Tex Edwards in 2001 - the year he founded the company that would become 2degrees. Photo / Martin Sykes
Once upon a time, in early 2009, Simon "Tex" Edwards picked me up in his battered hatchback.
We left my newspaper's office and set off on a tour of 2degrees cell towers in central Auckland. Edwards stared at each transmitter intently, as if he was trying to reassure himself it really did exist.
I couldn't quite believe it, either.
For so long since its founding in 2001, the company, then known as Econet Wireless, had been one mad man and his photocopier.
But between writing angry letters to the Commerce Commission and bending reporters' ears about the Telecom/Vodafone "duopoly", Edwards did slowly begin to assemble an oddball crew of partners.
They included Zimbabwean telecommunications entrepreneur Strive Masiyiwa, who became the first outside investor (the first was Edwards himself, who funded his early agitation with profits from money saved during his earlier careers as a stockbroker, international banker - a career turn that introduced him to Masiyiwa - and commercial property developer).
Next, Edwards cut a shares-for-spectrum deal with the Te Huarahi Tikia Trust, a pan-iwi group that had gained 3G spectrum at a cut-rate price from the Crown - a deal billed as both benefiting Māori and laying the ground for more competition in the mobile phone market. The advent of 2degrees certainly achieved the latter, but the former is still an open question. The Trust's commercial subsidiary, Hautaki, had to take on millions in debt to buy more shares to prevent its stake becoming too diluted with various rights issues - though it retains a stake today that could ultimately be sold at a profit.
For keenly priced mobile network technology, and the core servers that ran it, Edwards turned to the then little-known Chinese company Huawei.
And for the kind of serious finance that allowed 2degrees to bankroll its network build and staffing up, Edwards assembled a line-up of international investors, the largest of which was Seattle-based Trilogy International Partners, chaired by veteran telco dealmaker John Stanton, which took a 26 per cent stake in 2008. Over the years, it would build its holding to 73 per cent.
Endless submissions to the Commerce Commission at one point included biscuits baked by his mother, with the recipe hidden at an unknown point in his critique to encourage the regulator to keep reading (what you might call a cookie and stick approach).
And despite Edwards' constant grizzling about it (or perhaps, in part because of it), the Commerce Commission helped to push through a number of key changes that paved the way for 2degrees' launch.
The measures included number portability (the ability to take your mobile phone number with you when you switched phone companies), squashing mates-rates plans that made it cheaper to call people on the same mobile network (which would otherwise have had the effect of smothering a newcomer) and slashing the regulated fees that telcos could charge each other when calls crossed between their networks.
The ComCom also leaned on the incumbents to allow "colocation" and roaming deals - that is, for 2degrees to put its gear on rivals' cell towers, or strike deals for its customers to roam on their networks (unknown to them) at a preferential rate. 2degrees did not take advantage of the hard-won colocation (earning itself a huffy ticking-off letter from the Commission) but it did to strike a favourable deal with Vodafone NZ to use its network in areas where it had yet to build its own infrastructure - allowing the newcomer to get a running start.
And 2degrees did get off to a flying start. One of its early ad campaigns - its "giant logo" effort starring comedian Rhys Darby - became an instant Kiwi classic.
In 2012, it hit the one million customer milestone.
In 2015, it moved into the landline broadband market by buying well-regarded second-tier player Snap Internet.
And in 2016, 2degrees celebrated is seventh year in business with a maiden profit - and it has made money every year since.
Mark Aue - who recently became 2degrees' first homegrown CEO after a series of chief executives drawn from US major shareholder Trilogy - says all Kiwis have benefitted from his company, even if they're with a rival.
"Ten years ago, New Zealand was one of the few OECD countries with just two mobile networks, competition was restricted, prices were high, customer service was poor, and you had to be rich to talk on the phone. New Zealand mobile prices were 37 per cent higher than the OECD average," he said.
"The arrival of 2degrees saw prices halve overnight. Calls went from an average of 89 cents per minute to 44 cents, while text messaging dropped from 44 cents each to 22 cents."
He's right, our mobile and broadband plans have gone from some of the more expensive in the OECD to, according to a recent ComCom report, cheaper than average (which is great progress, though the Commission still found that Australia is markedly cheaper, so there's still room for improvement).
