I think the importance of space is it’s going to provide critical connectivity in terms of those areas that don’t have it. Today that service will evolve from basic messaging to basic browsing to something else over the next three, four, five years. But it’ll be interesting to see how all that plays out. You’ve even got the players like Apple with the iPhone, iPhone 14 that can do SOS messaging as well. So exactly what it is, what ends up in consumers hands, how it’s priced, how consumers use it, what segments of the market might find appeal for it. It’s all the exciting part to come and from our perspective we will have a story in this. In this market we need to provide those services. We’ve partnered with Lynx and that’s gone been very well.

Mark Callander:
We’ve learned a lot. Again we’ve done SMSes in space, which is pretty cool. We made some voice calls as well, which is pretty amazing. But if you take the operators out for a second, there’s a lot of activity in terms of winning the race for space. And again, we’ll have a voice, we’ll pick the right partners and we look forward to being part of building the solutions because that’s really, at the end of the day, the connectivity, if you take my earlier point around us being a software company, the connectivity is only one component of it. How do you stitch together a service, how do you enable it? Through pricing propositions, digital execution. That’s the role that we play. So that’s what we’ll be focused on.

Paul Spain:
And in terms of how it plays out, obviously SpaceX have a unique position in terms of just how many Falcon 9s they’re launching and their ability to put up satellites very fast. But when we sort of step back and look over the longer term, you know, it seems, you know, there is certainly a possibility that, you know, there’ll be quite a number of players in the market. You know, when we’ve looked, I guess, at other sectors that have, you know, that have been changed and disrupted in varying ways, you know, sometimes it is, you know, the first strong player that comes in that does very well. Other times, you know, that player is, you know, is disrupted over time. You know, do you have any sort of particular view on the varying possibilities? Like I imagine, you know, one possibility is that, you know, carriers such as 2Degrees and others around the world could co invest in their own satellite network. Right. And yeah, all manner of other kind of possibilities in between.

Mark Callander:
So I think if you come back to the principle that space and the technology is going to meet a big part of the market that hasn’t been served and it’s a big opportunity. There’ll be more than one player. So that fundamentally has to play out. It’s very unusual that one player gets left to a large and big market opportunity. Each of the players again have different technology, different solutions, different commercial models. You know, there won’t be a world where I think there’s exclusivity with any one of those operators. There’ll be the ability to commercialize the service across multiple providers. And that’s a good space for us because we can obviously pick and align with the models that make sense for us, those that deliver a particular outcome for customers or again, a certain set market of the segment that we’re actually trying to appeal to.

Mark Callander:
So again, it’s going to be very interesting to see how it all unfolds. I think we’ve got a very exciting 12 to 24 months coming up. But again, if you look at players like ASD Space Mobile, they’ve got some good launches out, their satellites are much bigger, they’ve got some pretty good backing behind them now. But the same applies to Amazon as well. So we feel very comfortable where we sit in the market. And like I say, we all have a strong voice and a strong solution for our customers, but let’s see who wins the race.

Paul Spain:
There you go. So you’re not having any quiet chats to Peter Beck around some special network in the background?

Mark Callander:
No, no, I see he’s doing very well. I see he picked up a contract recently. I saw us in the Herald today. It was well done them. They’re a great company.

Paul Spain:
Yeah, yeah. It’s exciting to see and, yeah, certainly, I think, you know, a lot of us are curious, you know, how that ultimately plays out for Rocket Lab. But, yeah, they’re doing very, very strongly at the moment, which is.

Mark Callander:
Love to support them however we can.

Paul Spain:
Very encouraging. So, yep, well, if. Yep, maybe, maybe you and Pete need to get together. All right, now, in terms of the, you know, the Vocus and 2degrees merger. How’s that look now? Cause I think when, you know, when things were announced, the idea was to, you know, simplify your technology stack, simplify your brand, what’s done and what’s left to go.

Mark Callander:
So, yeah, firstly the brand consolidation. So I made good progress there. So very early on, we’ve shut down the Vocus brand and the Flip brand, got, obviously three other brands. You’ll be familiar with 2degrees, which will be staying. It’s a core part of our strategy, which is one company, one brand. We’ve got all Con and Slingshot. So brands that I built and grew up with, part of the family, part of the kids, Orkon will be the next cab off the rank. So we will, at some time this year, this financial year, look to start retiring the Orkon brand.

