2011 Germany - Telecoms, IP Networks, Digital Media and Forecasts

Falling telecom market revenue requires new operator strategies

BuddeComm’s quarterly publication, Germany - Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in one of Europe’s largest and most important telecom markets. The report includes VATM and regulator market data for 2010 and 2011, operator data to September 2011 and market developments into 2012.

Germany’s telecom sector is supported by one of the largest and more 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. More than half of telecoms investment since the market was fully liberalised in 1998 has been undertaken by new entrants, which have steadily increased their expenditure since 2004. Investment by operators was stymied in 2009 as a result of liquidity problems, yet recovery in 2010 looks to continue during the next two 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 as well as 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 advantage of a greater 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. Growth in the broadband market has also slowed – from about 30% in 2007 to 6% in 2011 – although the penetration rate remains below benchmark countries 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 advantage 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 four 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 all 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 all homes. Terrestrial reception stands at around two million homes, while cable has 18.2 million and IPTV about 0.9 million. DTTV has grown quickly, with more than 90% of the population 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 demand content online. Available to around 75% of households, the service includes broadband and adds a key competitive edge to the existing two DTH players.
• The excellent broadband infrastructure in Germany has helped maintain the country as one of the more 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 advantage of scale to invest in DOCSIS 3.0 upgrades. The purchase of Kabel BW by Liberty Global, owners of Unitymedia, in 2011 brought together Germany’s second and third largest cablecos.
• The number of homes passed with fibre broached one 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 population by early 2011), steadily improving transmission rates, the growing availability of data-intensive applications, and the prevalence of more 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 among 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 seven 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 more profitable cities.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in Germany. It provides further information on:

• Market liberalisation and regulatory issues;
• The impact of the global economic crisis;
• Telecoms operators – privatisation, acquisitions, new licences;
• Mobile data market developments in coming years in light of spectrum auctions and new license awards in 2010;
• 3G developments, regulatory issues and technologies including HSPA and LTE;
• Broadband migration to an FttH architecture;
• Historical and current subscriber statistics and forecasts;
• ARPU statistics and forecasts.

Data in this report is the latest available at the time of preparation and may not be for the current year.