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Wireless

German operators need spectrum for LTE subscribers, data growth

Wednesday 22 July 2015 | 10:51 CET | Background

Non-voice revenues (data and messaging) amounted to more than 50 percent of mobile service revenues in Germany in Q1 2015, for the second quarter in row, according to Telecompaper's quarterly data report for the German mobile market. Non-voice revenues grew by 2.4 percent during the first quarter, which was not enough to compensate for a 6.1 percent decrease in voice revenues. The three mobile operators, Telekom Deutschland, Telefonica Deutschland and Vodafone Germany, ended the quarter with together more than 5 million LTE subscribers. Telekom had the most, followed by Telefonica and Vodafone. At the end of the first quarter, 14.8 percent of all mobile subscribers in Germany were LTE customers (with LTE device and LTE tariff). The growth in data and need for spectrum to facilitate that growth was reflected in the recent German multi-band spectrum auction, which ended in June with a total yield of EUR 5.08 billion. Despite having only three participants, the auction yield was around EUR 3.6 billion higher than the minimum bids set by German network regulator BNA.

Non-voice revenue continues growth, not enough to offset voice decrease

In the first quarter of 2015, German mobile operators reported non-voice (messaging plus data) revenues of EUR 2.29 billion, 2.4 percent more than in the fourth quarter of 2014. In the same period, total voice revenues decreased by 6.1 percent to EUR 2.24 billion, leading to a 2.0 percent drop in total mobile service revenues in Q1 to EUR 4.53 billion. The figures are based on Telecompaper’s quarterly Excel sheet for the German market.

Non-voice's share of total service revenues was over 50 percent for the second consecutive quarter, as both Telefonica and Telekom Deutschland reported non-voice at 51 percent of their services revenues. Vodafone’s estimated non-voice share remains just below the 50 percent mark, but has been growing steadily and is expected to pass 50 percent during the second half of this year.

Very high yield from spectrum auction

On 19 June, the German multi-band spectrum auction ended after sixteen days of bidding with a yield of EUR 5.08 billion. As expected by Telecompaper, the auction at first focused on the 900 MHz and 1800 MHz spectrum where bidding was fierce on all auction days as all operators need that spectrum to continue their current operations. Vodafone won five blocks of 2x5 MHz in the 1800 MHz band, Telekom got three and Telefonica won two. For the 900 MHz band, the outcome was more equal, with Telekom getting three blocks and Vodafone and Telefonica both acquiring two blocks.

For the new spectrum on sale, Vodafone and Telekom were the only bidders for the 1,500 MHz band, but both were very keen to win the frequencies, leading to continuous bidding during the whole auction period. At the end of the auction, each operator won four blocks of 5 MHz. The other new spectrum was in the 700 MHz band, for which Telecompaper expected no real battle as the rules supported only three participants obtaining spectrum for prices close to the reserve bids. This was the situation until Vodafone started to increase its bids for the 700 MHz spectrum on the second to last day of the auction. This led to a final tally of EUR 1 billion for the band, or EUR 550 million more than the reserve price set by network regulator BNA. Each operator ended the auction with two blocks of 2x5 MHz spectrum.

Spectrum needed for growing LTE users

Although the auction yield was perhaps unnecessarily high, especially for the 700 MHz band, the operators will need the spectrum in order to support quality LTE service for their customers. All three operators are reporting growing LTE customer bases.* Telekom Deutschland had 6.422 million LTE customers at the end of March 2015, growing almost 85 percent compared with 3.472 million at the end of May 2014. Telefonica had 5.146 million LTE customers, up from 464,000 a year earlier. Vodafone Germany reported around 5 million LTE customers in Q1 2015. The total LTE customer base amounted to 16.57 million at the end of March 2015, which is 14.8 percent of German active Sims. The total mobile customer base decreased by 3.3 percent to 112.32 million.

Telefonica Deutschland had the largest customer base, after adding 54,000 new users during the first quarter. It ended the quarter with a market share of 37.6 percent. Number two Telekom Deutschland gained 212,000 customers during the first quarter to end March with a market share of 34.9 percent. Vodafone was the smallest mobile operator in Germany, after losing more than 500,000 customers during the quarter and ending Q1 2015 with a market share of 27.5 percent. The drop at Vodafone was mostly due to disconnecting inactive prepaid customers. 

*Telekom Deutschland and Telefonica Deutschland report customers as LTE customers when they have a LTE device and LTE tariff. Vodafone Germany does not provide a precise description.



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