Video services

DT Struggles to Entertain

Deutsche Telekom AG (NYSE: DT) must be looking over its shoulder at neighbor Orange (NYSE: FTE) and wondering where it's going wrong, and where FT is going right, in IPTV.

In unveiling its first-quarter results today, the German incumbent failed to mention its IPTV progress in its earnings press release, and CEO René Obermann omitted to mention his company's TV-over-broadband service, called Entertain, during his conference call speech. (See DT Reports 1Q08.)

That could be because DT's IPTV customer numbers certainly aren't anything to brag about.

Only in the company's extensive 84-page report does DT mention that its Entertain customer base (connected customers receiving IPTV services) reached "around 154,000" by the end of the first quarter. That means it added just 38,000 new IPTV customers during the first three months of 2008.

France Telecom, meanwhile, added 133,000 IPTV subscribers in France alone during the first quarter, and another 34,000 in other European markets, taking its total telco TV customer base to 1.41 million. (See FT Ramps Up Its IPTV.)

While it's true that the French carrier has been in the IPTV game a long time -- it first launched its service in late 2003 -- Deutsche Telekom is hardly a newcomer, having launched its service in August 2006.

The German operator's main issue appears to be its marketing. Having had a disastrous first year, DT renamed the service in August 2007 and cut its prices, which led to an upsurge in orders during the fourth quarter of last year. (See Deutsche Telekom Relights Its IPTV Fire and DT Cuts Its IPTV Price.)

But that increased level of interest hasn't been maintained, leading the carrier to further cut its prices in March, when it reduced the price for its entry-level triple package, called Entertain Comfort (150 free and pay-TV channels, more than 2,600 VOD selections, DSL Internet access, and flat-rate VOIP), by 17 percent to €49.95 (US$77.01).

The carrier won't comment on its current order intake -- a DT spokesman says more information on Entertain's progress will be released in the next couple of months -- but it clearly has a steep hill to climb to reach its end-of-year target, announced in January this year, of having 500,000 IPTV customers.

Having broadband customers to whom it can pitch the IPTV service is not an issue. DT added 539,000 DSL customers in the first quarter to take its domestic retail total to 9.56 million at the end of March, up 25 percent from a year earlier. It also has nearly 1.5 million broadband customers spread across its Central and East European operations, up 35 percent from 384,000 at the end of March 2007.

Overall, financial results were pretty much in line with expectations. Total revenues for all of DT's businesses were €15 billion ($23.1 billion), down 3.1 percent year-on-year, while net income more than doubled to €924 million ($1.4 billion). More than half (51.6 percent) of DT's first-quarter revenues came from outside Germany, with T-Mobile US Inc. a major contributor. (See T-Mobile Adds 2M in Q1.)

— Ray Le Maistre, International News Editor, Light Reading

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