Telefónica Deutschland CFO: We have changed the market in Germany forever

Telefónica Deutschland's CFO Rachel Empey said the merger of the operator with E-Plus not only sparked a wave of other mergers in the European telecoms sector, but also changed the telecoms market in Germany "forever" after bringing together the two smallest players to form a stronger competitor.

Empey said the market's two former "challenger" operators had faced the same problem before the merger took place. Although they had a market share of only around 15 per cent apiece, the companies both had to maintain a similar infrastructure to market leaders Deutsche Telekom and Vodafone Germany, which each had a share of around 30 per cent.

"This merger therefore also came as no surprise for the market," said Empey in an interview for Finance Magazin.

Following the acquisition of E-Plus from its former Dutch parent KPN, Telefónica Deutschland is now the largest mobile operator in Germany by subscribers. According to the 2014 market report from regulator Bundesnetzagentur, the company has a 37 per cent share of the market with more than 42 million subscribers. Telekom and Vodafone Germany have shares of 35 per cent and 28 per cent respectively.

Looking ahead, the next major task for Telefónica Deutschland will be to participate successfully in Germany's next spectrum auction. Starting on May 27, a total of 270 MHz of spectrum from the 700 MHz, 900 MHz, 1500 MHz and 1800 MHz bands will be auctioned.

For Empey, the challenge is to maintain a financial equilibrium, ensuring that the operator has the financial flexibility to buy the spectrum it needs while also continuing to support the ongoing integration and restructuring process.

As things stand, Telefónica Deutschland is in a reasonably good financial position. The company recently reported a "solid set" of preliminary results that were slightly ahead of expectations for the first quarter of 2015. Revenue in the first three months of the year increased 2.9 per cent year on year to €1.9 billion ($2.1 billion), while underlying operating income before depreciation and amortisation (OIBDA) grew 5.7 per cent to €378 million.

At the same time, the German mobile sector as a whole faces the ongoing challenge of maintaining network investments in the face of declining revenue. The Bundesnetzagentur report noted that while the industry is investing like never before, overall mobile revenue fell slightly from €26.22 billion to €26.04 billion last year.

For more:
- see this Finance Magazin article (in German)
- see this Telefónica Deutschland release (in German)
- see the 2014 report from Bundesnetzagentur (in German)

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