Mobile firm predicts German consolidation

The owner of a Dutch mobile telecommunications company has predicted that the German mobile phone market is on the brink of...

The owner of a Dutch mobile telecommunications company has predicted that the German mobile phone market is on the brink of consolidation, where only three of its six mobile telephony operators would remain.

"There will, no doubt, be consolidation in the German market and we think that we can play a pivotal role in that," said Ad Scheepbouwer, chairman and chief executive officer of Dutch telecommunication company Koninklijke KPN, the owner of Germany's third-largest mobile operator.

T-Mobile International and Vodafone Group dominate the German market, holding about 78% of the market between them.

KPN's E-Plus Mobilfunk claims to have a market share of between 13% and 14%, while the remaining 8-9% is split between VIAG Interkom, Mobilcom and Group 3G UMTS (operating under the brand name Quam)..

"The German market can't handle more than three players. There is room for a third operator with a 20% to 25% market share next to T-Mobile and Vodafone. I think we are the only one to be that player," Scheepbouwer said.

Scheepbouwer's call for consolidation is premature, said Bernt Ostergaard, research director with Giga Information Group.

"Consolidation should only occur when you know that there is not enough room for all players. We don't know yet what the 3G [third-generation] service model will be. So how can you say that there is no room if you don't know what the room is?" he said.

"I don't see a limit for three operators, there could very well be four or more. If you can build a business case then you can build a network."

Speculating on what competitor E-Plus could hook up with, Scheepbouwer said that mm02, the UK parent of VIAG Interkom, "has a good position in the U.K. and Ireland, but not in Germany", and that mm02 is "a prey for whoever they want to be a prey for".

VIAG is the fourth largest German mobile operator.

Ostergaard said that if an operator were to be snapped up by another or go under, it could also be E-Plus. The KPN subsidiary just launched I-mode, a mobile Internet service imported from Japan.

"There is an equal chance that E-Plus will go away. The gamble with I-mode is a very high stakes gamble. If I-mode does not work for E-Plus, then KPN will no longer be able to afford it," Ostergaard said.

There is one prerequisite for mergers or acquisitions to happen, warned Scheepbouwer. The German telecommunication regulator has to relax the rules for 3G licences, he said.

Two years ago, operators spent fortunes buying licences to build 3G networks, but today those licences are blocking the much-needed consolidation, according to KPN.

"The regulator is not putting in the right ingredients to make consolidation possible. At the moment, the only option is to give the licence back and find later that it has been sold for next to nothing," said Scheepbouwer, adding that he hopes the rules will be relaxed after the German national elections in September.

Giga's Ostergaard does not expect any changes in the licence terms. The regulator has made it very clear that it is not budging, he said.

Nobody at Regulierungsbehörde für Telekommunikation und Post (the German Regulatory Agency for Telecommunication and Post) was immediately available for comment.

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