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T-Mobile NL: becoming a smart attacker or just window dressing?

Wednesday 16 December 2015 | 12:34 CET | Market Commentary

T-Mobile Netherlands is working to break out of its status as mobile-only operator, or 'smart attacker', as its parent company Deutsche Telekom calls it. First it announced new services for the business market, with its Cloud & Clear offering developed with Mitel, then it partnered with Eurofiber for business fibre services. The operator has now announced plans to market 4G as a home broadband service and to launch next year an OTT TV service called Knippr. The company is moving beyond its traditional market of mobile services for consumers. The question is whether it's too little, too late. 

Asset-light

The new services are aimed at developing new sources of revenue, both from services (Cloud & Clear and Knippr) and connectivity (Eurofiber and 4G). It's taking an asset-light approach, relying in part on third parties. The margins will be low, especially for Knippr. Content is expensive, and the TV market is competitive. T-Mobile is positioning Knippr as a replacement for traditional TV subscriptions, and not an add-on. It will compete on price, using an 'a la carte' model so customers pay only for the channels they want (pricing and channel details haven't been announced yet). The question will be whether the service can set itself apart from the rest of the market.

Traditional telecom operators are several years behind the pioneers of the OTT market, such as WhatsApp and Netflix. They're now discovering they can enter this market on their own, although this comes with the risk of cannibalisation. Knippr though is no threat to existing services at T-Mobile, as the company's not yet present on the TV market and will act as an aggregator. The company is essentially admitting that mobile alone is not enough in the current market climate: TV also needs to be offered on the consumer market.

T-Mobile's strategy is to some extent going against the current trend. Vodafone also wanted originally to take an asset-light approach to entering the fixed market, but has since changed tack. Now it's acquiring cable operators and rolling out its own FTTH networks. In the Tele2 model, 'asset-light' is only the first step in the evolution to a 'facilities-based' operator. MVNOs are another example, where it's very difficult to generate the scale needed to turn a profit while relying on third-party infrastructure.

Takeover

All this occurs with the backdrop of continuous speculation over possible takeovers. Ziggo is fixed-only, and Vodafone and T-Mobile don't have fixed networks. Without a doubt this will at some point lead to a merger, with either Vodafone or T-Mobile being left without their own fixed network. Are T-Mobile's latest efforts a sign that it's resigned to letting Ziggo and Vodafone pair up? Or is it more window dressing, in order to make the company more attractive to potential bidders?

Whatever the case, the telecom market is largely being displaced. As a late arrival, T-Mobile will find it difficult building significant market share in its newly chosen market segments. 



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