Deutsche Telekomwatch Report #5 November-December 2011 Executive Brief
4 January 2012
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- GROUP: Deutsche Telekom reported another gloomy set of quarterly financials, with the Group remaining cornered by the European sovereign debt crisis, as well as struggles in the USA. While Q3 FY11 revenue dropped 6%, and core profit contracted 2.3%, these declines were less precipitous than anticipated by analysts (a sign of how low expectations have dropped), and so relatively good news, and investors may have been further heartened by DT’s reaffirmation of its full-year forecasts. The Group went on to indicate a new wave of cost-cutting initiatives are to be announced in 2012, amid the unfavourable outlook. [pp.4-10.]
- The earnings report came as the Group’s sticky situation in the USA looked, if anything, to be worsening, after the proposed sale of T-Mobile USA to AT&T received another significant regulatory setback, prompting the two companies to tactically withdraw their application to the Federal Communications Commission, and look to rework the deal’s parameters. While the approval process has now dragged on for eight months, TMUS’s operational performance continues to be hurt by difficulties in retaining higher-value customers. 186, 000 contract subscribers departed the OpCo in Q3, and executives warned of further churn following October 2011′s iPhone 4S releases by rivals. [pp.11-13, 55-56.]
- In Europe, DT was again among operators linked with for-sale mobile virtual network operator group Lebara, which the Group partners in Germany. [p.14.]
- Disruption of DT’s broad-reaching, Fix, Transform, Innovate programme could be on the cards, via further personnel changes among senior technology decision-makers. Edward Kozel, Chief Technology & Innovation Officer, and key architect of the Group’s reorganisation efforts, is reported to have caught DT off-guard by asking to leave the company, less than two years into his role. It also emerged that Steffen Roehn, Chief Information Officer at DT, has resigned from the company. Further, Heinrich Arnold took over as Head of DT’s research and development unit, T-Labs, following Peter Moeckel’s earlier departure. [pp.14, 15.]
- There was also a leadership change at DT’s InteractiveMedia digital marketing unit, seeing Philip Missler promoted to Managing Director. [p.17.]
- DT followed up its recent “strategic partnership” with US start-up Blue Jeans Network, by launching the latter’s “anyware” video-conferencing proposition in Austria, Germany, and the UK. [p.18.]
- GERMANY: Telekom Deutschland saw sales contraction accelerate in Q3, hurt by reduced equipment revenue at mobile arm T-Mobile Deutschland — another reflection of how scheduling of Apple’s iPhone releases continues to heavily influence operator results. [pp.21-24.]
- Key mobile rival Vodafone Germany appeared to have stolen an early march on T-Mobile Deutschland, in terms of Long Term Evolution development, possibly reflecting the rival’s lower concerns over cannibalisation of legacy broadband investments. Vodafone claimed to have made around twice the level of progress of TDE in base station footprint and subscriber uptake, although both processes remain at a very early stage. [pp.26, 27.]
- The German LTE market update came amid broader, renewed talk of Vodafone as an “active” consolidator in Europe, offering both a potential challenge and opportunity to Group businesses. Vodafone was speculatively linked with a move for either of Germany’s two smaller mobile operators, E-Plus and Telefónica Germany, which, it was noted, could enable TDE to ‘passively’ gain from reduced competition. In a similar vein, Michael Tsamaz, Chief Executive of OTE, gave backing to ongoing merger talks between Vodafone Greece and Wind Hellas, which would reduce the market to a duopoly, and potentially alleviate pricing pressure. [pp.25, 26, 37, 38.]
- TDE gained a boost for its strategically-important Entertain pay-TV offering, and its wider battle with Germany’s cable operators, claiming “great” early traction for the new ‘hybrid’ version of the service, which was launched in September 2011. Executives hinted that the proposition could see a bid for expanded Bundesliga football rights, with negotiations said to have started for the 2013-2014 season. [pp.27, 28.]
- EUROPE: The impact of the Eurozone crisis continued to weigh heavily on DT’s Europe operating area, with reduced sales reported at every regional OpCo, and Group executives describing the outlook as “tense”. [pp.31-38, 41, 42, 44-48.]
- Cosmote Greece said it is planning “further upgrading and development” of its mobile network, after using a long-awaited auction held by the Greek National Telecommunications and Post Commission to gain additional “technology-neutral” 900MHz and 1800MHz frequencies. [p.39.]
- Romtelecom and controversial behavioural-advertising player Phorm said they have now “fully ramped up” their joint, MyClickNet-branded online advertising service, and promoted its potential value, but they are reported now to be facing an investigation by Romania’s data protection authority into its privacy implications. [pp.46, 47.]
- Everything Everywhere continued efforts to secure financial self-sufficiency, announcing a further wave of headcount reductions, and securing external funding to repay part of the start-up loans provided to it by Deutsche Telekom and joint parent France Télécom. [pp.49, 50, 52, 53.]
- USA: TMUS continued efforts to mitigate its isolation from iPhone distribution, via activity around iOS rival Android, forming a launch partnership for Google’s long-anticipated Google Music offering in the USA. The move will see TMUS offering direct billing for tracks purchased through Google Music — extending the operator’s existing carrier billing service for Google’s Android Market application store. [p.57.]
- SYSTEMS SOLUTIONS was again DT’s only operating division to register sales growth during Q3, but it continued to flag difficulties in translating customer wins into profit, blaming costs of “big deal execution” for reduced margin. [pp.58, 59.]
About Deutsche Telekomwatch
Report: #5
Covering: November-December 2011
Published: December 2011
Next report: January 2012
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