Germany Communication Profile 2O12

Falling telecom market revenue requires new operator strategies

Germany’s telecom sector is supported by of the major and additional affluent populations in Europe. Nevertheless, the sector has been affected by the poor economic climate since mid-2008: the government has stepped in with a €50 billion economic stimulus package which included €17.3 billion of investment in infrastructure, of which a proportion is dedicated to telecom network upgrades. Additional than half of telecoms investment since the market was fully liberalised in 1998 has been undertaken by new entrants, which have steadily increased their spending since 2004. Investment by operators was stymied in 2009 as a result of liquidity problems, from now on recovery in 2010 looks to continue during the next years at least as operators upgrade mobile networks for LTE and HSPA+ technologies and further roll out FttH.

Despite these positive trends, market turnover has fallen steadily since 2005, reaching an estimated €58.5 billion in 2011 as operators feel the effects of lower prices in fixed and mobile telephony inclunding a number of regulatory measures designed to reduce costs for end users and encourage market competition. Revenue to 2013 is expected to be affected by these influences, but operators should subsequently expect an improving landscape as upgraded networks enable customers to take chance of a better range of bundled offer and higher ARPU mobile data services.

The market share of fixed-line telephony continues to fall as consumers migrate to mobile-only options, DSL-based VoIP or cable telephony. The government’s broadband strategy is focussed on providing universal access, with data rates of 50Mb/s available to 75% of households by 2014. Increase in the broadband market has as well slowed – from about 30% in 2007 to 6% in 2011 – although the penetration rate remains below benchmark nations such as the Netherlands. In the cable sector, operators have upgraded networks to provide a realistic alternative to the dominance of the incumbent Deutsche Telekom, while ongoing market consolidation has resulted in a small number of players able to take chance of scale and geographic reach to expedite DOCSIS 3.0 rollouts and so offer services of at least 100Mb/s across their footprint.

In the mobile market the mobile network operators are supplemented by a number of resellers and MVNOs. The share of mobile data of the total mobile revenue is now around a third of amount mobile revenue, largely the result of increased mobile data use compounded by falling mobile voice prices and lower contract tariffs.

In the TV market end users mainly rely on cable or satellite to receive signals. Digital homes include digital cable (DVB-C), DTTV (DVB-T), digital satellite DTH (DVB-S/S2) and IPTV. The number of digital homes reached 17.7 million by mid-2011, or about 50% of amount homes. Terrestrial reception stands at around million homes, while cable has 18.2 million and IPTV about 0.9 million. DTTV has grown quickly, with additional than 90% of the people able to receive signals.

Germany – Key telecom parameters – 2010; 2012

(Source: BuddeComm)

Key Highlights

• The recent launch by Telekom Deutschland of Entertain Sat supplements the company’s IPTV platform, taking linear content from satellite and adding on request content online. Available to around 75% of households, the service includes broadband and adds a key competitive edge to the existing DTH players.
• The excellent broadband infrastructure in Germany has helped maintain the country as of the additional mature in the region. Although DSL accounts for most connections, consolidation within the cable sector has established a small number of significant players able to take chance of scale to invest in DOCSIS 3.0 upgrades. The purchase of Kabel BW by Liberty World, owners of Unitymedia, in 2011 brought together Germany’s second and third major cablecos.
• The number of homes passed with fibre broached million by the beginning of 2012, though perhaps only about 40% of these had signed up. Fibre infrastructure is a stimulus for the country’s budding trans-sector developments. In addition, the regulator will oversee the price which the incumbent charges for access to its fibre network.
• Amended regulatory conditions imposed on Telekom now oblige the company to provide competitors with access to its VDSL network, including cable ducts and dark fibre. The move brought to a close a three-year regulatory protection for Telekom, and will further boost FttC in coming years.
• The volume of mobile data traffic has grown sharply since 2006, brought on by the expanded network coverage (reaching 95% of the people by early 2011), steadily improving transmission rates, the growing availability of data-intensive applications, and the prevalence of additional capable devices. In addition, the reduced rates for mobile data services and the introduction of transparent tariff models for data use will further encourage data use part subscribers during the next few years.
• MNOs have invested in LTE in a range of frequencies: spectrum auctions in several bands, including 1.8GHz, 2GHz and 2.6GHz, most of which is being used to add capacity to the operators' existing 2G and 3G networks, triggered LTE deployments. Vodafone alone is committed to serving 1,500 areas in the first phase of its rollout programme.
• By early 2012 MNOs had reached coverage requirements for their 800MHz licences in Länder, enabling them to deploy networks in these areas as they see fit.
• For the regulator, the auction of 4G spectrum has been crucial to eliminating areas of poor broadband: under the terms of the 800MHz licenses, the three licensees must first use the spectrum to provide services to rural areas underserved by fixed-line broadband before they can deploy in the additional profitable cities.

