Good Reception

Discount Carrier Congstar Carves Out a Strong Presence in the No-Frills Mobile Market

You want Congstar's Martin Knauer? You got him. Source: DPA
Wanna good deal? Then speak to Congstar's Martin Knauer.
  • Why it matters

    Why it matters

    Deutsche Telekom long hesitated to start a discount brand, fearing it would cannibalize its premium business. But Congstar’s success has sparked a rethink in strategy.

  • Facts

    Facts

    • Cologne-based Congstar is averaging 30 percent annual growth and accounts for almost 10 percent of the SIM cards used on the Telekom network.
    • The discount provider is now turning its attention to contract customers and offering better customer service.
    • Deutsche Telekom considers Congstar not a subsidiary, but a second brand to complement its other business lines.
  • Audio

    Audio

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At first, they were greeted with weary smiles or total disinterest, but mobile telephone discounters have found a lucrative niche and turned it into a smashing success. Brands such as Alditalk, Blau, Fonic and Simyo are now widely familiar to German consumers looking for mobile bargains.

Yet just seven years after its launch as a no-frills service, driven by the advertising slogan “You want it. You got it”, Congstar is among the leaders of the low-priced pack.

“A few weeks ago, we were number three among the discounters,” said Martin Knauer, managing director since June 2011. Congstar has attracted about 3.4 million customers in Germany, who make calls and surf the Internet on the network of parent company Deutsche Telekom, but at significantly more favorable rates.

With annual growth averaging 30 percent, the Cologne-based firm has made a name for itself against more established rivals in the intensely competitive low-cost cellphone sector. In the most recent quarter, it was the second-tier brand that boosted the growth of T-Mobile International, the holding company for Deutsche Telekom’s subsidiaries outside Germany. A recently-completed sponsorship with Hamburg’s popular second-division soccer club FC St. Pauli is expected to increase awareness of the Congstar brand ever further.

In contrast to its parent company, Congstar focuses on young, price-conscious customers.

“Almost 10 percent of the SIM cards used on the Telekom network are registered with the Congstar brand,” said Mr. Knauer. “Today, Congstar has a much more pronounced status within Telekom as the second brand.”

In contrast to its parent company, Congstar focuses on young, price-conscious customers. Since April, Congstar has been selling its mobile products in Telekom retail shops.

“This is not a substitution, but an additional business,” Mr. Knauer said.

The launch was anything but smooth when the former chief executive of Telekom, René Obermann, introduced the discount provider in 2007. Large network operators had serious reservations about establishing second brands, fearing they would only cannibalize customers from the parent company.

Yet Deutsche Telekom faced a huge problem. Discounters controlled by rival E-Plus were becoming more popular with the public and increasingly aggressive in their pricing. Mr. Obermann hoped Congstar would bring customers back. After a rough start, his strategy is bearing fruit, even as Congstar directs its focus more toward contract customers.

The price-conscious segment is currently fueling the company’s growth, but the discount mobile business is always a challenging environment and it’s becoming even more crowded with new players. According to telecommunications experts,  the discount sector accounts for about 30 percent of the mobile market, but more than 50 companies are competing in that arena, aggressively lowering prices in an effort to wrest away a larger share of customers.

And that means even though Congstar is currently enjoying its status as one of the nation’s top discounters, retaining that status will only get harder.

DPA contributed to this story.

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