Deutsche Telekom’s familiarly reticent results do not paint a picture of an operator currently in the throngs of opposing a mega deal after regulators recently green lighted the deal for Vodafone to buy Liberty Global’s cable assets. Nor does its second quarter filing make much about the M&A activity across the Atlantic with its US holding merging with Sprint in a market-altering deal.
This was despite the fact that T-Mobile USA remains a star. With the T-Mobile Sprint deal pending regulatory approval, which DT expects to arrive in Q3, the US company once again raked in subscribers from competitors – onboarding 1.75m to break 83m mobile subs. T-Mobile must be getting bored of breaking records, recording more than 1m net subscriber additions for the 25th consecutive quarter.
On the finance side, T-Mobile US revenue rose 5% to $11bn on EBITDA of $3.2bn, up 6%, while Deutsche Telekom net revenue was up 7.1% for the second quarter to €19.66bn ($22bn).
The German giant’s Q2 results do, however, show a European video business which performed steadily in the second quarter with subscriber gains totaling 64,000, of which 58,000 came in its native Germany where its footprint grew to 3.48m MagentaTV customers.
Deutsche Telekom put progress in its broadband and TV operations down to the large-scale network build-out using fiber optic lines (FTTH, FTTB, and FTTC), in particular in Greece and Hungary. As a result, the number of IP lines increased by 8.0% to 8m at the end of Q2, primarily thanks to the migration from traditional PSTN lines to IP technology.
Broadband lines increased by 28,000 in Germany to 13.63m, of which just over 7.9m are now on optical fiber, growing by a healthy 304,000 in the last quarter. Outside Germany, the broadband base grew by 62,000 to 6.54m while the non-German video subscriber footprint – across IPTV, cable and satellite – increased by a minimal 6,000 to 4.9m, covering Greece, Romania, Hungary, Poland, Czech Republic, Croatia, Slovakia and Austria.
But there is change coming. Deutsche Telekom notes that its focus is shifting to furthering the development of convergent offerings such as MagentaTV with exclusive access to a wide range of additional content, as well as TV lines and fiber optic lines.
It says pursuing new paths in marketing has been driven by the persistently challenging fixed-network market, primarily owing to aggressive pricing offers of competitors. As stated in our opening gambit, DT wants to overturn the European Commission’s contentious decision allowing Vodafone to acquire Unitymedia, and by citing this “challenging market” DT is most definitely suggesting this new cable powerhouse in Germany should not be given the go-ahead.
Ownership of Unitymedia gives Vodafone control of 80% of the cable market and therefore close to 50% of the broadband field. In video, Unitymedia has over 6m basic cable subscribers, while Vodafone has approaching 8m, so the combined total is 14m. By comparison, Sky Deutschland has 4.8m video subscribers and as mentioned Deutsche Telekom has approaching 3.5m in Germany.
But DT also had some OTT video moves making headlines this week. After years of continued controversy surrounding StreamOn, the operator’s zero-rating video streaming service, the Federal Network Agency and Deutsche Telekom finally agreed to lift StreamOn’s bandwidth limit.
In a recent ruling, the Münster Higher Administrative Court confirmed that the Federal Network Agency’s orders regarding the optimization of data traffic in connection with internet access services must be followed for the time being. This includes the obligation to also make the services available within the EU.
“In consultation with the Federal Network Agency, we will modify the product pursuant to the legal requirements. Nevertheless, the Cologne Administrative Court will review in separate principal proceedings whether the steps to optimize data traffic as well as the restriction of the service to Germany are compatible with the EU’s net neutrality rules,” stated DT.
Less than a month ago, DT was ordered to make fundamental changes to StreamOn but without publicly specifying what. We suspected it would be to eliminate the throttling element, whereby video quality is reduced to 480p when the 1.7 Mbps bandwidth limit is reached, and we were bang on. Yet we continue to uphold the opinion that 480p is sufficient for streaming content to smartphones and StreamOn was designed as an intrinsically positive initiative enjoyed by some 2m DT subscribers.