Deutsche Telekom’s mobile unit T-Mobile has announced aggressive growth plans.
Deutsche Telekom’s mobile subsidiary T-Mobile, the world’s second largest mobile operator, told the Financial Times at the weekend that it will use acquisitions and aggressive price cuts to take on Vodafone’s dominance of the European mobile telecoms market.
At first sight, it looks like a bizarre move. Other European mobile operators are moving away from acquiring market share and new market presence at all costs. Vodafone has said it will not expand into any more new territories, while operators across Europe have been cutting handset subsidies, trying to build average revenue per user rather than sheer numbers.
The focus in the mobile industry is shifting from national to global. Vodafone and Orange can offer pan-European coverage, using the same brands across the continent and offering price plans that allow calls to be made at a flat rate from any of the countries where they have networks. But T-Mobile only has operations in Germany, Austria, the US and the UK, as well as a share in Dutch operator Ben.
T-Mobile’s US operation, unlike its major rivals, uses the GSM standard prevalent in Europe. It is almost certain to upgrade to the W-CDMA standard for 3G, which will be used in Europe and most of Asia. This should leave T-Mobile in a better position than any of its rivals to offer transatlantic roaming services.
However, T-Mobile must build up its European coverage to maximize this potential advantage. It does not currently operate in France, Italy and Spain, and entering these markets from scratch is unviable. There is an obvious acquisition target: Telecom Italia Mobile is strong in Italy and Spain and has some operations in France.
While it might carry traces of deja vu, since parent companies Deutsche Telekom and Telecom Italia almost merged in 1999, a merger of their mobile operations would be a good move. Going it alone makes less sense for either company, and their fit is near perfect. All that needs to happen first is T-Mobile’s long-awaited IPO.
