At a quarter to eleven on Thursday morning, Deutsche Telekom chief Timotheus Höttges presented his company’s quarterly figures and stressed that he saw no evidence of increased competition in the German telecoms market.
But within less than an hour, his key rival Vodafone sent a clear sign to the contrary. At half past eleven the firm sent out a press release that said it was the only network provider that had managed to boost mobile market share. Its gain of 0.2 percentage points was negligible, but the company trumpeted the rise as evidence of its growing foothold.
And that marks a big change. The German subsidiary of the British company had long failed to invest in infrastructure, meaning its customers increasingly went elsewhere. Since October however, Vodafone Germany’s boss Hannes Ametsreiter has been brimming with confidence and wants to return the company to the top position in the German market.
As part of this drive, he has been pressuring Deutsche Telekom in terms of customer numbers, quality, speed and price. Handelsblatt has looked more closely at the companies’ claims to show who is really winning the race.
“No one invests more than we do in Germany. We act whereas others just talk. ”
In terms of mobile customer numbers it was long clear that Deutsche Telekom had a significant lead over Vodafone. Statistics showed how the British firm had lost customers en masse. However, when Mr. Ametsreiter took up his post in Vodafone’s Düsseldorf headquarters, he looked at the figures closely and realized that the wrong statistics were being used.
It turned out that his company had failed to include customers from third parties and SIM cards that are not in smart phones and tablets. By including these SIM cards, Vodafone actually serves 41.8 million mobile customers in Germany, while Deutsche Telekom has 41.1 million.
But as well as the number of SIM cards, a vital statistic is how much the companies profit from each card. In the second quarter, Deutsche Telekom made around €1.6 billion, or $1.78 billion, a decrease of 0.8 percent on the same quarter last year. Approximately half of its revenues came from data transport, a share which rose by 3.7 percent. Meanwhile, Vodafone’s service revenues in the first quarter stood at €1.5 billion, a decline of 2.1 percent.
Both companies have been punished by declining prices and the abolition of roaming charges, which they factored in this year, ahead of the ban which comes into force next year. Overall, Deutsche Telekom currently makes more revenue but on the key issue of customer numbers, Vodafone wins.
On the issue of quality, for years Deutsche Telekom has relied on a persuasive argument, its high-quality network. On Thursday the company said it planned to offer 75 percent of their customers fast LTE mobile connections. In contrast, Vodafone modernized with an LTE roll-out in Germany as well as the 2G and 3G network which is almost ready.
But the issue of quality was long neglected by the British company, costing it many customers. And these problems have not been solved. In February it was announced that the insurance firm and major Vodafone customer, Allianz, had decided to switch back to Telekom. This speaks to the fact that in terms of network quality, Telekom continues to lead.
The third main area of conflict comes down to speed. Right now, Vodafone’s favorite buzzword is gigabit. Its German chief Mr. Ametsreiter and his team all talk about a “gigabit society”.
Deutsche Telekom continues to talk about super-fast data exchange, but the company is slowed by the burden of an old network. For years Deutsche Telekom’s nationwide telephone network gave it a competitive edge but it is increasingly difficult to keep up with the competition.
The fact is, transmission technology has changed. Today conversations and TV are transmitted as data packets over the Internet, meaning they can be sent along the networks of the former cable television providers. With Vodafone’s purchase of Cable Germany in 2013 for €10 billion, Vodafone can now offer landline packages – using cables which can provide a higher bandwidth than Deutsche Telekom’s copper cable. In response, the latter is planning upgrades worth more than €4 billion.
Vodafone also said in May that it would invest about €5 billion within two years. In terms of cable distribution, it said its technicians have given more than 13 million households 200 Mbit capability.
Deutsche Telekom boss Mr. Höttges defends himself against the accusation that its network is too slow, saying customers focus on how fast their own Internet connections are. In addition, Deutsche Telekom has 500,000 kilometers of fiber optic cable, which allows particularly fast Internet. Vodafone on the other hand has just 50,000 kilometers. “No one invests more than we do in Germany,” said Mr. Höttges. “We act – whereas others just talk.”
However, marketing specialist Mr. Ametsreiter announced in mid-July that Vodafone would expand its 4.5 G network, making it significantly faster than the previous 4G network, better known as LTE. “We now have the fastest mobile network in Germany,” he declared, adding that it was “simply faster, more agile.”
This applies not only to its network, but also company structure. Vodafone has 14,000 employees in Germany while Deutsche Telekom has some 68,000 and is known for delayed decision-making processes which slow the company. So, in terms of pace of service and business style, Vodafone wins again.
When it comes to prices, Vodafone and Deutsche Telecom are engaged in a bitter price war. Although Germany still has a high price level compared to other countries, many managers ask if the current all-out battle, especially on Internet prices, is really necessary. Two competitors have already declared that they do not to want to join in the downward price competition.
Deutsche Telekom boss Mr. Höttges has signalled that his company can still afford a price war. Sales in Germany in the second quarter stood at €5.4 billion, a decrease of 3.1 percent compared to the same period last year. Vodafone sales in the first quarter were €2.6 billion, marking an increase of 1.5 percent. So that’s a win for Deutsche Telekom.
Looking ahead it is also clear that the emerging 5G mobile technology will spark change beyond the telecommunications industry. Experts foresee a breakthrough in areas like networked industry or self-driving cars. Therefore both Vodafone and Deutsche Telekom are pushing 5G research. However, experts highlight one critical point: 5G will have to be linked to wireless networks.
Both companies are expanding their wifi coverage, both in public places and for residential customers. At the end of the day, success will hinge on how quickly the underground cables spread. Although Vodafone is doing well here, the race is still open.
Handelsblatt’s Ina Karabasz writes about IT and telecoms. To contact the author: firstname.lastname@example.org