Mobile market report: Germany

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Lessons for the UK operators

Telefónica O2 Germany’s move to buy Telecom Italia’s German subsidiary Hansenet will see it leapfrog E-Plus in the German market in terms of revenues, if not for mobile subscribers. It is a bold move by O2 Germany, and adds useful fixed line services to its roster. However, it is E-Plus, owned by Dutch operator KPN, that is making all the running in the German mobile market.

The German market is instructive in many ways because of the E-Plus business model, which has been hugely successful in recent years and precipitated a general surge in new connections in the market, despite total saturation.

Mobile penetration of the German market is 130 per cent, or 103 million accounts spread among a population of 83 million. It is one of the most saturated markets in the world – by contrast, UK penetration is 120 per cent. But Germany, unlike most other Western markets, is experiencing a signifficant growth curve – 10 per cent of market penetration has come in the past 12 months. It is expected to add a further 10 million lines by 2013.

E-Plus has brought a price war to Germany and turned the market on its head, and for all O2’s new claims of revenue superiority, it is chasing E-Plus’ shadows along with the rest.

E-Plus ranks third in Germany in terms of mobile subscribers, with a 17.9 per cent share and 18.2 million customers. Local operator T-Mobile leads with 36.5 per cent and 39.1 million customers. Vodafone takes second with 32.6 per cent and 34.9 million customers. O2, which brings only fixed line broadband subscribers with the Hansenet deal, sits in fourth with 13.9 per cent share and 14.9 million.

The German industry is interesting, then, because it represents another Western mobile market where the leading players take more than 30 per cent – in its case, both its top networks take more. Like Spain, it bears resemblance to the likely make-up of the UK market some time in 2010, when the slated Orange/T-Mobile joint venture comes into effect and leads with a projected 37 per cent share.

But there is more. E-Plus’ growth has come by a unique marketing ploy. In 2005, it launched five distinct ‘challenger’ brands, to run alongside the E-Plus parent brand and off the same systems and books. These were not MVNO brands leasing airtime from E-Plus, but brand new wholly-owned sub-brands. Each targeted specific markets on price, gambling ARPU for higher volumes.

So, ‘Base’ offers simplified flat-rate tariffs, ‘SIMYO’ offers low-cost prepay and SIM-only via the web, ‘Blau’ is a cheap-rate international calling SIM, and ‘AY YILDIZ’ is an ethnic market brand pitched to the Turkish community. It has also this year launched a new youth brand, ‘Vybemobil’, in conjunction with MTV Germany.

Full article in Mobile News issue 452 (November 16, 2009).

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