Vodafone Germany Fighting off Rivals, Big and Small

Vodafone Germany's new CEO, Hannes Ametsreiter, has his work cut out for himself in the fiercely contested German cable-TV and Internet market. It's not just market leader Deutsche Telekom, but also small regional providers that try to snatch the firm's market share.
Vodafone Germany CEO Hannes Ametsreiter would like to play David against his Goliath, Deutsche Telekom.

Vodafone chief executive Vittorio Colao acted quickly after the head of the British telecommunications firm’s German subsidiary resigned in mid-May “because of irreconcilable differences.”

If a top-notch successor to Jens Schulte-Bockum had not been found quickly, a leadership crisis could have thrown the wobbling business totally off-track. Thus executive search firm Egon Zehnder received a rush order to woo a top manager away from the competition.

About two weeks ago, Mr. Colao was able to present his new leader of German operations: Hannes Ametsreiter, previously the head of Telekom Austria. Mr. Ametsreiter will move to Vodafone Germany’s headquarters in Düsseldorf on October 1.

The 48-year-old Austrian is tasked with completing what Mr. Schulte-Bockum began with the purchase of cable television operator Kabel Deutschland: Build an alternative network operator that can offer serious competition to Deutsche Telekom in the areas of mobile phones, Internet and television.

Mr. Ametsreiter must eradicate weak points in the network and marketing and also deal with a new, big problem: Competing providers of Internet connections could soon be granted access to parts of the cable television infrastructure and thereby annihilate Vodafone's competitive advantage.

In the lowlands of the cable-TV network, resistance is rising.

Vodafone is the world’s second largest mobile phone network operator, and it’s seeking to gain control over all cable TV infrastructures in Germany, which is already the British firm’s largest national market by sales.

CEO Mr. Colao has repeatedly met with U.S. media mogul John Malone. The informal talks with the president of Liberty Media concerned the future of his German subsidiary Unitymedia. Vodafone would like to extend its cable TV network, currently in 13 German states, to North Rhine-Westphalia, Hesse and Baden-Württemberg. In those states, Unitymedia is the largest cable operator, with 12.7 million households.

Together with Kabel Deutschland, Mr. Colao envisions having access to the cable TV connections of 28 million households. Vodafone could thereby offer two-thirds of the German population a genuine alternative to market leader Deutsche Telekom and also offer an Internet connection that is twice as fast.

In the world of cable TV networks, however, resistance is rising. Three small providers ― Telecolumbus, Primacom and Pepcom ― control important sections of the cable TV network in several large cities. The firms don’t want to be pushed aside by Vodafone or are seeking at least to push up the purchase price for their networks.

Pepcom from Bavaria with its brand Cablesurf is even going on the counter-offensive. Its subsidiary Kabel & Medien Service, or KMS, is the market leader in Munich, with 324,000 households. Pepcom is also strongly represented in Frankfurt, Nuremberg and Leipzig.

Pepcom's new managing director, Uwe Nickl, has drawn up an ambitious three-year plan together with a big shareholder, financial investor Star Capital. Pepcom plans to grow faster and acquire more Internet customers in 800,000 households provided with cable TV. Revenues are supposed to rise by 9 percent to €137 million, or $151 million, this year.

In order to reach this goal, Mr. Nickl intends to break a business taboo. The cable industry has until now adhered to the unwritten rule that only the company that owns the infrastructure is allowed to offer services to customers. The operators of cable TV networks wanted to remain the sole beneficiaries from the boom in high-speed Internet connections.

But Mr. Nickl wants to open up his cable TV networks to the providers of conventional DSL connections. “We are seeking to use the capacity of our networks faster and better,” said Mr. Nickl, who hopes to accelerate growth by licensing the cable network to Internet providers.

This opens up a new option for DSL Internet providers such as Teléfonica and United Internet. Suddenly the competition being left in the dust by Vodafone could sell Internet connections with a top speed of 200 megabits per second in cities served by Pepcom. That would deprive Mr. Ametsreiter of his most persuasive sales pitch. And with one stroke, part of the expensively purchased cable network would be devalued.

 

This story first appeared in WirtschaftsWoche. To contact the author: [email protected]