Investment in Germany's telecom market recovers despite continuing slide in revenue

Germany's telecom sector is supported by one of the largest and more affluent populations in Europe. However, 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, but recovery in 2010 looks to continue while the then and there two years until further notice as operators upgrade mobile networks for LTE (Long Term Evolution, latest standard in the mobile network technology) and HSPA+ technologies and furthermore roll out FttH.

Despite these positive trends, market turnover has fallen steadily since 2005, reaching about €61 billion in 2010 as operators feel the effects of lower prices in fixed and mobile telephony as then as a number of regulatory measures designed to reduce costs for end users and encourage market competition. Revenue for 2011-2013 is expected to be affected by these influences, nevertheless operators should subsequently expect an improving landscape as upgraded networks enable clients 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 (Voice over Internet Protocol) 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 as well slowed - from about 30% in 2007 to 6% in 2011 - even though the penetration rate remains below benchmark countries just as the Netherlands. In the cable sector, operators have upgraded networks to provide a realistic alternative to the dominance of the incumbent Deutsche Telekom, during 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 to cut a long story short offer services of for the moment 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, DTTV, digital satellite DTH 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, during 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.

The country as one of the more mature in the region

- The excellent broadband infrastructure in Germany has helped maintain the country as one of the more mature in the region. Though 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 at the same time Germany's second and third largest cablecos.

- The number of homes passed with fibre may approach 900,000 by the end of 2011, of which maybe 400,000 will be active. Fibre infrastructure is a stimulus for the country's budding trans-sector developments. Just in case, the regulator will oversee the price which the incumbent charges for access to its fibre network.

- Amended regulatory conditions imposed on Deutsche 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 Deutsche Telekom, and will furthermore boost FttC in coming years.

- The volume of mobile data traffic has grown sharply since 2006, brought on by the expanded network coverage, steadily improving transmission rates, the growing availability of data-intensive applications, and the prevalence of more capable devices. To boot, the reduced rates for mobile data services and the introduction of transparent tariff models for data use will furthermore encourage data use among subscribers while the then few years.

Range of frequencies

- 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.

- For the regulator, the auction of 4G spectrum has been crucial to eliminating areas of poor broadband: pursuant to this agreement 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 previously they can deploy in the more profitable cities.

- 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

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