TV cable finds mobile phone partner
Source: Handelsblatt No. 056, March 20, 2009, page 11
Cable market leader KDG concludes alliance with 02 for an all-in-one offer
Kabel Deutschland is forging ahead in the competitive telecommunication sector: apart from TV, internet and landline connections, Germany's largest cable company now also wants to offer mobile telephone service. Its intended partner is the Munich mobile firm 02, the Handelsblatt learned from the company group. According to this information, Kabel Deutschland (KDG) and 02 are currently negotiating final details, and the agreements are to be signed in April.
"We are intensively working on a corresponding bundle offer," KDG's CEO Adrian von Hammerstein told the Handelsblatt. "We are confident that we will come to an agreement with a mobile phone company in the foreseeable future." He did not want to comment about any actual negotiations with 02.
The Telefónica subsidiary likewise refused to make any comment. However, a speaker did say that the company is fundamentally open to partnerships. 02 already offers mobile phone contracts to customers of the German Italia subsidiary Hansenet and users of the Munich provider Mnet.
KDG is using this foray to expand its attack on the telecommunications provider. The Munich company is the first cable network provider in Germany to offer mobile phone services to its customers. "The cable network operators are becoming increasingly like the Telekom companies," says Roman Friedrich of the business consultancy Booz & Company. "That shows that the markets are growing together."
This is a thorn in the eye of telecommunication companies. Rene Obermann, CEO of the market leader Deutsche Telekom, sees a serious threat in the cable networks. They are technologically more advanced than those of Te¬lekom: while the controversial high-speed network (VDSL) of Telekom achieves a transmission speed of 50 Megabit per second, the cable company lines are twice as fast. "We thus hold a real advantage over Telekom competition," von Hammerstein is happy to report.
Officially, Telekom is keeping calm. "It stands to reason that the next step for cable network operators is to add on mobile phone services," says a speaker in Bonn. "But we feel we hold a good competitive position with regard to cable." However, speeds are an important competitive factor. They decide how long it takes for users to download online films on their PC or how many applications they can run and use simultaneously over their internet connection.
In other countries such as the USA, the cable sector is already engaged in a neck-and-neck race with the telecommunications companies. In Germany, these companies fear a similar development and have thus prepared their counterattack, and are already offering TV via internet protocol themselves, and are thus trying to penetrate the cable provider business sector. So far they have not been successful. The Deutsche Telekom just missed its own target of acquiring a half a million TV customers by the end of last year.
In contrast, KDG already provides some 700,000 customers with telephone and internet access. Just one year ago, the number was less than half that amount. Such strong growth is made possible by the continued upgrading of the networks, which KDG as well as the other cable providers have continued to push forward.
In the past few years the sector has invested in making their lines open for internet and telephony. Kabel Deutschland can offer telecommunication services to three-fourths of its customers in the meantime. "We are right in the middle of a hot pursuit," says von Hammerstein. "We will continue to invest. Our growth comes from new internet and telephone products."
Fantasy in cable
Growth
Telephony and internet are the greatest growth engines for the cable companies. In the last quarter KDG already attained 27 percent of its sales revenue of 310 million Euros with the new products internet, telephone and pay TV. In the same period last year, the figure was only 19 percent. The cable market grew by seven percent across Europe in 2008.
Internet
For rapid internet in Germany, cable has only achieved a market share of eight percent up to now. The market leader is Deutsche Tele¬kom with 45 percent. The resellers such as United In¬ternet and Freenet together amount to 12.7 percent. The residual 34 percent of the market go to other suppliers with their own networks such as the British telecommunication firm Vodafone/ Arcor.
Authors of original text: Sandra Louven, Düsseldorf, and Hans-Peter Siebenhaar, Berlin
Translation by KDG.