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Germany's biggest operator says customers are flocking to its new quad-play packages, but is the converged-services strategy a safe long-term bet?
September 4, 2015
Germany's Deutsche Telekom has revealed that more than 1.5 million customers have signed up to use one of its quad-play offers, which combine fixed-line and mobile phone services, since the packages were introduced about a year ago.
The figure still represents a small percentage of the operator's overall customer base -- which included 20.4 million fixed-line subscribers, 12.5 million broadband accounts, 2.6 million TV customers and 39.5 million mobile connections at the end of June -- but shows that interest in convergence products is growing fast. (See Convergence: All the Rage in 2015.)
Since mid-May, when it last provided an update, the German incumbent appears to have attracted another half a million customers to its MagentaEINS packages, which allow subscribers to pay a set monthly fee for a selection of fixed, mobile and TV services.
The launch of MagentaEINS has clearly troubled rivals such as Vodafone Germany , the country's second-biggest mobile operator by revenues, which has emerged as one of Deutsche Telekom AG (NYSE: DT)'s chief broadband rivals since completing its takeover of Kabel Deutschland GmbH , Germany's number-one cable operator, in late 2013. (See Euronews: Vodafone Strikes €7.7B Kabel Deal.)
Earlier this year, Vodafone Group plc (NYSE: VOD) blamed a weak performance in the German market on difficulties in the mobile sector, where it has been hit by the arrival of low-cost MVNOs, but also warned investors that it would have to come up with an answer to MagentaEINS. (See Vodafone May Buy Content to Fight BT, Telefónica.)
"It's priced intelligently and I think Deutsche Telekom has moved customers on to it rather than acquired them but it will have an impact, and we will have to respond and have our own products in that space," said Vittorio Colao, Vodafone's CEO, during a presentation of the operator's financial results for the year to March 2015.
Deutsche Telekom today increased the pressure on Vodafone by revealing that customers on MagentaEINS plans are to benefit from even higher-speed services and more generous data-usage allowances for no additional cost.
Customers on the mid-range "M" offer will be able to use 2GB of mobile data each month, up from 1.5GB previously, while those on the "L" deal will have their limits raised from 3GB to 4GB per month.
In the meantime, the "L Plus" data allowance is to increase from 5GB to 10GB per month, while the "Complete Premium" offer will let customers use as much as 30GB every month, compared with 20GB under the original scheme.
The operator has also launched a new family offering allowing parents to equip their children with a mobile communications service.
Although the revamp will be unwelcome to rivals like Vodafone, it also suggests Deutsche Telekom has come under pressure to polish its offerings amid growing competition in the German telecom sector.
The incumbent has been investing in higher-speed broadband technologies such as vectoring, but its services do not match up to those offered by Germany's cable operators, which have continued to nibble away at its market share. (See DT Expands Its Vectoring Commitments and Tele Columbus to Launch 400Mbit/s Service.)
Like Vodafone, Deutsche Telekom has also complained about regulatory moves designed to support the market entry of MVNOs, arguing that authorities should be doing more to help infrastructure investors rather than companies piggybacking on their networks.
The rollout of gigabit broadband access networks is spreading. Find out what's happening where in our dedicated Gigabit Cities content channel here on Light Reading.
Moreover, while "connected home" revenues -- generated from the sale of broadband and TV services -- are supposed to represent one of Deutsche Telekom's growth areas, they have not been rising as hoped.
In the second quarter, Deutsche Telekom made €1.28 billion ($1.42 billion) from the sale of broadband and TV services, just €3 million ($3.3 million) more than in the same period last year.
If Vodafone's Colao is right, and most quad-play customers were already using Deutsche Telekom's fixed and mobile services, the take-up of MagentaEINS services could put a further squeeze on sales.
Quad-play services have taken off in parts of southern Europe, where economic conditions remain challenging, but some operators have expressed concern about the impact they could have on average customer spending.
Notwithstanding the convenience of receiving a single bill for all communications services, many customers seem unlikely to sign up for the quad-play unless it is cheaper than buying separate services.
Deutsche Telekom's subscriber data appears to support Colao's assertion: In the 12 months to June, the operator lost 597,000 fixed-line connections, gained 157,000 broadband and 260,000 TV customers and picked up another 128,000 mobile subscribers.
Those rates of decline and growth indicate that most quad-play customers have migrated from other Deutsche Telekom services, even if the figures do represent a performance improvement in the fixed-line area.
In the preceding 12-month period, Deutsche Telekom lost 846,000 fixed-line and 69,000 broadband connections and added 240,000 TV customers.
It did, however, grow its mobile business by more than 1.8 million subscribers, attributing this success to its launch of new mobile rate plans in May 2013.
With a much smaller presence in Germany's broadband sector, Vodafone could have more to gain than Deutsche Telekom from the launch of quad-play products.
Vodafone had just 5.5 million broadband customers in Germany at the end of June and might see quad-play as a means of bulking up its broadband business.
However, the cable network it acquired with its Kabel Deutschland takeover covers only about 40% of German households, forcing Vodafone to rely on a wholesale deal with Deutsche Telekom in other parts of the country.
The challenge there may be differentiating itself from the incumbent while effectively operating as a reseller of its broadband technology.
— Iain Morris, , News Editor, Light Reading
Read more about:Europe
International Editor, Light Reading
Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).
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