German mobile service revenues drop 5% in Q1 2013, hurt by MTA cuts

Thursday 20 June 2013 | 15:04 CET | Background

The number of mobile customers in Germany decreased by 0.5 percent or 532,000 year-on-year in the first quarter to 112.69 million at the end of March 2013. The mobile service revenues for the German market decreased by 5 percent compared to the fourth quarter of 2012 to EUR 4.72 billion in Q1 2013, hurt by lower MTA fees which lead to an 8 percent drop in voice revenues. Non-voice revenues also fell by 1 percent.

Mobile connections drop 0.5%, Vodafone loses most due to prepaid

The German mobile network operator market consists of four operators (Telekom Deutschland, Vodafone Germany, O2 Germany and E-Plus). In October 2012, O2 Germany’s parent Telefonica listed slightly more than 23 percent of Telefonica Germany’s shares on the German stock market, raising EUR 1.5 billion. Following the IPO, market rumours of a possible cooperation with KPN’s German subsidiary E-Plus continued to surface, but in May 2013 Telefonica Germany’s CEO ruled out a merger in the near future.

In the first quarter of 2013, the German mobile market lost more than 530,000 customers or 0.5 percent year-on-year, to reach a total 112.69 million lines at the end of March. The addition of 2.91 million postpaid customers was offset by a loss of 3.44 million prepaid customers. 

The decrease in prepaid was caused by Vodafone Germany changing its definition for active customers, leading to a 19.4 percent annual decrease in its prepaid base, from 20.95 million in Q1 2012 to 16.89 million in Q1 2013. Telekom Deutschland's prepaid base was stable, E-Plus added 3.6 percent more customers, and O2 won 0.6 percent. 

All operators reported annual growth in postpaid customers, with Telekom leading with a gain of 10.5 percent or 1.897 million net additions. O2 Germany followed
with 7 percent growth or 672,000 net additions, and E-Plus added 4.3 percent or 324,000. Vodafone was only able to add 12,000 new postpaid customer year-on-year, equal to 0.1 percent growth. 

At the end of the quarter, Telekom Deutschland was the largest MNO in terms of customer numbers with a market share of 32.8 percent, growing by 1.8 percentage points year-on-year. Vodafone lost its top position, going from 32.2 percent in Q1 2012 to 28.8 percent at the end of March 2013. E-Plus stayed in third place with a market share of 21.3 percent, adding 0.9 percentage points year-on-year, and O2 Germany followed with 17.1 percent, up by 0.7 percentage points year-on-year.

Figure 1: German mobile connections per MNO (x millions) at end-March and quarterly service revenues per MNO (in billions of euros). Sources: company annual reports, Telecompaper estimates.

Service revenues decrease 3.3 percent year-on-year to EUR 4.72 billion in Q1 2013

German mobile service revenues (excluding M2M for O2 and MVNOs for Telekom Deutschland and Vodafone) amounted to EUR 4.72 billion in the first quarter of 2013, down by 3.3 percent or EUR 163 million from EUR 4.88 billion in Q1 2012. The decrease was mainly caused by reductions in MTA fees by the German network regulator BNA in November 2012. The termination rates dropped from between EUR 0.0336 and EUR 0.339 per minute to EUR 0.0185 per minute on 1 December 2012 and will fall again to EUR 0.0175 per minute from 1 December 2013. The MTA fees could be cut further, as the European Commission has asked the BNA to reconsider the calculation method.

The cut in MTAs contributed to a drop in voice revenues of EUR 266 million or 9.4 percent year-on-year to EUR 2.568 billion in Q1 2013. This could not be offset by an increase of EUR 102 million or 5 percent in non-voice revenues to EUR 2.149 billion. 

Vodafone remains largest MNO in revenue terms, despite customer losses

Excluding the negative MTA effects, Telefonica was the only operator to report year-on-year service revenue growth, adding 0.5 percent. Telekom Deutschland reported that excluding the MTA cut, its service revenues decreased by only 0.1 percent year-on-year, while Vodafone saw its underlying service revenues drop 0.5 percent, blaming increased price competition. E-Plus saw underlying revenues (excluding MTA) drop 2.5 percent, citing increased competition in the prepaid ethnic segment and the continued impact of its customer optimization processes.

Despite the customer losses and underlying service revenue drop, Vodafone is still the largest mobile operator in terms of service revenue, with a market share of 34.8 percent in Q1 2013, up by 0.1 percentage point year-on-year. Telekom Deutschland is closing in with a 34.5 percent market share in the latest quarter, after winning 0.5 percentage points year-on-year. O2 Germany passed E-Plus to become the third largest MNO based on revenues with a share of 15.5 percent, stable compared with Q1 2012. E-Plus ended Q1 2013 with 15.1 percent of revenues, losing 0.6 percentage points year-on-year.

The above figures are based on Telecompaper’s database on the German mobile market, which is available for purchase. For more information, click here.

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