Broadband Market - Overview

Germany has the second major broadband market in Europe. The dominant DSL platform is led by Deutsche Telekom which has invested in ADSL2+ and VDSL upgrades serving a lot of urban areas. The greatly consolidated cable sector has responded with extensive DOCSIS 3.0 based 120Mb/s services which DSL cannot match. Faster broadband is creating request for new bundled services while intense competition has seen prices fall dramatically. Lower charges for local loop unbundling imposed by the regulator should as well help increase competition and lower prices further.

This statement profiles Germany’s fixed and wireless broadband markets, together with forecasts to 2020 and an analysis of developments with related technologies such as fibre-to-the-home, powerline broadband, wireless broadband, WiFi and internet via satellite. It as well examines Deutsche Telekom’s Next Generation Network and the regulatory issues relating to competitor access to new networks.

Key developments: NGA Forum adopts framework policy on the interoperability of broadband networks; EC closes infringement case against German government for former legislation protecting DT in VDSL market; DT plans to form separate FttH division; Vodafone considers migrating DSL subscribers to its LTE network; KDG extends 100Mb/s DOCSIS 3.0 network to 6.9 million homes; Kabel BW to complete 200 fibre projects by end-2011; Liberty World secures approval to acquire Kabel BW; DT agrees to lease fibre access from NetCologne; regulator’s market data for 2011, VATM market data for 2010 and update to September 2011; operator data to September 2011.

LTE network strategies

Germany has the major mobile subscriber base in Europe, with about 111 million subscribers in mid-2011. The high penetration rate – at some 140% – is chiefly attributable to the growing use of SIM cards for mobile Internet access. Vodafone and T-Mobile dominate the German mobile market, together accounting for about 63% of subscribers, about 4% lower than in 2009 since the major network competitors O2 and E-Plus have increased their market share. Customer churn in the German mobile market remains high, driven by number portability, regular tariff changes and competitive deals introduced by operators.

In line with the government’s National Broadband Strategy, Mobile Network Operators (MNOs) have consolidated their awards for licences in a number of spectrum bands by further advancing their deployments of Long-term Evolution (LTE) networks. MNOs are committed to playing a significant part in Germany’s broadband strategy, given the licence conditions set for their 800MHz licences to provide rural areas with priority coverage.

Digital Economy and Digital TV

Germany’s market for digital TV and bundled services has grown strongly on the back of excellent DSL and cable infrastructure. The capacity for consumers to make use of VoD and IPTV services will increase considerably during the next three years as cabled 120Mb/s networks increase their footprint and Telekom Deutschland’s FttH network expands to reach million homes, complementing its existing VDSL infrastructure.

Digital TV has undergone regulatory and licensing processes, and successful rollouts will have extended the service to additional than 90% of the people. Digital dividend spectrum, released from analogue switch-off and half auctioned in 2010, promises bandwidth which can be used for advanced wireless services extending and enhancing the reach of converging media. In this statement we provide an overview of convergence in Germany, including recent developments in VoD, bundled offerings and VoIP services, together with an overview of the digital and satellite TV markets.

Key developments: Kabel BW sold to Liberty World; Entertain Sat shows early promise; KDG launches VoD service; KDG extends 100Mb/s services on DOCSIS3.0 technology to 7.5 million homes; digital TV penetration reaches 50% of amount homes; Kabel BW adds linear TV to VoD service; Vodafone relaunches multiplatform IPTV service; Unitymedia adds mobile voice and data to bundled packages; DT re-enters cable TV market; regulator’s market data for 2011, VATM market data for 2010 and updates to September 2011; operator data to September 2011.

