Revealed: Vodafone’s secret deal with 2degrees
Wednesday August 5 2009 - 03:02pm
 
In November 2008, in the dying days of the last Labour government, communications and IT minister was determined to clear the path for 2degrees’ launch.

A source says that at the climax of discussions, a fed up Mr Cunliffe gave Vodafone just more hour to reach a mobile termination rate agreement with 2degrees - or face a fresh investigation on the issue from the Commerce Commission (mobile termination rates - MTR - are what one telco pays another when a call terminates - is received - on another’s network).

The two mobile operators duly stitched up an MTR agreement, which has remained confidential ever since - to the infuriation of Vodafone, which has maintained that 2degrees has complaining loudly about MTR, while in reality knowing it was in line for sweetheart rates.

The source says that at the time, “2degrees thought the deal was the best thing since sliced bread”. Yet, to Cunliffe’s dismay, the new carrier failed to launch by the end of the year. And when National came to power, 2degrees saw the chance to push its MTR luck further.

The Commerce Commission - which under the new government is investigating MTR a third time, regardless of Mr Cunliffe’s promise (again, to Vodafone’s chagrin) - has told NBR it has no issue with the deal being made public.

However, 2degrees said no dice. “We respect the confidentiality of our agreements,” said head of corporate communications Bryony Hilless.
Terms revealed

Now, NBR has obtained the terms of the secret MTR deal.

There are three key elements.

One, Vodafone gives 2degrees a “new entrant” discount of around 33%.
For mobile-to-mobile calls, Vodafone charges other telcos 15 cents a minute, but 2degrees will only have to pay 10.75 cents per minute.
For txt, Vodafone’s MTR is 9.13 cents per message. 2degrees is charged 6.25 cents.

The second element is asymmetry: 2degrees will pay 10.75 cents a minute. But when as call terminates on Vodafone’s network, it will pay 2degrees the full whack: 15 cents. The same applies to txt, with Vodafone paying 146% of 2degrees’ rate.

The third is that MTR is charged by the second, from the first second - which, says one source, makes it pretty rich that 2degrees charges by the minute.

Vodafone wants the Commerce Commission - which has so far based its MTR sums on Vodafone’s headline rate - to take its 2degrees deal into account when weighing whether market termination rates are competitive.

The commission recently recommended that MTR be reduced to 7.2 cents per minute immediately for voice calls, and 3.8 cents per txt, with a series of further cuts through to 2015. A review and consultation process is now underway, with communications minister Steven Joyce likely to make a decision on the matter in the New Year. 
Many independent observers, including Tuanz, representing 500 corporate customers, have strongly backed the commission’s call for voice MTR of 7.5 cents or below.
For its part, Telecom has challenged all carriers to agree to a voice MTR of 7 cents a minute - though by 2015, rather than immediately as the commission is angling.