Wednesday, January 21, 2015

Deutsche Telekom to Invest US $27 Billion in Network

Deutsche Telekom, Europe’s largest telecommunications company, will spend €23.5 billion (US $27 billion) over the next five years on its infrastructure in Germany, including mobile and fixed networks and small cells, according to CEO Timotheus Hoettges, speaking during an interview at the Digital Life Design conference in Munich on Sunday. “We can’t start investing and then suddenly stop,” Hoettges said. “Building networks is what we know how to do best—we’ll leave making apps and creating services to others.” The investment represents an increase in spending over the last five-year period; from 2010 to 2015 Deutsche Telekom budgeted €23 billion. Details of the long-term financial plan will be disclosed at an investors’ meeting in February.

Deutsche Telekom is playing to its strengths by continuing to invest heavily in network infrastructure in its core home market and by increasing that spending over the next five years. This long game is a wise strategy, we believe, in light of the challenges the German giant faces from its major competitors, Vodafone and Telefonica. Having the best network in the country is the best way to compete, and driving one’s competitors to spend more money to beef up their own networks would also be to Deutsche Telekom’s advantage. Furthermore, concentrating on providing fast speeds and broad coverage is a good idea because once they are in place, the best deals with partners for value-added services and content will be forthcoming. For a company like Deutsche Telekom, concentrating on “making apps and creating services” at the expense of network development would be putting the cart before the horse, as CEO Hoettges clearly realizes. The “others” to whom he referred can easily become partners at the appropriate time.

The above item appeared in a recent issue of Tarifica's "The Story of The Week", a weekly report that analyzes noteworthy developments in the telecoms industry from around the world. For past issues or to learn more about The Story of The Week or to contact the Tarifica Research department:

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