The German DSL Market in Q4 / 2007
DSLWEB Special, March 2008
The customer figures of the six leading DSL providers in Germany for the fourth quarter mainly confirm the trends of the previous three months. All DSL providers which showed percentage increases in the third quarter - Versatel, Arcor and T-Home - improved further in the fourth quarter. This also applies to the development of the "relegation" companies of the previous quarter: 1&1, Alice and Freenet lost further ground.
The shifts, however, were marginal in most cases - the only exception being Freenet. Here, the takeover issue, which is being hotly discussed by specialist media, seems to have had a direct impact on the growth in customer numbers. While the company was able to gain around 50,000 customers in the third quarter, this figure was much lower in the fourth quarter with around 10,000 new customers.
Generally it seems that the topics of takeover and buying customers from competitors - i.e. achieving growth at any price - that were so widely discussed recently have run out of steam. For instance, 1&1 decided to back away from taking over Freenet in the end. Also, Arcor manager Harald Stöber made clear recently that he considered buying customers from competitors to be less profitable than the wholesale business or enticing customers away from competitors.
Versatel has also shown that growth is not everything. The fall in number of new customers from 50,000 (Q3) to 20,000 (Q4) was put down by the chairman Peer Knauer to a change in strategy: "In this highly-competitive market, we don't want to gain customers at any price with ruinous advertising costs. Growth is still our aim, albeit in moderation. The focus is on profitability."
This is a statement that can be viewed as being representative for many providers, considering the previous development of the market in the first quarter of 2008. The large round of price cuts amongst the top-6 providers did not take place; smaller product modifications were the common line of action. Only T-Home has been announcing plans to lower their prices: "We no longer want our prices to be less competitive", René Obermann announced recently. However, the Telekom manager will most likely want to catch up with the price cuts of the competitors in the market rather than take the pole position in the race for the lowest prices.
The real price battle is being fought on the other side. Arcor's parent company Vodafone is currently investing heavily in gaining new customers; around 100 million euros are intended to flow into the subsidisation of new DSL connections over the next three years. These investments are currently being turned into discounts for new customers and make the Vodafone product unrivalled in price. Arcor manager Stoeber expects that the market will be saturated at the end of this investment period. This all implies that Vodafone is trying to have a few more slices of the remaining cake.
With around 110,000 DSL customers at the end of 2007, the seasoned mobile provider is still a long way behind the current top-6 providers. This could soon change, however, as the rumours that Vodafone is looking to reintegrate its landline subsidiary Arcor are growing stronger. It is quite possible that Vodafone may soon replace Arcor amongst the top-6 providers, as the dissolution of the Arcor brand is also being discussed in this context. This would then make Vodafone the third largest company on the German DSL market and give it the best chance of growth thanks to its subsidised discounts for new customers.
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