It looks like after multiple false starts and a complete rethink to its pricing strategy, the strong local brand of Deutsche Telekom is beginning to win the IPTV war in Germany. It announced this week that subscribers had risen to over half a million, and set its sights on reaching 1 million customers by the end of 2009. This would represent a 7% penetration of the Deutsche Telekom broadband customer base.
If it achieves that, Germany won’t quite rival the combined French IPTV customers nor those in Italy, but should mean that it overtakes most IPTV growth in the rest of Europe.
Initially the Mediaroom driven IPTV services were overpriced compared to Telecom Italia owned rival HanseNet, and Vodafone’s Arcor, but are now clearly winning the battle for IPTV customers across Germany, mostly on brand and depth of offering, and HD capability.
Microsoft won the DT IPTV account in March 2006 and it promised a major network upgrade using VDSL to allow broadband speeds of up to 50 Mbps, initially in ten cities by the end of 2006 including Berlin, Hamburg, Cologne and Munich and then reaching 50 cities by the end of 2007. The network upgrade alone was to cost Deutsche Telekom $3.7 billion without the IPTV costs.
As the 2006 figures were announced Deutsche Telekom was in a real mess, losing fixed line telephony customers at an alarming rate, around 2 million lines a year. It had also tried to build French and Spanish ISP businesses which were deemed too small to scale and which leaked money. Its CEO Kai Uwe-Ricke stood down, and Ren’ Obermann was appointed. He sold off the overseas ISP operations and looked for cost cuts. One of the upshots of this change was a switch to cheaper ADSL2+ infrastructure for much of Germany for its IPTV.
It had announced the IPTV service in 2006 but didn’t really begin signing customers until Obermann took over. DT offered a multi-tiered service starting with TV at €80 a month including a 25 Mbps broadband line, plus €100 for a set top and router. It also had a more expensive HD tier and VoD content from Universal, Dreamworks, 20th Century Fox, MGM, Paramount, Warner and Sony.
Meanwhile Telecom Italia subsidiary in Hansenet began offering IPTV under the Alice brand at €30 for a full triple play (phone, broadband and TV). This put pricing pressure on other Germany IPTV operators, namely Vodafone’s Arcor, which only came into the market in January 2008.
Arcor offered from 22 to 50 channels with prices of just €9.95 and €12.95, and triple play pricing starting at €39.95 for VoIP, broadband at 16 Mbps and 50 TV channels.
Against this backdrop the new DT CEO drove down prices twice last year and ran promotions offering customers IPTV free for two months. This now seems to have done the trick and accelerated take up.
The system passes over 19.2 million German households and the service had just 120,000 customers by the end of 2007 and now 500,000 at the end of 2008.
Timotheus Hoettges, head of Telekom’s fixed-line unit T-Home, told Germany’s Focus magazine this week that ‘we want to double that number to 1 million and enter the mass market.’
Telecom Italia’s HanseNet Alice IPTV since dropped its IPTV price to nothing, offering it for free to people who take broadband and telephony, but now says that it cannot keep this up for much longer.
Deutsche Telekom, in a show of financial strength, this week said that it would recruit 3,500 people and add an additional 3,600 training positions this year, roughly in line with its pre-recession practices. That sends a strong signal to the talent market about where they should work.