Summary
Increased penetration in the German market is mostly caused by MVNOs on the E-Plus network. These are price-fighters which lead to lower average prices in the market and is hurting the big MNO margins.
The growth in mobile internet traffic is not leading to big increases in data ARPUs for MNOs. Flat-fee data plans are great for heavy users, who are basically getting more speed and data for a lower price.
Analysis
The last few years, E-Plus has been very successful in the German market in allowing MVNOs on their networks. These MVNOs as VybeMobile, Aldi, Base, AY Yildiz, Simyo and Blau.de focus on niche markets, as youngsters, shoppers, music adicts, value consumers and ethnic minorities. Quarter-on-quarter E-Plus's market share has slowly, but surely been increasing, mainly due to these MVNOs. Penetration is up to 130% with a large group of consumers having multiple sim's. This means their mobile spending is being split between multiple providers, lowering their ARPUs. Consumers are become more and more 'mobile adults', meaning they swop sim's depending on the specific call they want to make (different provider for international calls, for family/friends, for the weekend, for texting, etc.). I.e. increased competition and price-consciousness lead to contraction.
In addition to the regulatory pressure on roaming tariffs and terminating rates, mobile internet is not really leading to higher ARPUs. 4 out of 5 Germans are not using the mobile internet. Those that do are the innovators. They are taking off flat-fee data plans with high-end phones. This leads to higher traffic, i.e. higher costs for the operator, whereas the flat-fee data plans give these heavy-users a lower price than before. The applications which consumers purchase hardly give the MNOs incremental revenues.
MNOs must look into opening new revenue streams as mobile advertising. E-Plus does so.
Tarik Fawzi consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