Mark Callander:
We’ve stopped taking new customers on that brand now as well. So the steps are in place to retire those brands. Once the Orkon brand has been retired, we’ll then turn our attention to the last part of my family, which was Slingshot. Yeah. But we’re going to take the learnings out of All Con and just, you know, we’re very focused on making sure we learn through each brand shutdown what we get right, what we get wrong, what customers are looking for. And just making sure we don’t do an iron goal. So that’s gone incredibly well. The technology stack side of it again has been a phenomenally well run program of work.

Mark Callander:
It’s not easy to take a large and complex business like ours and everyone says they’re going to go into a single technology stack and often it doesn’t happen. Very pleased to say with us the progress we’ve made. We’ve got very good line of sight to all the objectives we set out in our first thousand day plan. So like I said, so we’ve got a very good plan of attck and we’re progressing really well towards it. So the outcome for that for our customers and our staff when we get there again will be a modern stack, our ability to compete and pivot and move more quickly in the market and also making sure we can provide our staff with good tools as well. So again, people talk a lot around AI. AI is as much for internal staff as external staff. You’ve got to have modern technology environments, single stacks where you can and constructor in your data and they’re all things that we’re very focused on as we go through the integration process.

Paul Spain:
Yeah, that’s encouraging to hear. I realize these things sometimes are more challenging in some situations than others, but.

Mark Callander:
Yeah, we’ve actually developed a really. I’d say one of our core competencies is our technology environment and technology team. We’ve got a particularly in the IT and technology space, got about 450 across both networks, IT and platforms but our IT and platform teams is probably a couple of hundred and we’re building on an in house stack so we’re not dependent on third parties to build that. But that is really quite a unique point of difference for us in terms of the scale and capability that that platform delivers for us in market. And again we’ll keep investing in that.

Paul Spain:
Yeah. Now sort of, you know, back to 5G. How much demand are you seeing for 5G at this point? Like you know, when a new mobile generation comes along there’s a lot of excitement and so on about it, but of course it takes a good few years to roll it out and for IT to end up handling the majority of communications, be IT data or calls. How is that going and where are you seeing the biggest benefits?

Mark Callander:
Yeah, so 5G for us, Ian probably came along at a pretty good time. As I mentioned, we’re modernizing our network so when we touch a site we’re putting 3, 4 and 5G equipment on it. So excluding speed for a Second, which a lot of people around speed and latency with 5G, obviously capacity is one of the really big benefits we get. So as a company that’s growing, particularly in the mobile space and the fixed wireless broadband space, getting the additional capacity through the network upgrades is critical and kind of underpins our investment. It’s less around the 5G on the mobile. Everyone loves to see the 5G on the mobile. People get pretty good speeds on their mobile phones these days. Not many people are complaining around the ability to stream mobile, but for us, where it turns up in reality is in the fixed wireless broadband space.

Mark Callander:
So not only do we get more capacity to sell more fixed wireless broadband, we’ve seen quite high demand in terms of customers that are coming up when they’re getting the 4G and 5G option. A very significant portion of those customers are now taking 5G. You know, on a typical 5G fixed wireless broadband product, you’re getting, you know, 2 to 300 meg speeds, which is, you know, a phenomenal alternative for those customers that, again, value speed, still have the comfort of unlimited data, but might want to save a little bit money compared to other alternatives that are out there at the moment. Because we have been through a very high inflationary period and fibre services can be quite expensive in New Zealand now. So. Yep. So a long way of saying 5G for us is important to put it where customers need it. So those business customers, it’s important for capacity and it’s also important for driving that fixed wireless broadband growth across our business.

Paul Spain:
And how is that going when you put options in front of potential customers? I guess some people are very, very price conscious. Other ones are maybe in an area where fixed wireless is by far the best option, how does that tend to play out in terms of the decisions that people are making? You’re right.

