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Germany Telecommunications Report Q4 2011
Business Monitor International, Sep 2011, Pages: 134
Business Monitor International's (BMI) Germany Telecommunications Report (Q4 2011) provides industry professionals and strategists, corporate analysts, telecommunication associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Germany's telecommunications industry.
The Q411 update of the Germany telecommunications market report provides an overview of the latest developments in the country's mobile, fixed-line and broadband sectors. The report is based on data from the regulator, covering the period to the end of 2010, as well as operator data for the period to the end of June 2011. The report contains data analysis, including, for the first time, on Germany's converged service providers, regulatory updates and BMI forecasts. BMI’s five-year growth forecasts depict how Germany's mobile telephony market share weighted and how operator monthly blended ARPU, fixed-line telephony, internet and broadband subscriber markets will develop over the next five years.
At the time of writing, all four of Germany's mobile network operators, T-Mobile, Vodafone, E-Plus and Telefónica O2, have released subscriber data for the first six months of 2011 to the end of June 2011. In the mobile sector, the largest change reported by operators was the loss of more than 1mn postpaid subscribers by Vodafone as a result of the renegotiation of a wholesale arrangement that has seen the subscribers transferred to an MVNO. However, this is a one-off change to the mobile ecosystem and not indicative of a trend that will keep on affecting the market. In terms of trends, T-Mobile has continued to lose subscribers, with a net loss of 57,000 subscribers in Q211, with its market share falling to 31.4%. BMI believes it is continuing to execute a strategy focused on the migration of customers to more valuable postpaid contracts and the development of VAS.
This strategy has left an opportunity open in the prepaid segment that the other operators have benefited from. E-Plus has exhibited the strongest growth, recording 11.5% y-o-y prepaid growth to 14.2mn subscribers, outpacing its 7% y-o-y growth in postpaid subscribers. This strategy is as BMI expected based on E-Plus' lack of suitable spectrum for a full focus on the postpaid and VAS sub-segments of the market. Telefónica O2 has also achieved growth in the prepaid segment with 8.4% y-o-y growth, but this achievement is overshadowed by its success in attracting postpaid subscribers with competitively priced offers. This has led to a decrease in postpaid ARPU of 8.8% y-o-y, although this somewhat counters, it does not negate the positive impact of improvements in subscriber mix.
The operator's financial performance has not only been affected by changes in subscriber mixes and subscriber acquisition drives. In December, Germany's network regulator, the Federal Network Agency (FNA), proposed a 50% cut in mobile termination rates (MTRs). The move aimed to bring the fees in line with European Commission targets, but squeezed operators’ revenue streams. Among other things, the timing of the regulator's decision has been criticised because it coincides with preparations by the operators to invest in fourth-generation networks. Deutsche Telekom estimates that the cuts to MTRs reduced service revenues in Q111 by EUR57mn.
Following the LTE spectrum auction in May 2010, three of Germany's mobile network operators - Deutsche Telekom, Vodafone and O2 - were awarded new mobile frequencies in the 800MHz spectrum range. Since then, all three operators have begun deploying LTE networks, with a view to extending mobile broadband services to remote parts of Germany. In its Q211 results, Vodafone became the first operator to release figures for number of subscribers, reporting 27,000 LTE subscriptions; impressive growth just over one year after suitable spectrum was auctioned. As noted above, Germany's smallest cellco E-Plus was not awarded spectrum in the 800MHz band, but it was announced in December 2010 that E-Plus had been authorised by Germany's regulator to use frequencies in the 900MHz band for mobile data transmission services. It is understood that E-Plus first plans to deploy a HSPA+ network using the 900MHz spectrum, offering maximum download speeds of 21.6Mbps. E-Plus can also use the 900MHz frequencies to roll out LTE technology, if this does not cause interference with other mobile networks. However, BMI does not believe this compromise puts E-Plus on an even footing, and therefore continues to believe the operator will have to focus on the less data- and VAS-oriented, lower value sub-segments of the market.
BMI remains optimistic about growth prospects in Germany's broadband sector on the back of Germany's strong rebound from economic problems. It estimates Germany had 30.721mn broadband subscribers at the end of 2010, equivalent to a penetration rate of 37.6%. BMI predicts the market will grow by about 8.7% in 2011, with penetration expected to rise to around 41% by the end of that year. It should be noted BMI’s broadband subscriber forecast for Germany now includes mobile broadband subscribers. These are broadband subscribers who use netbooks, smartphones and USB sticks to connect to the internet wirelessly via a high-speed (3G/HSPA) network. BMI expects the proliferation of LTE availability to be a key driver of broadband subscriptions over the course of the forecast period.
Germany moved up to seventh position in BMI's Business Environment Ratings table for Western Europe for this quarter. The country is mid-table, just behind Spain.
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