App Insights: DT Wages an App Attack

Although Deutsche Telekom AG (NYSE: DT) has its hands full in the United States with ailing T-Mobile US Inc. , it's been busy in its other markets -- Germany and the UK -- executing a full-fledged mobile applications battle plan that is equal parts attack and defend. (See T-Mobile Talks to Harbinger .)

At yesterday's shareholder meeting, DT CEO René Obermann said he is committed to transforming the company from a conventional telecom provider to a "telco plus" -- a multi-product Internet company. A large part of this strategy will be driven by mobile applications, but DT isn't looking to own the market -- at least not the entire thing.

When it comes to the core of DT's business, selling access lines, DT will strictly partner, according to DT's senior vice president of mobile products Dr. Rainer Deutschmann. For the non-access areas of business, services that don't directly affect the core, DT is bent on attacking the IP players on its own, he says.

"Our first priority is not to build and own a store; it is to integrate and partner with the strong guys out there and monetize," Deutschmann says. The bottom line with everything the carrier does is to sell access lines, he said, but achieving extra revenues and "biting into the business of the IP players and OEMs" is another important goal.

DT's direct attack on the IP players comes in the form of Softwareload, its own mobile app portal, now available in both the UK and Germany. It houses more than 15,000 mobile apps that each come with a 12-month download guarantee, meaning that users can store their apps online and install them on any new devices they acquire during the year. So far, more than 1.5 million users have registered with the site, which runs on both PCs and DT mobile phones.

Deutschmann says the store has been successful in "attacking the iPhone store" in part because it as an independent business with very little DT branding and no limitation on who can access it. But the store also relies on credit-card billing, which he recognizes is less than ideal, as Nokia Corp. (NYSE: NOK)'s experiences in the space have proved. (See App Insights: Nokia Ovi Store Professes Relevance.)

DT defends its turf
That's where the "defend" part of the strategy comes into play. In this case, instead of attacking the iPhone, which DT actually offers, it is making an attempt to be more like it.

"We are striking partnerships with existing and emerging app stores," Deutschmann says. "We make sure the integration and usability are as easy as the iPhone. A big part of the work is to make it work across the ecosystem."

Likening these partnerships to shopping malls with several stores, Deutschmann said DT embraces existing app stores with an operator shell. Within the Android Marketplace, for example, DT is one option. He said that the appeal of the operator's store is that it is guaranteed to house safe, trustworthy apps from both DT and its partners. It's not the Wild, Wild West that Android can be.

It also means DT gets a cut of the revenue on these applications. The operator offers recommendations to its customers based on their downloading history or on whichever partner the operator wants to promote that week. DT provides the billing, and it takes a cut of the profit.

"[DT has] the valuable property on the device," Deutschmann says. "I can start to broker that space on that device and make money on it. I can do direct advertising or advertise certain applications and sell it to providers. It's an attractive business model for the application."

In this model, DT's own apps, such as a Media Manager that ties into its IPTV service and a DT-branded mobile TV app, have performed beyond expectations, Deutschmann says.

DT is also a member of the 24-operator Wholesale Application Community announced in February. (See MWC 2010: Operators Form WAC Pack for Apps Push.) The goal of the group, which plans to divulge more details tomorrow, is to build a cross-carrier open platform to compete with the likes of Apple Inc. (Nasdaq: AAPL). Deutschmann says plans for the WAC are moving along with regular meetings to find common ground for an open standard.

"What we see with Apple and some other stores is not really where we want to be in the long run," Deutschmann says. "Those are closed ecosystems where Apple alone and no one else has the absolute dominating decision to say what comes into the app store and what doesn't. It works nicely in the beginning, but in the long run, it can't be that only a few people control the Internet. People want openness also on the mobile side."

This is Part 2 in a series on the mobile apps market. Read Part 1 here.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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