Dan Bieler, Research Director Ovum on the German Mobile Outlook:
We predict that in 2005 T-Mobile and Vodafone will continue to account for virtually the entire free cashflow generated by the German mobile market. We do not see how the current market scenario can benefit the long-term cash positions of sub-scale players E-Plus and O2 Germany, and we continue to argue for a tie-up between the two companies.
The arrival of true mobile virtual network operators (MVNOs) in 2005 could undermine the unstable pricing in the German mobile market. This is likely to exert further pressure on ARPUs and margins. Apart from offering their networks for wholesale services, the network-based operators seem complacent about the MVNO threat. Instead, they should consider offering their own 'no-frills' brands.
We expect UMTS to make a slow entry and to gradually reach a tangible momentum in 2005. Once again, significant handset subsidies might provide the only answer to boost a new generation of handsets, thus risking the economic case for 3G. We therefore predict no significant jump of data ARPUs in 2005. In our view, current MMS tariffs are not set at the optimal level to boost data revenues.
Not only are corrosive forces at work in the form of MVNOs and EU-wide regulatory harmonisation, but we predict that IP and potentially even fixed-mobile substitution will make themselves felt in the long term. Although 2004 trends for subscriber growth, APRUs and revenues and margins are likely to continue into 2005, they obscure gradual but fundamental changes that will take place in the mobile market. Today's players should use 2005 to prepare themselves for the inevitable, rather than merely hoping for the 'good old days' to return. Mobile telephony is as much a part of the discussion about when telecoms operators will return to the fold of other utility providers as fixed-line telephony is.
