Q4 2011: DSL market picks up again, Liberty Global sets sight on Kabel BW
Broadband Report Germany Q4 2011
At the end of 2011, the number of fixed-line broadband connections in Germany totaled 27 millions. While the number of customers with the five largest national DSL providers increased only slightly (+12,600 DSL subscriptions) in the period between October and December, the three major German cable providers retained strong growth with a net total of 125,400 additional internet subscriptions during the fourth quarter of 2011.
DSL customer numbers continue to stagnate
After the number of DSL connections held by the five major German DSL providers had decreased for the first time in Q3 2011, it rose again in Q4 2011, albeit by only 12,600. On December 31st 2011, the top five had reached 22.04 million DSL subscriptions, representing a year-on-year increase by 186,800. But compared to 2010 (407,300 net additions), the DSL market has cooled off considerably.
Only Deutsche Telekom with net increase in DSL customers
Subscription numbers at the major DSL providers followed the trends established in the previous quarter. As in Q3 2011, only Deutsche Telekom was able to expand its customer base and increased the number of DSL subscriptions by 64,000 to 12.265 million.
Both Vodafone (-7,000 DSL connections) and 1&1 (-10,000 DSL connections) were able to stabilize their DSL customer base in the second half of the year, but still couldn't prevent a net loss in customers for Q4 2011. After a period of strong growth, Telefónica Germany's customer numbers, too, began to stagnate in the second half of 2011. With a net loss of 15,300 DSL subscriptions in Q4 2011, the customer churn at o2 and Alice remained on a similar level to the previous quarter. Not surprisingly, Versatel was once more affected the most by customer migration. Although the company still sees its private customer base as a key pillar of business, it sees no chance for further growth in the mass market segment. As a consequence, Versatel currently only seeks to either retain its existing base of private customers or at least keep the respective churn rate as low as possible.
A new direction for the market: Telekom and cable providers reap benefits
The increasing saturation of the broadband market is only one of the reasons why the ability to attract customers willing to switch their provider will become increasingly important in the near future. Another factor is the upcoming update of the German telecommunications laws, that was ratified in February after a long lead-up. It contains several regulatory changes that will make switching providers considerably easier. Not only must all broadband packages be available in a variant with a minimum contract term of 12 months, if a customer leaves his current provider for a new one, the providers will also be obligated to complete the technical migration of the broadband connection in a single day.
As the Bundesnetzagentur shows in its yearly report for 2011, German broadband customers on average have been reluctant to leave their provider in the past. According to a 2011 study, just about 70 percent of customers have been with the same telephone provider for four years or more. The number of customers who actually have switched their provider, the Bundesnetzagentur estimates, has remained nearly constant at about 3 million in the past four years.
What's interesting is the distribution among the different broadband providers: During the last four years, about half of the switching customers went to one of the alternative (non-Telekom) DSL providers, while 30 percent switched to Deutsche Telekom. The remaining 20 percent meanwhile chose an internet and telephone package from one of the cable providers.
The high rate of migration towards alternative DSL providers isn't surprising, considering that Deutsche Telekom was forced to open up its network infrastructure and provide its competitors with bitstream access for reasonable market rates as recently as May 2008. Only then the smaller market players were able to provide double play package deals and establish themselves as a fully viable and cheaper alternative to the former monopolist Telekom.
In its last quarterly report, Deutsche Telekom, however, showed the lowest ammount of line losses in years, which suggests - especially when taking into account its relatively high share of the migrating customers - that quite a lot of customers who had left for one of the alternative providers are already returning to the market leader. Combined with the declining number of new DSL customers this leaves only one conclusion: The majority of DSL customers who leave their current provider aren't heading to the direct competitors in the DSL segment, but are switching to the increasingly popular cable internet.
Major consolidation in the cable space
The acquisition of the cable operator Kabel BW by the international media group Liberty Global had already been initiated back in March 2011. In December, the Bundeskartellamt (Federal Cartel Office) finally gave its official approval to the purchase. With the aquisition by Liberty Global, Kabel BW now resides under the same corporate umbrella as Unitymedia. As a result of adapting the new owner's reporting guidelines, Kabel BW had to adjust its internet subscriptions downward by 19.100 to 767,000, even if it was able to activate 33,000 additional broadband internet connections in Q4 2011.
Unitymedia and Kabel Deutschland, meanwhile, increased their internet subscription numbers by 58,200 and 69,200 respectively. Together, the three big cable operators now serve a total of 3.24 million broadband connections which accounts for 12 percent of all fixed-line broadband connections.
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