Mark Callander:
So you’re in an environment where economically there are some challenges out there. So the ability to save, you know, 20, $25 a month on broadband compared to another alternative is three or $400 a year. So it’s not insignificant in terms of household spend. You also have people that for whatever reason, move a lot. So the other big benefit you’ve got with fixed wallets broadband is the ability for people to pick it up and go and take it with them as long as it’s within some sort of areas. And then for some, it’s fit for purpose. So for those that, again, have household demands that aren’t extreme, unlike my household, you know, it’s a good, suitable technology, but we always make sure. That customers, when they come to choose a product with us, that they choose what’s right for them.

Mark Callander:
So we certainly don’t bias one product over the other. We put forward the options and based on budget requirements, household demands, they choose the best product for them. But we are seeing incredibly strong demand for that 5G fixed wireless broadband product at the moment.

Paul Spain:
Yeah, that’s interesting. And with fibre you’ve obviously got the sort of faster options. Now, the hyper fibre, two gigabits and four gigabits. Do you see much of an interest in that amongst your.

Mark Callander:
A little bit. I wouldn’t say it’s massive. So again, the speed and experience you get on those products for the price, we get some pretty good one gig offerings in the market at the sort of price points we sell it at. So again, for certain households, certain small businesses, it makes absolute sense and it goes incredibly well. But again, I think New Zealand is spoiled through a very good fibre investment throughout New Zealand. So again, I think the government many years ago made a very good decision with that regard and I think New Zealand’s benefiting from it now, along with our investments in all the mobile infrastructure.

Paul Spain:
Yeah, yeah. And when it comes to sort of rural connectivity, how much, you know, how much difference has it made? The varying improvements in your network, you know, but also that you’ve got a bit of competition there from SpaceX when it comes to some of those rural customers. Has that sort of put a lot of pressure on you and price or.

Mark Callander:
Otherwise less so for us. So if you think rural, there’s a few things you need to think about. Firstly, there’s just mobile connectivity in rural. With that regard, we’ve formed a joint venture with Spark and one in ourselves called rcg, which is a rural connectivity group. So collectively we’ve invested in, you know, 450 odd towers in rural New Zealand to share infrastructure to provide the best possible connectivity for people in those regions. So it’s great for rural, it’s great for, you know, addressing black spots, roads etc. So again, I think it’s a great illustration of industry collaboration to make sure that, you know, we’re getting connectivity to people that need it in rural. When you talk around connectivity, potentially to rural homes, there’s the RBI and then as you’re aware, there’s the satellite.

Mark Callander:
We haven’t been an active player in rbi, so the impact of the likes of Starlink that have come in, we see very minimal impact on our business. You would expect it must be having an impact somewhere because I believe the uptake of services like Starlink is very high in New Zealand. They have very strong numbers as it’s been made, we’re publicly aware. We build a lot of the infrastructure for Starlink in terms of ground base stations, you know, domestic connectivity and some international connectivity as well. So we can see it as a very strong and growing part of the New Zealand rural scene, which is great because again, we’re getting better service into areas that might not otherwise be getting the connectivity they need and a lot of instances the most cost effective way to reach them as well. So again, I think it comes back to that point around. Space does play quite a critical role in some areas of the market and some segments of the market and I think that rural connectivity components are a brilliant illustration of that. And then you have things like IOT that you might be able to do in those areas as well.

Mark Callander:
So it’s quite exciting when you’re like I say, when you’ve been in the market for 20 years and all of a sudden this thing’s come along in the last couple. It’s quite exciting to be a part of because it’s different and it’s new and it’s. What might you do with it? How do you augment it as part of your existing service experience and how do you start building new products over the top of it? That’s the exciting part from our perspective.

Paul Spain:
So what are you doing on the IoT front? Internet of things?

Mark Callander:
Yeah, so we do very little at this stage. Again, our first thousand day plan that we set was highly focused on making sure that we integrated appropriately and as part of that we need to minimize build on old systems, if that makes sense. So we are in the middle of a strategy reset. So we’re looking forward to FY 26 to 29 horribly already. But part of that is what is the product innovation layer that we’re going to do post integration and it’ll be no surprise IoT is one of those and it’s just made all the more accessible through the likes of emerging space players, our own investment in our own mobile infrastructure and the partners out there. So we don’t do much today, but I’d be very surprised if it doesn’t feature in FY 26 to 29.

