GENEVA-The ferocious competition that has characterized the DM70 billion (US$40 billion) German telecommunications market since the introduction of full telecom competition a year-and-a-half ago shows no signs of abating, with the country’s four cellular operators all promising more price cuts and the introduction of a range of new services through the rest of 1999.
With more than 80 new competitors now slugging it out for a share of the country’s fixed-line traffic, Germany’s cellular market can seem peaceful by comparison. But don’t be deceived; it’s in the mobile services arena that the real money will be made, and all the serious players know it.
While not expanding as fast as the booming markets of Italy and France, Germany nevertheless just surpassed 15 million subscribers to become Europe’s second-ranked market by customer base after Italy. What’s more, with new subscribers signing on to one of the country’s four digital cellular networks at a rate of more than 16,000 every day, the future looks bright for the country’s wireless operators.
Mannesmann still leads
Germany’s leading mobile carrier is not the former PTT, Deutsche Telekom, but privately owned Mannesmann Mobilfunk, a fact that Mannesmann spokesman Matthias Andreesen attributes to his company’s aggressive pricing, high-capacity state-of-the-art digital network, and innovative approach to developing new services and tariff plans. Mannesmann added around 2.5 million new customers to its D2 network last year, and Andreesen said the company expects to sign up at least that many subscribers again in 1999.
Mannesmann can’t afford to rest on its laurels, though. With around 6 million subscribers to Mannesmann D2’s 6.5 million, Deutsche Telekom is hot on its competitor’s heels.
As Europe’s largest carrier, with 1998 revenues of DM34.4 billion (US$19 billion), Deutsche Telekom remains an immensely strong force in the German market, despite the inroads now being made by competitors. The carrier recently took advantage of Germany’s CeBit show to announce a range of innovative new services, most notably the introduction of a one-number PCS service on its D1 network.
“The convergence of fixed and mobile services will be the next step in the development of the German market,” said Deutsche Telekom spokesman Hans Ehnert, adding that close-to-record growth of 67 percent brought in an additional 2.2 million new subscribers during 1998.
The company makes no secret of the fact that it has its eye firmly on stealing Mannesmann’s lead in the next year or so.
“Deutsche Telekom has proved a very eager competitor in the mobile market, and very much wants to be number one,” said Michael Berlage, a senior consultant with German analysis firm Eutelis Consult. “For the moment, I’d say it’s still very much an open race.”
Despite the fact that Mannesmann and Deutsche Telekom between them hold around 80 percent of the German cellular market, most analysts agree there is still enough growth to sustain the country’s two other mobile operators, third-ranked E-Plus with 2.3 million customers and newcomer Viag Interkom, a fixed and mobile provider that launched its E2 cellular network last October.
Viag’s fixed-cellular plans
“The launch of Viag Interkom as the fourth big player in the German mobile market is without doubt the most important development of recent months,” said Berlage.
A joint venture between German industrial giant Viag, British Telecom and Norway’s Telenor, Viag Interkom plans to launch a merged fixed-cellular service called Homezone on 1 July, allowing customers to have one number linked to a single phone that can be used both at home and on the move. Close to its home base station, the system will connect to the fixed-line network like a cordless phone, but when out of range will automatically connect to the digital cellular network.
Viag is betting the new service will win favor with German customers because of its convenience and predicts a rapid expansion of its customer base from today’s 100,000 to around 800,000 by the end of the year.
While Berlage joins with other European analysts in predicting a market shake-up in the fixed-line market over the next 12 months, he said the current crop of mobile operators should weather the storm providing they can continue to deliver on service and keep prices low.
“Competition is currently more than tough,” he said. “It’s unlikely the German market can sustain the kind of price war we’ve seen over the last year or so. More probable is that mobile operators will begin to focus on differentiating through coverage, network quality and most importantly, service offerings-SMS (short message service), PCS and WAP (Wireless Application Protocol), for example. Efficient and user-friendly customer service will also be important.”
The operators agree, with Deutsche Telekom’s Ehnert and Mannesmann’s Andreesen skeptical about the market’s ability to support much more downward pressure on tariffs. “We probably haven’t seen the end of it,” said Andreesen. “But I predict we’ll soon move to a new phase, where the intensity of competition we’ve seen recently will shift towards the overall offering, rather than just the bottom line price.”