Aue touts a report by Venture Consulting that finds 2degrees' cumulative $950 million investment has been worth $13 billion to the NZ economy through its direct influence, and by forcing rivals to push down prices.
Regulatory changes certainly paved the way, too - but 2degrees helped agitate for them, and they would have meant little in themselves if the company hadn't been around to take advantage of them and shake things up.
Aue points out that 2degrees was first-to-market here with a number of tasty initiatives, including carryover minutes and unlimited mobile data - and it made a bit of a splash with a new policy encouraging staff to switch off after hours.
But he also concedes that most success has been in the consumer mobile market.
In two other key areas, broadband and business, there's room for improvement.
2degrees' share of the broadband market is still in single digits (see charts below), and two-thirds of its customers are on pre-pay plans, trailing Spark and Vodafone who each have closer to half their customers on more profitable contract plans.
Telecommunications Users' Association head Craig Young hopes 2degrees does make gains in business.
"A multi-player market is important for competition and 2degrees showed right from the start that they would challenge the incumbents in new and innovative ways. We're very keen to see them to continue to succeed and grow their share, particularly in the business market so that users continue to have real choice," he says.
2000: The Helen Clark government gives a pan-iwi group, Te Huarahi Tika Trust, access to cut-price spectrum plus $5m for its commercial development.
2001: Former analyst and commercial property developer Tex Edwards founds 2degrees.
2001: Edwards gets seed capital from Zimbabwean telecommunications entrepreneur Strive Masiyiwa.
2005: Edwards, Te Huarahi Tika (which has parlayed its spectrum for a shareholding in 2degrees) and Huawei sign a partnership agreement.
2007: Network build begins, with then little-known Huawei as 2degrees' cut-price technology partner.
2008. Seattle-based Trilogy International Partners buys a 26% stake.
2009: Commercial launch. 2d's first ad campaign, starring Rhys Darby (above) becomes an instant classic - and delivers it Kiwi underdog status that belies its international ownership.
2011: Hits the one million mobile customer milestone.
2012: Founder Tex Edwards put on gardening leave after he clashes with US managers installed by Trilogy.
2013 - 2degrees' CEO Eric Hertz and his wife Kathy are killed after the small plane he was piloting goes into a spin and crashes at sea near Raglan over Easter.
2015: Enters the landline broadband market by buying well-regarded second-tier ISP Snap for $26m.
2017: Trilogy is cleared by the OIO to take a 100% stake; it lifts its holding to 73%; soon after Trilogy reverse-lists on the Toronto Stock Exchange with 2degrees and Viva (a smaller Bolivian telco) as its two primary assets.
2019: Mark Aue becomes 2degrees' first Kiwi-born CEO; the telco now has 1.4m customers, but Aue says it still has strides to make in broadband and business.
Tech commentator and one-time Vodafone staffer Paul Brislen says, "The market without 2degrees would be a very different place. 2degrees brought in real competition and keeps the incumbent telcos on their toes, which is exactly what the market needed. Consumers should be very happy with the era 2degrees has helped usher in - prices are lower, service is better and we have actual choice in the market."
But he qualifies, "In an ideal world 2degrees would have a robust fixed-line offering as well to really shake up the market. A strong competitor brand needs both fixed and mobile offerings so I'd like to see 2degrees and Vocus get into bed - either a merger or a buyout - and then we can really see some fireworks."
2degrees and Trustpower both bid for Vocus's NZ assets (including Orcon, Slingshot and Flip) were put on the block by its Australian parent in early 2018, only to be pulled after offers fell short.
The rumour mill has Vocus NZ up for sale again, which could provide a chance for the aforementioned fireworks.
Meantime, Aue has plenty on his plate including the thorny problem of Huawei political troubles.
The Chinese giant remains 2degrees' primary technology partner, but last November was blocked from Spark's 5G upgrade by the GCSB - and the spy agency, which now has to vet every proposed network upgrade, would presumably nix any 2degrees proposal.
Aue says allegations against Huawei are a beat-up. He says he's confident the Chinese company will ultimately be vindicated.
And he sees no particular urgency.
