Deutsche Telekom moves into Spain

Deutsche Telekom has been given the go-ahead by Spanish telecoms watchdog CMT to offer fixed-line voice and data services via a Spanish subsidiary.

The German telecoms giant will begin touting ADSL connections bundled with flat-rate voice services with immediate effect. From the middle of 2005, the operator also plans to roll out voice over IP services.

Dan Bieler, research director at analyst firm Ovum Deutschland, suggested that the move, which targets one of Europe's most profitable telecoms markets, should be a boost for Deutsche Telekom and a growing threat to incumbent Telefonica's domestic position.

Deutsche Telekom, which currently offers ISP/portal services through T-Online's Ya.com subsidiary, has long generated negative returns in Spain, although the company has made great strides to break even in the past few quarters, Bieler noted.

"We estimate that Ya.com has a broadband market share of merely six to seven per cent in Spain, well below Terra's 58 per cent. Ya.com still largely depends on its one million narrowband customers. Deutsche Telekom wants to increase the ADSL market share to 12 per cent," he said.

"Currently, T-Online generates about 12 per cent of revenues outside Germany, and we assume that not more than five per cent come from Spain. Hence, the additional revenues are unlikely to boost Deutsche Telekom's revenue base significantly."

However, Bieler added that the move is designed to "catch up" with France Telecom's Wanadoo, which already offers a fixed-voice service in Spain.

"We have our doubts about T-Online's international strategy but, assuming that T-Online conducts a fundamental financial analysis of all new offers it plans to launch, we see only upside from the new voice service in Spain."