SIGN UP FOR MONTHLY UPDATES

NAME 
EMAIL 
 
Fighting for a level playing field, more competition and more choice for consumers.
Mobile Challengers > Studies > Case study: Germany
Case study: Germany

Germany represents many of the worst oligopolistic excesses of Europe’s mobile phone market, and offers a fascinating insight into how things could be so much better for consumers. Until 2005 Germans paid among the highest retail rates for mobile telephony in the EU, and unsurprisingly the country languished at the bottom of the EU league table when it came to key measurements such as mobile usage and fixed-mobile substitution.


Germany
(situation Q4 2008)
the incumbents
(*)
T-Mobile
Ownership
Deutsche Telekom
E-Plus
Ownership
KPN
Market share
36.5 %
Market share
16.5 %
Share of revenue
38.5 %
Share of revenue
12.7 %
Vodafone
Vodafone group
O2
O2-Telefonica
Market share
33.8 %
Market share
13.2 %
Share of revenue
37.1 %
Share of revenue
12.2 %


Having liberalised in 1993, toothless regulation ensured that, up until the aggressive strategy shift of E-Plus in 2005, operators were able to avoid reducing their retail prices despite an unprecedented market expansion. Under normal competitive conditions, they would have been forced to pass on these economies of scale to consumers.

Germany, before the Challenger strategy of E-Plus
Yet Germany also provides evidence as to how challengers can bring benefits to consumers, even in hostile regulatory environments. In the twelve months after E-Plus switched strategy from a me-too follower towards an active challenger with innovative flat-rate and discount offering in 2005, retail prices dropped by a staggering 12%, bringing much needed respite to the country’s consumers. And prices kept falling in the following years 2007 and 2008 by approx. 2 per cent each year. As a result, prices in Europe's biggest economy now are below European average.





Germany, after the Challenger strategy of E-Plus
In recent years, the German market has shown some signs of liberalisation, with the Bundeskartelamt, the anti-trust watchdog, appearing more prepared to step in to defend competition in the absence of action by regulator, the Bundesnetzagentur. However, inequality still exists. The table below shows how largest the two incumbents, T-Mobile and Vodafone, use their disproportionate pricing power, retail networks and handset economies to lock in the vast majority of new customers. Meanwhile, in terms of number portability, actual physical porting still takes far too long while the cost of E25 further puts consumers off changing. These two issues underline why the country has the lowest numbers of mobile portability in Europe. Likewise, the policy of spectrum re-farming – currently under way – threatens to impose on E-Plus and its fellow challenger O2 a similar long drawn-out struggle to gain adequate UMTS spectrum as it did to get enough its GSM operation up and running





EVOLUTIONS OF THE GERMAN MARKET
BETWEEN Q1 1999 AND Q4 2005

T-Mobile
Vodafone
E-Plus
O2
Customers
Market
share
Customers
Market
share
Customers
Market
share
Customers
Market
share
Q1 1999
6.069.248
39 %
6.595.000 43%
2.341.000
15% 96.833 1%
Q4 2005
29.500.000 37 %
29.165.000
37%
10.748.000
14% 9.769.000
12%
additions
since
1999
+23.430.752
+22.570.000 +8.407.000
+9.672.167