While a newly invigorated Vodafone announced has just announced its first wave of 5G upgrades will go live in December, Aue is in no hurry.
His predecessor, Stewart Sherriff, warned against "drinking the 5G Kool Aid".
Similarly, Aue says incremental upgrades to today's 4G technology will be enough to handle consumer and business user needs for years to come.
That could be true. But it could be also making a virtue out of necessity. Vodafone NZ boss Jason Paris used to use a very similar line even in November last year, but changed his tune after new owners Infratil and Brookfields came to the party and suddenly the telco had more freedom of operation, and money in its pockets.
Aue is also wrestling with Spark over its Spark Sport app. He says 2degrees and other telco accelerated investment in their networks to help the Rugby World Cup stream smoothly, on the understanding they would get the opportunity to resell Spark Sport.
But that gentlemen's agreement fell apart, acrimonious after Spark started selling an earlybird deal before any wholesale offer was on the table for 2degrees and other telcos. Aue has put his grievance to the Commerce Commission as tension builds.
Online video will be another area to watch. So far, 2degrees has partnered with Amazon Prime Video to offer the Netflix rival free to its customers for six months, but it's resisted a move into hardware like Vodafone TV or its own apps and content like Spark Sport and Lightbox.
Aue has big ambitions. But although his company is now consistently in the black (it made an operating profit of $131 million last year on revenue rose 10 per cent to $806 million), it's not the kind of silly money that Telecom and Vodafone made in the 1990s and 2000s and his company is still only a third the size of its rivals, so he'll have to sharp.
Tech commentator Peter Griffin says, "Without a doubt, we wouldn't have nearly as good mobile pricing or the innovation in services if 2degrees wasn't here, so we all have a lot to thank them for that. That goes all the way back to the work Tex Edwards did in the early days of Econet.
"But the next couple of years will be pivotal for 2degrees and their future is uncertain. The move to 5G will require a big investment in technology and spectrum and with tight margins and fierce competition, it isn't going to get any easier for them. Who will own them in two years time is anyone's guess.
"I just hope we continue to have three players in mobile, because a return to the cosy duopoly of Vodafone and Spark is unthinkable."
And as for Tex Edwards?
He left the company he in 2012 after something of a classic colourful founder vs buttoned-down investors and management clash, which included a High Court filing over his shareholding and an Employment Court case.
Both disputes were ultimately settled out-of-court with payouts to Edwards, who sold his 2 per cent stake and cut his final ties to the company on amicable terms in 2016.
And speaking to the Herald this week, Edwards called 2degrees "the most positive example from the past decade of public policy influencing the market for the good of consumers."
After leaving 2degrees, Edwards got on board with another disruptive startup - Hawaiki Cable, which has broken the 50 per cent Spark-owned Southern Cross Cable's monopoly on trans-Pacific fibre.
But he's giving retail telecommunications a swerve these days in favour of a foray into pre-fab housing (more on that shortly).
He says the biggest challenge to 2degrees today is not Spark or Vodafone, but the so-called OTT (over-the-top) providers of messaging, voice and video calls who freeload on networks that cost the telcos billions of dollars to build.
"In my farewell speech, I talked about Facebook, Apple, Google, Microsoft - how dangerous they were to infrastructure investors and how the value chain has shifted," he told the Herald on Friday.
He says today, the OTT threat is keener than ever. As with the mobile phone market 20 years ago, governments and regulators are finally waking up to some of the dangers of the emerging new monopolies.
2degrees' future will depend, in part, on how they respond.
• Vodafone: 2.55m (41% on contract)
• Spark: 2.46m (49% on contract)
• 2degrees: 1.41m (31% on contract)
• Spark: 698,000
• Vodafone: 424,000
• Vocus (incl Orcon, Slingshot): 194,000
• Trustpower: 107,000
• 2degrees: 87,000
• Auckland customers use the most minutes, with users talking on average for 201
minutes each month.
• Hawke's Bay locals text the most, with the average customer sending 97 text
messages per month.
• Gisborne customers use more data than any other region, averaging 3.9GB per user each month.
• The most text messages sent by a 2degrees customer over a 12-month period was 278,604.
• The most data used over a 12-month period by one customer reached 107,854 GB.
Can the telco navigate through its perfect storm?