Paul Spain:
Yeah, look, I mean, I think, you know, we’re used to that, you know, connectivity just keeps improving in every which direction and you know, no problem. So many things want to connect. Right. So, you know, it definitely becomes increasingly important over time.

Mark Callander:
Yeah, exactly, yeah. And again on the connectivity piece, you know, we recently picked up Network for Learning. So, you know, I think it’s another good example of we choose in the markets we can win when we’ve got a very strong proposition. So Network for Learning is obviously providing connectivity to 2,500 schools, you know, 70,000 odd teachers and 900,000 students. So it’s a good example, I think, of the growing credibility of what the new merged business looks like for us to be able to go up, compete and win a business like that. You know, it is a very, very large network with close to a million people touching it every week. It’s a credit to our investments in the teams that can stand up and win that type of business. It’s the software building over the top of it.

Mark Callander:
So we’re going into these with new solutions, new service models, and really listening to what the customer wants. And the infrastructure is a ticket to the game. It’s how you listen to what your customers want, put creative models in front of them and then making sure you’ve got the software delivery to back it up. So wins like that are very, very exciting for 2degrees and we look forward to getting more of them.

Paul Spain:
What was different about that partnership with Network for Learning compared to other things that you’ve done in the past?

Mark Callander:
We’ve actually had a few others similar to it. But again, as corny as this is going to sound, we listened to the customer. We knew that they wanted to go to a different model. We knew that we needed to put, we needed to give them software access to put control in their hands. So, you know, allow them to manage the network and allow them to turn the network up and down. Allow them to, you know, make everything dynamic and on demand. You know, if you look globally, kind of open API networks is a very big and growing trend. And I kind of think we’re on the forefront of that in terms of our experience in developing the type of software that customers want to use.

Mark Callander:
And that was the difference. Again, we had the right to play through our infrastructure. So that’s your ticket to the game. But you don’t win it on that, you win it on the software and thinking creatively. But there’s a few examples like that. And we’ve won a couple of large enterprise customers where we went in and we solved the problem. And it wasn’t necessarily related to the connectivity or the mobile connection. It was related to internal issues or build structuring issues or removing administration out of their businesses.

Mark Callander:
That’s how we’re engaging and winning on your business. And that’s how we can turn up and be different.

Paul Spain:
And in that case, was that a purely fibre, ultra fast, broadband sort of connectivity or was there a variety of types of connections?

Mark Callander:
So the end access depended on whether there’s obviously two and a half thousand schools. So each school is in a different location. Some locations are more challenging than others. So absolutely it’s using the UFB or equivalent network around the country. But more importantly it’s got to come back to a backbone network and obviously connect to all the providers that the school needs to. The network needs to connect to as well. So it’s a large network, it’s reasonably complicated, but simplified through how it’s designed, how we deploy it and the software we give Network for Learning for it.

Paul Spain:
Yeah, interesting.

Mark Callander:
But it is fixed only there’s just purely the fixed aspect of this course.

Paul Spain:
Yeah, yeah, okay. And you know, you talk about sort of opening up APIs and so on. So that put, does that put Network for Learning in a position where they’ve got, you know, sort of a next level of control over what happens with those varying connections compared to what is normal, how much different?

Mark Callander:
The best way to describe it is we give them flexibility to manage the networks as they, as they want to. I think the most important thing is, you know, bandwidth. Again, bandwidth moves all the time. So it’s how can you create tools that put that control in the hands of the end user versus having to call a telco and say can you increase the pipe here? Or we want to do an activity here or we want to connect to a cloud provider here. We don’t need to be part of that discussion process or thought process. We give you the tools and you can do it yourselves and you can see your network performance, you can see when you might need to increase, you might need to decrease to save money. So again, to me it’s just listening to your customer and being flexible on how you built your commercial models. And there’s great examples around the world of people that have done similar.

Mark Callander:
But again, putting that power on the control of end users is what customers want. So from our perspective it’s easy. You build software that enables them to do it.

Paul Spain:
I guess in this case Network for Learning, kind of the retailer, aren’t they, because the school is the end customer, but you deal with Network for Learning rather than the school.

