Germany’s largest cable operator Kabel Deutschland Group (KDG) feels that it is finally ready to launch its own mobile phone service and will do it as an MVNO on the Telefonica O2 network in Germany. The company can now offer quad play services to its existing cable TV customer base of over 9.6 million German homes.
A deal of this type will immediately trigger a long hard look by cable operators in France, Italy, Spain and the rest of Europe at their local cellular operators. In the UK Virgin Media was the first European cable operator to acquire a mobile component, in a deal announced three years ago, but it took until this year to really push a full quad bundle. Right now the conditions for a multinational cable roll up, taking in three or four major European countries, is only held at bay by monopoly regulators around Europe. Such a move, if allowed would change the face of European telecommunications.
The German financial regulator has only just blocked a merger bid between Kabel Deutschland and Unitymedia which would have created a cable operator in Germany reaching 15.6 million homes (84% of all German cable homes). If you added this kind of MVNO deal, it would have been able to take on Deutsche Telekom head on across the board.
The new deal with Telefonica means that KDG is the first German cable operator to offer mobile services. No bundle price has yet been published, but the list prices for buying in seem very low. The idea is to offer up to five SIMs to each cable household, and to give calls to existing Kabel Deutschland phone customers for nothing ‘ both fixed line customers and those who take this new deal which confusingly is called simply Mobile Phone. For calling the rest of Germany customers can either opt to pay €4.99 a month ($7.0), to call anyone in the entire German fixed line network or pay per call at €0.15 a minute, which is the same price for each SMS.
Activation of the SIM cards is €9.99 per card and internet access is €2.50 a day. KD it will also offer discounted USB broadband dongles and a cheap flat rate monthly access.
It looks like Telefonica O2 is the company being aggressive here in helping Deutsche Telekom’s primary communications rival, and has the network capacity and coverage to make a serious European business out of this, as does Vodafone. It was always assumed that the weakest player in a given European country would partner with the local cable operators in an attempt to undermine the established cellcos and so it has proved both here in Germany and in the UK, where Virgin Mobile sits on the T-Mobile network. That would make Bouygues a natural partner target in France and 3 Italia another for Italy.
The success of Deutsche Telekom in the last few quarters in attracting IPTV customers has probably provide the spur to finally go ahead into mobile for KDG. Prior to that KDG has been busy trying to upgrade its infrastructure to digital and convert customers across from analog TV.
Most of the European cable operators had to be acquired by Private Equity Groups over the past four years, because they lacked the money to pay for the necessary network upgrades. In Virgin Media’s case debt for equity swaps mean that it was 98% owned by investment banks.
Now there is talk of cable operators being forced together and sharing content purchases and creating a European wide Quadruple play option ‘ with mobile the last dimension for them to accommodate. The only real cable based Quad plays in the world are Virgin and Rogers in Canada, but the US cable operators are just a step away with investments in ClearWire, partnerships with Sprint Nextel and in one case a full network build out being scheduled.