The Q411 update of the Germany telecommunications market report provides an overview of the latest developments in the country's mobile, fixed-line and broadband sectors. The report is based on data from the regulator, covering the period to the end of 2010, as well as operator data for the period to the end of June 2011. The report contains data analysis, including, for the first time, on Germany's converged service providers, regulatory updates and our forecasts. Our five-year growth forecasts depict how Germany's mobile telephony market share weighted and how operator monthly blended ARPU, fixed-line telephony, internet and broadband subscriber markets will develop over the next five years.
At the time of writing, all four of Germany's mobile network operators, T-Mobile, Vodafone, E-Plus and Telefónica O2, have released subscriber data for the first six months of 2011 to the end of June 2011. In the mobile sector, the largest change reported by operators was the loss of more than 1mn postpaid subscribers by Vodafone as a result of the renegotiation of a wholesale arrangement that has seen the subscribers transferred to an MVNO. However, this is a one-off change to the mobile ecosystem and not indicative of a trend that will keep on affecting the market. In terms of trends, T-Mobile has continued to lose subscribers, with a net loss of 57,000 subscribers in Q211, with its market share falling to 31.4%. We believe it is continuing to execute a strategy focused on the migration of customers to more valuable postpaid contracts and the development of VAS.
This strategy has left an opportunity open in the prepaid segment that the other operators have benefited from. E-Plus has exhibited the strongest growth, recording 11.5% y-o-y prepaid growth to 14.2mn subscribers, outpacing its 7% y-o-y growth in postpaid subscribers. This strategic focus is as we expected based on E-Plus' lack of suitable spectrum for a full focus on the postpaid and VAS sub-segments of the market. Telefónica O2 has also achieved growth in the prepaid segment with 8.4% y-o-y growth, but this achievement is overshadowed by its success in attracting postpaid subscribers with competitively priced offers. This has led to a decrease in postpaid ARPU of 8.8% y-o-y, although this somewhat counters, it does not negate the positive impact of improvements in subscriber mix.
The operator's financial performance has not only been affected by changes in subscriber mixes and subscriber acquisition drives. In December, Germany's network regulator, the Federal Network Agency (FNA), proposed a 50% cut in mobile termination rates (MTRs). The move aimed to bring the fees in line with European Commission targets, but squeezed operators revenue stream. Among other things, the timing of the regulator's decision has been criticised because it coincides with preparations by the operators to invest in fourth-generation networks. Deutsche Telekom estimates that the cuts to MTRs reduced service revenues in Q111 by EUR57mn.
Following the LTE spectrum auction in May 2010, three of Germany's mobile network operators - Deutsche Telekom, Vodafone and O2 - were awarded new mobile frequencies in the 800MHz spectrum range. Since then, all three operators have begun deploying LTE networks, with a view to extending mobile broadband services to remote parts of Germany. In its Q211 results, Vodafone became the first operator to release figures for number of subscribers, reporting 27,000 LTE subscriptions, impressive growth just over one year after suitable spectrum was auctioned. As noted above, Germany's smallest cellco E-Plus was not awarded spectrum in the 800MHz band, but it was announced in December 2010 that E-Plus had been authorised by Germany's regulator to use frequencies in the 900MHz band for mobile data transmission services. It is understood that E-Plus first plans to deploy a HSPA+ network using the 900MHz spectrum, offering maximum download speeds of 21.6Mbps. E-Plus can also use the 900MHz frequencies to roll out LTE technology, if this does not cause interference with other mobile networks. However, BMI does not believe this compromise puts E-Plus on an even footing, and we therefore continue to believe the operator will have to focus on the less data- and VAS-oriented, lower value sub-segments of the market.
We remain optimistic about growth prospects in Germany's broadband sector on the back of Germany's strong rebound from economic problems. We estimate Germany had 30.721mn broadband subscribers at the end of 2010, equivalent to a penetration rate of 37.6%. We predict the market will grow by about 8.7% in 2011, with penetration expected to rise to around 41% by the end of that year. It should be noted our broadband subscriber forecast for Germany now includes mobile broadband subscribers. These are broadband subscribers who use netbooks, smartphones and USB sticks to connect to the internet wirelessly via a high-speed (3G/HSPA) network. We expect the proliferation of LTE availability to be a key driver of broadband subscriptions over the course of our forecast period.
Germany moved up to seventh position in our BMI's Business Environment Ratings table for Western Europe for this quarter. The country is at the mid-point in our table just behind Spain.

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Executive Summary 7
SWOT Analysis 9
Mobile SWOT Analysis 9
Wireline SWOT Analysis 11
Political 13
Economic 14
Business Environment 15
Industry Business Environment Overview 16
Western Europe 16
Table: Western Europe Risk Reward Ratings, Q411 18
Germany 19
Industry Forecast 21
Mobile 21
Table: Telecoms Sector - Mobile - Historical Data & Forecasts 21
Fixed Line 24
Table: Telecoms Sector - Fixed Line - Historical Data & Forecasts 24
Internet 26
Table: Telecoms Sector - Internet - Historical Data & Forecasts 26
ARPU 29
Table: Telecoms Sector - ARPU - Historical Data & Forecasts 29
Market Data Analysis 31
Mobile 31
Table: German Mobile Market, Q310 34
Table: German Blended ARPU, Q208- Q211 (EUR/user/month) 37
Table: Mobile Contract Wins 43
Mobile Operator Tables 46
Table: Mobile Market Overview 46
Table: T-Mobile 46
Table: Vodafone 47
Table: E-Plus 48
Table: O2 50
Mobile Regional Content 51
LTE-Mobile Broadband 51
The Machines Are Taking Over 53
Table: Smart Meter Race Is On 54
Country Outlook 55
Table: Selected VAS Services 60
Fixed Line 62
Table: Fixed-Line Subscriptions By Operator ('000), Q210 And Q211 64
Table: German Fixed-Line Market (mn) 66
Broadband 67
Table: Wireline Developments 79
Converged Service Operator Data 80
Table: Deutsche Telekom 80
Table: Kabel Deutschland 81
Table: UPC Unitymedia 82
Regulatory Development 83
Table: Germany Regulatory Bodies And Their Responsibilities 83
Table: Enter view or abstract 84
Vendor Profile 95
Aiming To Exploit Fresh Demand For Fibre 95
LANs In Demand 98
European FTTH Venture With Sumitomo 99
Operator Profiles 100
Deutsche Telekom 100
T-Mobile International 106
Vodafone Germany 109
E-Plus 114
Telefónica O2 Germany 118
Competitive Landscape 121
Mobile 121
Table: Regional Mobile Penetration Overview 122
Fixed Line 123
Table: Regional Fixed-Line Penetration Overview 124
Broadband 125
Table: Regional Broadband Penetration Overview 126
Demographic Data 127
Section 1: Population 127
Table: Demographic Indicators, 2005-2030 127
Table: Rural/Urban Breakdown, 2005-2030 127
Section 2: Education And Healthcare 128
Table: Education, 2002-2005 128
Table: Vital Statistics, 2005-2030 128
Section 3: Labour Market And Spending Power 128
Table: Employment Indicators, 2001-2006 128
Table: Consumer Expenditure, 2000-2012 (US$) 129
Table: Average Annual Manufacturing Wages 129
Glossary 130
Table: Glossary Of Terms 130
Methodology 132
Table: Key Indicators For Telecommunications Industry Forecasts 132
Telecoms Business Environment Ratings 133
Table: Ratings Indicators 134
Table: Weighting Of Indicators 135
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