Mark Callander:
So actually with that regard they’re more a wholesale, if we view them as we deal with them really from they’re a wholesale customer to us, and then they manage the network out to the end user. So that’s more how we think about that relationship. But the relationship will grow and we’ll continue to do hopefully new and exciting things with their partners. We’ve already had some great engagements with. How do we use our collective capability across our organisations? How might AI feature in the coming years ahead? How might other types of connectivity be relevant? So you get the foundations of the partnership right Again, the opportunities moving forward are quite vast.

Paul Spain:
Yeah. And tell us a little bit about with your towers. Probably over, probably 18 months ago now, they were sold to. Was it Kinexa? Yeah. What does that mean for the business? Sort of long term, short term. I mean for most customers they probably don’t even know about it. It’s very much sort of behind the scenes things. But what were your thought processes when going through that?

Mark Callander:
Yeah, I’ll focus on the primary benefit to our customers. Again, probably the most important thing is to come back to our customers. So while we sold our mobile towers to Conexera, it’s just the passive infrastructure. So we still maintain all the active equipment, all the spectrum. Anything that really impacts the customer we’ve retained ownership of. But the really exciting thing with that relationship is more our commitment in terms of additional build. So as part of our relationship with Conexa, we’ve committed to building another 450 mobile towers in the next 10 years. That’s a phenomenal commitment to New Zealand.

Mark Callander:
Phenomenal commitment to build out our mobile infrastructure. We know the bandwidth demands aren’t going anywhere. Talked about 5G, you said 6G. I don’t want to talk about 6G. But you know, all of that requires more network infrastructure. So that has given us a very good investment plan. It’s given us ability to align our growth plans with that. And you know, it’s quite complicated process.

Mark Callander:
We have to consider spectrum and what spectrum we might have and densification and what fixed wireless broadband penetration might get to. So there’s lots of things that go into it. The good news is once you’ve done that, we’ve absolutely. We have a clean network plan now to support our growth. So it’s not terribly exciting for people out there other than saying from our perspective it’s future investment in the network.

Paul Spain:
The Commerce Commission, they come up from time to time and varying news articles and discussions. How do you kind of deal with the varying decisions that especially from a marketing perspective, it seems telcos are always sort of getting a slap on the hand. When I look back over the years for one thing or another. How do you kind of make your judgment calls from a marketing Perspective. And you know, how, how often.

Mark Callander:
You.

Paul Spain:
Know, do you expect to kind of get, get caught out? Because it’s, it just seems to be an ongoing pattern within the industry and you know, I’m at times a bit of odds with, you know, with, with, with some of these situations. But yeah, how do you think about this?

Mark Callander:
So first and foremost we plan to get court zero. So. And court’s the wrong word. So the commission plays an important role. Right. It’s very important that consumers don’t get misled. So that’s, you know, in coming back to our purpose, which is fighting for fear. That puts the customer at the heart of everything we do.

Mark Callander:
So you’ve got the customer lens, you’ve got a competitive lens as well. So, you know, behavior from one player may impact the performance of what you might achieve in the market you’re trying to play in. So yeah, it can be at times, you know, when things go against you, it can be a bit frustrating. But again, they’re the rules of the game that we abide by. We try to make sure that again, we play within them and when we don’t, you know, that’s not our call. So again, we take our medicine. But again, I just think that they do play an important role. It’s, you know, we don’t want a market or an environment across any industry or sector where, you know, consumers get misled by any player in particular, very large players like ourselves, given the role we play in the market.

Mark Callander:
So, yeah, so, yep, we’ll continue to, you know, do the best we can and operate within the rules of the game.

Paul Spain:
Yep, yep. Yeah. I mean, we were chatting before the show around some of these things and you know, I know sometimes you gotta tread a little bit carefully on these topics, you know, but I think, you know, one of the areas that has, has stood out for 2degrees and I see there’s a, there’s a degree of this has, has been, you know, replicated to some degree, I think, recently, but has been the free roaming to, to Australia. So, you know, that was a, you know, a situation from my perspective, seems reasonably, you know, fair and well communicated that people could roam, you know, while they’re travelling. You wouldn’t expect people to, you know, be staying in Australia for long periods and continue with that. But, you know, you got a little bit of trouble because it wasn’t, you know, in big bold letters that there was a 90 day limit to the free roaming. You know, walk us through what it’s like to get sort of hit with one of Those things.

