Vodafone's acquisition of Liberty Global's operations in Germany will see the group pass incumbent telco Deutsche Telekom to become the market leader of the country's fixed-line services industry. The deal, completed in July, gives Vodafone control of Liberty Global's cable operator Unitymedia. Ampere expects the merged entity to provide services to 18.5m households, with a market share of nearly 34%. This places Vodafone marginally ahead of Deutsche Telekom, which serves 18m households. Unitymedia's cable network does not overlap significantly with the footprint of leading cable operator Kabel Deutschland (acquired by Vodafone in 2013), meaning the acquisition broadens Vodafone's addressable cable household reach to over 70% of German homes.
Vodafone's portfolio will give the group control of more than 50% of Germany's pay TV subscriptions, compared with Deutsche Telekom's 14%. The acquisition also boosts Vodafone's fixed-line broadband market share to over 30% and fixed telephony to above 26%, only a little behind Deutsche Telekom, which holds closer to 40% market share in each of these fixed segments.
The real opportunity for Vodafone - and the threat for Deutsche Telekom - lies with Vodafone's new near-national coverage, and the ability to cross-sell mobile products to its fixed base. Ampere consumer polling indicates that only a quarter of the combined Kabel Deutschland/Unitymedia pay TV subscriber base has a Vodafone mobile contract at present.
For the last nine years, Deutsche Telekom's mobile business has consistently gained market share at the expense of Vodafone, with the incumbent dethroning Vodafone as lead mobile operator earlier in the decade. One of the driving factors for Deutsche Telekom's success has been the rollout of the converged MagentaEins fixed/mobile bundles, which are now taken by more than half of Deutsche Telekom's mobile contract base.
For Vodafone, upselling mobile contracts to the 50% of households with one or more of its fixed products should be a strategic priority, with the objective of stemming, or even reversing, the decline in its mobile market share. Deutsche Telekom now faces a renewed threat from a large, national competitor, in what was previously a steady - if slow - growth market.