Telecom Market

Germany has Europe’s major telecom market, with average penetration in the broadband and mobile sectors. Both the fixed network and broadband markets are dominated by Telekom Deutschland, though other notable players including freenet, Vodafone and Telefónica have gained market share as the incumbent continues to rebound from poor recent performance.

This statement introduces the key aspects of the German telecom market, providing comprehensive data on the country’s fixed network infrastructure inclunding key regulatory developments including the status of interconnection, local loop unbundling, number portability, and carrier preselection. It as well profiles the major operators, and details the development of Next Generation Networks and the battle between the EC, the government and incumbent on NGN access.

Key developments: EU compels Telekom to provide access to VDSL network; Telekom reports 6.8% fall in revenue in 9M 2011; telecom market revenue showing continued contraction; Telekom Deutschland pursues new fibre-based strategy; France Telekom and Telekom joint procurement venture comes on-stream; regulator approves new LLU access charges to mid-2013; regulator’s market data for 2011; VATM market data for 2010 and update to September 2011; operator market data to September 2011.

Major Telecom Players

Germany has Europe's major telecom market, supported by a large and affluent people receptive to emerging technologies. Internet use is higher that the EU average, though broadband lags behind. Strong increase in the mobile sector since 2006 has pushed mobile penetration to 112%, catching up with the EU average. The fixed network and broadband markets in Germany are dominated by Deutsche Telekom, though notable players including freenet/debitel, O2 (Telefonica ), E-Plus (KPN) and Arcor (Vodafone) have gained market share as the incumbent has struggled with poor recent performance.

Mobile Market

The German mobile data market has enormous potential for increase following massive investments by the network operators to upgrade networks supporting mobile data services. The regulator anticipated next increase in coming years by auctioning spectrum in the 1.8GHz and 2.6GHz bands, inclunding refarming spectrum below 1GHz for use by mobile broadband. Operators have fast-tracked the development of data-rich applications to improve profit margins as voice ARPU continues to fall in response to competition from resellers and regulatory measures on roaming and termination rates. Mobile TV has not from now on caught the public imagination: the national DVB-H licence holder Mobile 3.0 withdrew services soon after launch, half sabotaged by network operators having introduced handsets allowing users to access free-to-air DVB-T channels.

This statement provides key statistics and analysis on the mobile data market in Germany in 2011. Focussing on HSPA and LTE services, it analyses market players’ strategies and assesses the range of emerging mobile data services and technologies.

Key developments:Benchmark auctions in 800MHz and 2.6GHz bands trigger LTE deployment; 3G reaches 85% of the people; Telekom Deutschland trials LTE 4×4 MIMO to provide up to 250Mb/s; Vodafone serving 1,500 locations; O2 launches rural LTE; m-ticketing in Northern Hessen; demise of mobile TV; regulator opens consultation for use of 900MHz and 1800MHz bands for post-2016; coverage requirements for 800MHz licensees reached in Länder; MNOs step up m-payments platform; VATM market data for 2010 and update to end-2011; regulator market data for 2011; operator data to end-2011; market developments into 2012

Mobile Data Market Insights, 4G,

The German mobile data market has enormous potential for increase following massive investments by the network operators to upgrade networks supporting mobile data services. The regulator anticipated next increase in coming years by auctioning spectrum in the 1.8GHz and 2.6GHz bands, inclunding refarming spectrum below 1GHz for use by mobile broadband. Operators have fast-tracked the development of data-rich applications to improve profit margins as voice ARPU continues to fall in response to competition from resellers and regulatory measures on roaming and termination rates. Mobile TV has not from now on caught the public imagination: the national DVB-H licence holder Mobile 3.0 withdrew services soon after launch, half sabotaged by network operators having introduced handsets allowing users to access free-to-air DVB-T channels.

Key developments:Benchmark auctions in 800MHz and 2.6GHz bands trigger LTE deployment; 3G reaches 85% of the people; Telekom Deutschland trials LTE 4×4 MIMO to provide up to 250Mb/s; Vodafone serving 1,500 locations; O2 launches rural LTE; m-ticketing in Northern Hessen; demise of mobile TV; regulator opens consultation for use of 900MHz and 1800MHz bands for post-2016; coverage requirements for 800MHz licensees reached in Länder; MNOs step up m-payments platform; VATM market data for 2010 and update to end-2011; regulator market data for 2011; operator data to end-2011; market developments into 2012.