Mark Callander:
And first and foremost, it’s a really good product. So for any business customers out there listening, you do get free Australian roaming with 2degrees. Again, we always put a customer lens on decisions we make. And again, in this instance, we interpreted what we thought we needed to disclose and the commission had a different view on that. And again, coming back to my earlier points, they’ve got a really important role to play. We try and get it right. When we don’t get it right, that’s the ramifications of it. But we hold ourselves to a high standard.

Mark Callander:
We expect the commission to do the same with other players. So in instances where they deem that we could have done better or should have done better, we’ll take that and we’ll learn. As frustrating as it can be from.

Paul Spain:
Time to time, one NZ will have been in trouble. Also, as these things happen in terms of their 100% coverage, you had some thoughts on that. In terms of what’s the impact from a competitive perspective, if the market misunderstands communication like that or it’s done in a manner that you feel is not appropriate, how does that impact you?

Mark Callander:
So given it’s going before the courts, I won’t comment specifically on it. But I come back to the other point. You’ve got to make sure what you’re putting in front of consumers is clear and accurate and easy to understand and factually correct. And if those statements hold true, regardless of what industry you’re in, you’re not going to have any issues. But like I said, we have an important role to play in the sector, given our size, as do many other players in other sectors. And yeah, we’ve just got to be confident in the calls you’re making and make sure we’re not misleading. And it’s over to the commission now to deem what they think is appropriate, obviously, given what’s occurred there. So suitably vague.

Paul Spain:
Yeah, thanks for that, Mark. Yeah, we sometimes end up with these statements that may or may not end in the final cut. Now, I mean, in terms of sort of looking at that broader sort of competition, you know, perspective, you know, where are the areas that, you know that, that you think you’re going to do well going forward. Yeah.

Mark Callander:
So again, 2degrees has still got an amazing opportunity to grow across all market segments. So for us, that’s consumer business and that includes enterprise and government and also wholesale. We’ve had historical success in the consumer side of the business. The business started out as a prepay company originally, but in the consumer market now, you’re seeing we’re having much more relevance and in that higher value segment of the market. So again, while our prepaid business is a large and important part of our business, we are having much more relevance and success in high value. So high value pay monthly plans, new Apple launches that come out. We are one of the leading players in that space now. So that’s a great opportunity in that space there and will continue to be very relevant from a fixed and fixed wireless broadband perspective as well.

Mark Callander:
So got a really good product suite where we will have an opportunity to accelerate will be in the business, enterprise and government space. So why do we have a right to play in that space? We’ve got the same networks as our incumbents, you know, we have a clear right to play with that. It’s really important that again we use our software capability to compete and most importantly, we’ve just got to move that brand perception. So I often refer to network equivalents all the time. Once you’ve got network equivalence, you’ve got your ticket to the game. So the only reason a larger customer might not consider us is their perception of our brand. Which is why I gave you a SIM card after our last call. But there’s gonna be new innovations like esim, so the ability to as opposed to sending you a physical SIM last time, I can simply show you my phone now and use scan a QR code and you can get on and try the network.

Mark Callander:
So we’re very, very focused on really over indexing in that business, enterprise and government space. Again, things like the Network for Learning wins are a great win for us. And again we’ve got some really good government customers with us as well. So we’ve got to keep pushing and investing in that area as well. Wholesale is also a big part of our market. So some of the larger fixed wholesale customers you see in the market are with us. There are some very successful MVNO customers that are in there using our mobile infrastructure, our mobile assets and again they’re choosing us because of our software. So again why I keep going on about software? Software enables them to manage their business more efficiently, enables them to compete and be more relevant in market, but all underpinned by equivalent infrastructure.

Mark Callander:
So we’ll continue to target all market segments. We believe we’ll achieve growth across all of those and again our brand is just going to go from strength to strength.

Paul Spain:
So how hard is that when the bulk of the market has always been in terms of at that enterprise and government level and so on. It’s always been one NZ or Vodafone as it was and spark. How hard is that to go in and convince a customer to come across to you? Why would they change? What’s the.

