Deutsche Telekom revamps phone offers, slashes prices
Friday, September 1, 2006, 13:30
Deutsche Telekom AG, after integrating its T-Online unit almost a year behind schedule, revamped its Web and phone packages and will cut prices of its combined services by as much as 30%. Europe's largest telephone company yesterday introduced three combined telephone and Internet subscriptions, starting at € 35 ($44.84) a month, before the opening of the annual IFA consumer electronics fair in Berlin. The Bonn-based company also offered so-called flat-rate fixed-line packages, charging as little as 4.6 cents a minute for calls to numbers abroad. Deutsche Telekom this month cut its sales and earnings forecasts for this year and next, sending the stock as much as 10% lower in one day.
CEO Kai-Uwe Ricke is seeking to slow a loss of traditional phone lines as customers switch to cheaper Internet technologies and services offered by competitors such as Vodafone Group Plc's Arcor unit. „We hope to be able to put a brake to the loss of customers,” Walter Raizner, the Deutsche Telekom board member in charge of T-Com fixed-line division, said in an interview. „The offer alone of course can't completely stop that, but I'm confident it will be well received by the market.” Deutsche Telekom lost one million traditional phone connections in the first half, and adjusted operating profit from the fixed-line and Web division fell 7.8% to € 2.2 billion in the Q2. Ricke had blamed the line losses on a delay of the company's merger with the T-Online Web unit. The transaction was completed in June.
Under the packages, available from Sept. 18, a customer may pay € 49.95 a month for the most common 2-megabit digital subscriber line combined with unlimited phone calls to fixed-line numbers in Germany, or € 26 less than at present, T-Com said. A comparable offer by Telecom Italia SpA's Hansenet unit currently costs € 44.90. „These measures could lead to lower revenue in the short-term,” said Ulrich Trabert, an analyst at Bankhaus Metzler in Frankfurt, who has a „sell” rating on Deutsche Telekom shares. In the fourth quarter, Deutsche Telekom will add packages of so-called „triple-play” services that combine phone, Internet and entertainment such as television and video on demand, with prices starting at € 66 a month. „We're not about to start a price war and we will not be the cheapest provider on the market,” Ricke said at a press conference. „We will safeguard our freedom to act in a market in which all competitors are experiencing immense price pressure,” United Internet AG, Germany's second-largest Web access provider, Aug. 30 introduced its own triple-play service, offering on-demand movies provided by ProSiebenSat.1 Media AG, Germany's biggest private broadcaster.
Deutsche Telekom this month introduced its television service broadcast over the Internet to coincide with the start of Germany's top soccer league matches. The service is transmitted by a high-speed fiber-optic network in which Deutsche Telekom plans to invest as much as € 3 billion. The company is at loggerheads with German and European regulators over whether competitors should have access to the new network. Ricke has threatened to halt the investments, a move the company says may jeopardize 5,000 jobs. Deutsche Telekom is already cutting 32,000 positions over three years in Germany after fixed-line sales shrank for as many years. Shares of Deutsche Telekom fell 8 cents, or 0.7%, to € 11.39 in Frankfurt. The stock has dropped 19% this year.
Deutsche Telekom's T-Mobile unit, Europe's No. 3 mobile-phone company by customers, said earlier this week it will cut the per-minute price for wireless calls in Germany to encourage customers to spend more. Among packages T-Mobile will start next month is the Relax 1000 plan, which charges € 59 for 1,000 minutes of calls, or 5.9 cents a minute. That's half the lowest rate charged by T-Mobile in its existing Relax offering. Spending by T-Mobile's 14.6 million contract customers in Germany dropped to € 35 each a month in the Q2 from € 38 a year earlier because of lower tariffs and as competitors such as Royal KPN NV's E-Plus unit introduced discount services. Telefonica SA's O2 Germany division said yesterday it plans to start selling a combined wireless and DSL Web service as of Oct. 27, further attacking Deutsche Telekom's market dominance. Vodafone's German unit also announced a Sept. 1 start of its combined fixed, mobile and DSL service, using the fixed-line network of its Arcor unit, Germany's No. 2 fixed-line network operator. (Bloomberg)