Vodafone steps up global multi-play strategy with German VDSL deal

Tools

Vodafone Germany inked a deal with Deutsche Telekom to allow the mobile operator to use the German carrier's VDSL network for the launch of new high-speed broadband and IPTV services.

Vodafone said the agreement, which is subject to approval by the German regulator Federal Network Agency, marks a significant further expansion of its strategy to offer integrated fixed and mobile services in European enterprise and consumer markets.

Vodafone Portugal said on Thursday it will double the size of its fibre-optic network to cover 1 million homes by 2015. In March the company signed an agreement with Orange Spain to build a new fibre to the home network, while in the UK it acquired Cable & Wireless Worldwide last July.

"Our agreement with Deutsche Telekom will greatly enhance our ability to offer our German customers a range of competitive, high-speed broadband and TV services, in addition to our industry-leading mobile services, in line with our broader Europe-wide strategy," Philipp Humm, Vodafone's CEO for Northern and Central Europe, said in a statement.

Vodafone Germany already has a fixed-line offering in Germany following its acquisition of Arcor in 2008, but the deal with Deutsche Telekom will allow it to offer its customers connection speeds of up to 50 Mbps, which will rise to 100 Mbps once DT has deployed vectoring technology on its VDSL network, as well as Vodafone's own on-demand and broadcast IPTV services.

The deal with Deutsche Telekom also caused a fall in the share price of Germany's largest cable operator, Kabel Deutschland, because Vodafone Germany will have less need to buy cable assets, Bloomberg reported. Vodafone Germany has considered making a bid for Kabel Deutschland, but the deal with DT will now give the company more time to build up its services.

"This agreement between Vodafone and Deutsche Telekom makes a takeover of Kabel Deutschland…unnecessary," Jochen Reichert, an analyst at Warburg Research, told the Wall Street Journal.

Vodafone Germany and DT have also agreed that a new, more advanced "Layer 2" (Ethernet-based) bitstream product will be made available by DT to Vodafone from 2016, which will allow an even greater level of differentiation and control over the design and delivery of the services that Vodafone offers to consumers and enterprise customers.

The ability to offer multi-service bundles of fixed and mobile voice and data services is increasingly being viewed as an important strategy for operators to retain customer loyalty and fight against declining revenue from traditional mobile services such as voice and texts. Traditional mobile operators are also facing an increasing threat from cable and telecoms operators that are tagging mobile plans onto their existing triple-play offers of TV, phone and broadband services.

In Spain and France, for example, quadruple play is now a major trend with most operators offering a combination of TV, fixed voice and broadband and mobile voice and data services. Leading examples of this type of service include Movistar Fusion in Spain and Orange Open in France.

Vodafone, which only a few years ago was focused on a mobile-only path, is now clearly embracing the multi-play trend. In Germany, Telefónica's O2 Germany also recently announced that high-speed data and converged services would be at the heart of its future strategy, as all Germany operators fight to maintain their positions in a hard-fought market.

For more:
- see this release
- see this Bloomberg article
- see this WSJ article (sub. req.)
- see this Reuters article

Related Articles:
Vodafone Germany to cut 500 jobs as competition bites
Vodafone's Colao: We don't need to sell Verizon stake to bolster European markets
Report: Kabel Deutschland will not oppose Vodafone takeover
Report: Vodafone could make bid for Kabel Deutschland within days
Report: Vodafone preps takeover of giant cable operator Kabel Deutschland