17 Jun 2009Germany Broadband Overview

Germany is the largest broadband market in Europe. After several years of strong market growth, the country has now entered a phase of consolidation, increased market competition and saturation of demand for basic broadband access. Major ISPs are currently trying to move broadband services onto a new digital plane that allows service convergence by pushing ahead with cable network upgrades and VDSL deployments.

The German regulator summed up the current state of the German telecoms market in 2008. VoIP and mobile telephony services competed strongly against the classical fixed telephony service offerings. Broadband take-up keeps growing, especially unbundled offerings. Mobile data services are becoming increasingly popular. German consumers view cable telephony and broadband access as an attractive alternative to DSL-based services.

The growing broadband market has opened new revenue streams for Germany’s telecoms operators. Despite falling consumer prices, total revenue from the telecommunications market grew by EUR 15.8 billion from 1998 to 2008. However, this long-term view masks a gradual decline in revenue from 2005 to 2008, and overall telecoms market revenue is estimated to be down from EUR 67.3 billion in 2005 to EUR 63 billion in 2008. The German incumbent Deutsche Telekom (DT) and alternative telecoms operators share total revenue streams at the ratio 46:54 respectively, marking the continuous erosion of DT’s revenue stream 74 per cent in 1997. Overall Revenue from DTs competitors has grown without exception from 1998 to 2008 and amounted to EUR 34.1 billion by the end of 2008.

The popularity of fixed-line connections is waning. About 35.4 million fixed access lines over PSTN/ISDN were actively used in 2008, down from 37.1 million in 2007. An additional 1.5 million homes used fixed access over coaxial cable, and 3.7 million were hooked up using VoIP over DSL or TV cable in 2008, up from 2.8 million in 2006. The main voice access technology in Germany is undoubtedly mobile 2G/3G technologies.

By end-2008, mobile subscriptions reached 107.2 million, with mobile penetration at 130.6 per cent. General coverage is excellent and prices were so low that they attained tipping point, helping to triple the mobile user base between 2005 and 2007. Regular users of UTMS access increased to 11.5 million by end-2008. Depending on individual network operators, UTMS/EDGE coverage ranges between 56 per cent and 80 per cent. Existing UTMS networks are being upgraded to HSDPA in 2008/2009. For instance, Telefonica O2 Germany has promised to upgrade its mobile network to HSPA+ by the H2 2009. The roll-out will begin in Munich, allowing theoretical download speeds of up to 28 Mbps, way above the average which is estimated to be around 8 Mbps. The use of WLAN Hotspots is in high demand too. By end-2008, Germany had around 12,000 Hotspots, mainly operated by DT, OecherNetz and The Cloud.

The main players in the German mobile market are T-Mobile, Vodafone, E-Plus and Telefonica O2. In December 2008, T-Mobile was the leader with a market share of 36.5 per cent followed by Vodafone with 33.7 per cent. There are over 50 mobile virtual network operators (MVNOs) in Germany’s wireless market, but only Freenet provides serious competition to the big four. At the end of March 2009 Freenet had a wireless subscriber base of 18.53 million. In March 2009, Telefonica Group and Vodafone Group agreed to share infrastructure to strengthen their market positions. They will deploy new infrastructure jointly in Spain, Germany, Ireland and the UK. In Germany, these two companies will share their 2G and 3G mobile networks. The Dutch MVNO Yes Telecom announced plans to enter the German wireless market in the summer of 2009.