Summary
While the current state of the overall economy is contributing to the decline in German mobile services revenues it is not the only factor at work.
Analysis
Mobile operators in Germany as elsewhere in Europe are having to accept lower mobile termination charges ( MTRs, a consequence of regulatory pressure that is independent of current economic conditions) which when high and well above cost benefit the revenues and profits of the larger ones among them. New mobile termination rates applicable from 1 April 2009 are €0.0659/minute for T-Mobile and Vodafone, and € 0.0714 for E-Plus and O2, declines of just over 16% for the former and just under 19% for the latter compared to their previous levels. At the same time Germany is a high priced mobile market in which the MOUs (monthly minutes of use) lag well behind even several of its European neighbors, let alone the U.S. Even allowing for distortions in comparisons between CPP (like Germany) and RPP (like the U.S.) countries, the average U.S. customer makes and receives 7 or more times the minutes of calls as their German counterparts. Lower retail prices could perhaps stimulate usage even to the point of overcoming declines in revenues per minute of use, depending on how large elasticity of demand is at the current price levels. No doubt poor economic conditions have contributed to subscribers' perhaps reducing their usage and/or switching (especially prepaid customers) to lower cost pricing packages, where E-Plus in particular has been aggressive. On the basis of the information I have It is not possible to tell how much the factors of lower usage and switching to lower priced plans may have contributed to the overall decline in mobile services revenues as compared to the impact of lower MTRs.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
