The German DSL Market in Q1 / 2009
DSLWEB Special, June 2009
Overall, the six leading German DSL providers were able to reap about 532.000 additional DSL subscriptions during the year’s first quarter. On March 31st, they provided nearly 21 million DSL connections in total. Even if these key numbers show a considerable increase compared to the previous quarter, a closer look at the individual results will provide a rather different picture.
The majority of DSL providers are struggling with customer acquisition, the market seems more and more saturated. While the DSL providers still try to attract customers with often massive discounts, there is probably not a lot of wiggling room left for further price deductions. This may even be one of the reasons why a number of providers have started to offer special service guarantees as additional incentives. One thing about this that is especially noteworthy: Quite a lot of the guaranteed services are explicitly targeted at customers who are looking into changing their DSL provider.
Market leader T-Home may have recorded a customer increase of 390.000 in its books, but this number is heavily inflated by the results of an internal restructuring process at T-Home: While the business division T-Systems will from now on exclusively provide services for major corporations, about 160.000 small and mid-tier business customers have been shifted to T-Home.
In the first quarter of the year Vodafone again took second place concerning the total number of customers as well as the number of newly acquired customers. Together with its subsidiary Arcor, Vodafone could increase its customer base by about 180.000 to 3.2 million. As in the whole of 2008, Vodafone reaped the highest percental growth among the leading German DSL providers.
1&1, on the other hand, wasn’t able to win any additional customers and had to report zero growth. Despite this, the earnings from 1&1’s product segment of 65.7 million euro were slightly higher than in the same quarter of the previous year. One of the reasons for this is 1&1’s success in transferring existing customers from old resale products to more profitable DSL packages. In the face of the problematic customer acquisition, 1&1 emphasizes this “qualitative growth”.
After the slight increase in Q4 2008, Alice again faced a net loss. During the 1st quarter of 2009, the DSL provider lost 19.000 customers in total, the gravest decline in customers for Alice until now. The consequence of the enduring weak performance: Just after the end of the business quarter, Telecom Italia initiated the sale of HanseNet. Until now, Vodafone and Spanish Telefonica have confirmed initial non-binding offers.
While the negotiations about the sale of Freenet’s DSL business continued, they haven’t lead to any tangible results - yet. The big clean-up of their customer base, however, seems to be finished for the most part, because the minus of 38.000 connections was not nearly as drastic as in the quarter before. The final decision about the future of Freenet was actually made after the end of the 1st quarter: On May 26th, 1&1 made a surprise announcement that they would take over Freenet DSL.
While Versatel was able to increase their customer base, their growth, too, slowed down considerably. This quarter, the DSL provider gained 3.000 additional subscriptions in the private consumer sector.
Strong Growth of Internet by Cable
In the meantime, the big German cable internet providers show no signs of stagnation: While the DSL market has only grown by 10 percent since the 1st quarter 2008, the number of cable internet subscribers has increased by more than 70 percent in the same period of time. Right now, Kabel Deutschland, Unitymedia and Kabel BW count more than 1.5 million broadband customers. By March 31st, the biggest of the three companies was nearly neck-to-neck with DSL provider Versatel.
Regulatory decisions influence German broadband market
A string of political decisions could heavily influence the development of the German DSL market in the coming months. The most important of them will be the new “broadband initiative” the German government made part of its economic stimulus package. One of the set goals of the program is to make broadband connections available everywhere and thereby close all of the existing “white spaces” in Germany.
A decision made by the Federal Network Agency (Bundesnetzagentur) angered Deutsche Telekom: The ex-monopolist campaigned for raising the “TAL” fee that network providers can charge their competitors for using their infrastructure. Instead, the agency lowered the fee by about 15 cent to 10.50 euro per month. In response, Deutsche Telekom publicly questioned its further investments into the DSL expansion in rural regions.
Similarly to the DSL providers, the cable network providers, too, are pressing for market consolidations. Such attempts, however, would in all likelyhood get thwarted by the Federal Cartel Office (Bundeskartellamt): A spokesperson of the Bundeskartellamt just recently labelled a possible merger of the big cable network providers as “problematic”.
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