Mark Callander:
Yeah, so it is hard. It used to be harder, it’s easier, but it can still be better. What’s going to change? You know, I have a saying, show, don’t tell. So the more customers may win. So again, Network for learning some of the very large customers. New Zealand Health Group is one that we’ve shared publicly previously. There’s some great customer testimonials on our site. So show, don’t tell.

Mark Callander:
I can sit here and tell you how great we are. I can now show you the customers that have chosen us and they’re prepared to put testimonials around how great our services are. So that’s really, really important. With that comes credibility. So again, that credibility for us is achieved through our infrastructure and our software. And the last piece of that puzzle is our brand. And again, you’ll see if you go to our website today, you’ll see a very distinctive business feel that’s quite different from our consumer feel. We think the brand purpose and the brand promise can remain the same.

Mark Callander:
But the subtleties in terms of the tone of how we communicate, the creative we put in market, the bids we turn up for is going to be slightly different to our consumer brand. But we will keep winning, we’ll keep sharing those success stories and the more of those stories we share, you know, the more successful start having in the market.

Paul Spain:
And just, you know, just a last one, seems like costs are, you know, we, for most of my lifetime, telecommunications costs were coming down. We now seem to be, you know, turned a corner where costs are sort of going back up again.

Mark Callander:
Yeah. So again, we’ve just been through a very inflationary period for everyone. So if I look across all of our cost stacks, you know, from employment costs to, you know, licensing to supply cost to vendor cost to capital costs, everything’s gone up. We’ve had, you know, two to three years of very high inflationary costs. We often have this discussion internally and it’s a great discussion to have because we, we talk around our brand purpose about being fighting for fear. And they say, well, how can you fight for fear if your prices are going up? Which is a nice healthy challenge to have from your stuff. And my response is pretty simple. It’s, we have to make sure that we continue to invest in the network, so we have to make sure we’re getting again the returns we need as a business to make sure that network and network discussions are no longer become an issue for us.

Mark Callander:
So we’ve got to continue to make sure we keep doing that. What we do as a business and how will we measure it as a business is what we do over 10 and 20 years, not in a year or two. So it’s important that again we’re making the necessary investments and generating the returns we need to make sure we continue to be a serious player in the market. If you look at where we sit, we are a value player in the market. We’ll offer better value than our competitors out there. So we still play a critically important role. Albeit we’ve been through a fairly tough inflationary period. Markets will change and they’ll change again.

Mark Callander:
So again, I just think it’s important that I remind our staff and often our customers from time to time that it’s what we’re going to achieve over decades. It’s really important. It’s called the 2degrees effect. You know, it’s what happens when your strong second player comes into a market dominated by two and it’s generational. So I can still stand up in front of my team being very proud that what we’re doing over multiple decades will define how we’ve succeeded in the market and the value we’ve put back into consumers and businesses hands, not what we do over a year or two.

Paul Spain:
And are we a mature enough market now that overall prices will never fall again?

Mark Callander:
Yeah, I don’t think that’s a statement you could make with a lot of certainty. Again we have been through a pretty tough two or three years. I could share some eye watering cost increases. That boy senseless. But they’re real. Right. So again we’re just doing what we need to do to make sure that again we are competitive in the longer term. Markets change all the time.

Mark Callander:
We went through a period and fixed broadband where fixed broadband prices dropped for year on year on year on year. The last few years we’ve just had some very large inflationary price increases pass through from lfcs and quite large. So they just can’t be absorbed. And I just think that’s a different, that’s the period we’ve been through. It’ll be fascinating to see what the next five years brings but you just don’t know.

Paul Spain:
Yeah. Oh, it’s been great to, great to catch up. Mark. Anything else that we’ve, we’ve missed that we should be adding in?

Mark Callander:
No, just got to get you across to 2degrees permanently now. Run away. Just joking. No, it’s been great thanks for your time. Yeah, well, thanks very much for joining.

Paul Spain:
Us on the New Zealand Tech Podcast. And of course, a big thank you to our show partners, to our sponsors, including 2degrees Spark, One, NZ, HP and Gorilla Technology.

Mark Callander:
Thank you.

Paul Spain:
Cheers, Mark.