Deutsche Telekom: strategy update brings little news

Deutsche Telekom has a strategy update and investor day, which unfortunately bring little real news.

Summary:

A. Four key areas.

1. Improve competitiveness in Germany.

• IP-technology.
• Productivity in customer care.
• Savings targets remain: EUR 2.0bn for 2007; EUR 4.2-4.7 mrd for 2010 relative to 2005.
• Broadband for IPTV and triple play:
  Available to 17m homes by year-end 2007. Target 1.5m IPTV-subs by late 2010.
  VDSL (50 Mbps) for HDTV: 50 cities by end of 2008.
  ADSL2+ (16 Mbps) for SDTV: 750 towns and villages.
• T-Mobile:
  Focus on existing products web'n'walk and @Home.
  New products, such as MyFaves (personalisation, proven success in the US)
• Branding:
  T-Home for the home, T-Mobile for on the road, T-Systems for businesses.
  A second brand, to be launched before the summer, for basic products, F/M bundles, low tariffs, young demographics.
  T-Mobile for outside of Germany.

2. Growth abroad with mobile, possibly with acquisitions.

• FMS.
• Data: WiFi, data handsets/terminals, web'n'walk handsets.
• Takeovers, both in existing and new markets.

3. Mobilizing the internet and the Web 2.0 trend.

• Personal & social networking, like mobile blogging.
• Open, multiportal internet access.
• Partnerships.

4. Developing key ICT accounts with a strategic partner.

• International footprint & scale are essential.
• A partner.

B. The planned sale of non-core assets:

1. T-Systems Media & Broadcast
2. DeTeImmobilien and Sireo (real estate)
3. Club Internet and Ya.com (triple play providers in France and Spain)
4. Tower business in Germany (Deutsche Funkturm) and the US (US Towers).
   

Comments:

1. The German fixed network is where the trouble is. Moving to IP and increased efficiency is all fine and dandy, but almost meaningless when the associated cost savings are hard to reap.
2. Germany gave its go-ahead to the VDSL-network, including a regulatory holiday, but the EC started a procedure to hault it. Also, the target of 1.5m IPTV subs looks uninspiring (cf. BT aiming for 2-3m in the mid-term).
3. Will the regulator allow DT to introduce a new F/M convergence brand? I'm not sure about this (over here in the Netherlands, OPTA wouldn't allow KPN to do this, but apparently the German governent is much more lenient on the local PTT).
4. Abroad, DT aims for a purely mobile approach (unlike FT/Orange in the UK and Spain). That makes a lot of sense: mobile markets are larger and more profitable than broadband markets. Acquisitions could be expensive though. Focus must be on Easter Europe and France, where a fourth UMTS license will be auctioned off.
5. T-Mobile is leading the way, with 3UK and Vodafone, in opening it's network for internet access and web 2.0 partnerships. As long as they can do the rebalancing act, that looks OK.
6. The planned sale of Club Internet and Ya.com is not a surprise. It is part of the new mobile focus. Should T-Mobile buy Orange NL, it will sell-on the DSL-network. FT/Orange will not bid for Club Internet (giving it too much market share), but Ya.com certainly makes sense. Similarly, Telefonica will not buy Ya.com but may look at entering France through both Club Internet and the new UMTS license.
7. DT is committed to the ICT-market, which will add to growth. Therefore, no sale of T-Systems, but no acquisition either, as the unit is now looking for a partner.