Open letter to Deutsche Telekom CEO – What happened to TV?

Back in March 2014 when he took over, new CEO of Deutsche Telekom Timotheus Höttges, promised that his company would reach 10 million TV customers by 2017. He did suggest that this was “TV across all screens,” which includes the TV, tablets, or a laptop, although he never mentioned phones. A peek at its figures, out this week suggests that he has given up on this target.

Here we are in 2017 and the growth in TV over this time last year is around 340,000 or 5%.

Quite clearly something has gone wrong with his calculation and his plans. We have tracked video at Deutsche Telekom for years and it promises to overtake Orange as the 6th placed pay TV operator in terms of the number of homes, if not in revenues, sometime soon. The leaders are of course Liberty Global and Sky with Vivendi, Orange and Vodafone next in line, then Deutsche, then a long drop to someone like Cyfrowy Polsat, on 4.7 million which only operates in a single country, Poland.

In broadband, Deutsche has grown from 17.8 million to 18.5 million over 2016, a rise of some 700,000 more than double that of pay TV, but actually that’s a rise of just under 4%, with some 12.9 million of them in Germany and its other large markets over 1 million are all incumbents telcos it has taken over in Romania, Hungary and Greece.

But despite this, Deutsche Telekom reported 2016 revenues up 5.6% to €73.1 billion, with net profits down 17.8% to €2.7 billion and capex rising by 1.3% to €11 billion. Growth in revenue for the last quarter however was up at 9.4% to €19.5 billion and it will now start a new segment of investments which will include T-Mobile Netherlands, Deutsche Funkturm and Deutsche Telekom Capital Partners, as well as the equity investments in BT, Scout24, and Stroer.

So, what is driving all this revenue? A rise of 25.6% in revenue at T-Mobile US to €9.4 billion, with the rest of the operation down and no mention of how much of this was brought on by currency fluctuations.

To us this just shows what a weak underbelly US mobile operators have, and how a determined challenger can take huge market share off AT&T and Verizon. The US MNOs are effectively pampered by protectionist US policy. Wait until the cablecos move into cellular.

Meanwhile what about those TV numbers? Well we know that Deutsche Telekom introduced OTT apps around a year ago, in Germany, and in other markets before that, but these are perhaps not yet broken out separately from mobile revenue. How long before Deutsche suddenly announces that it has 3 million of these already and has magically reached its 10 million target. Sometime this year we imagine?