Industry Trend Analysis - Drillisch To Face Two Competing Pressures As It Moves Upmarket - AUG 2017


BMI View: Drillisch will have pressure from two sides as it attempts to become an upmarket player. Despite a move towards premium services, prices have stayed and will remain low due to the presence of no-frills players, while the player does not have the flexibility of its main three rivals, each owning their own mobile network.

Drillisch is planning to become a more upmarket telecoms player, following its merger with United Internet's 1&1 subsidiary, enabling its move into convergence (see ' Low Pricing Key To Merged Drillisch/1&1 Viability ' , May 12 2017). We believe that, while there has been a move towards more premium services, competitive pressure remains on pricing, and it will be even more difficult for Drillisch to compete on the services side, as it lacks the mobile network ownership of its main three rivals.

The merger between Telefonica and E-Plus in 2014 led to more favourable wholesale conditions for MVNOs, in the sense that they can purchase capacity in advance (see ' MVNOs Providing Competition As MNOs Focus On Premium ' , August 24 2015). In order to differentiate themselves, network operators have moved into more premium services, looking to migrate customers towards smartphones, LTE and convergence. This has been successful in terms of data penetration, as we expect 92.8% of all subscribers to be on 3/4G by 2021, and operators have also entered the quad-play market, Deutsche Telekom with its Magenta plan, and Vodafone with its Kabel Deutschland acquisition. Drillisch is attempting to follow in those footsteps.

Moving Towards More Premium Services, But At A Price
Germany Mobile Forecasts, 2015-2021
e/f = BMI estimate/forecast. Source: BMI, National Sources

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