Consolidate Or Perish, Says Deutsche Telekom CEO

Rene Obermann, the CEO of Deutsche Telekom, gave a speech in London this week where he once again made the case for the need to consolidate or merge more mobile operations in Europe. It’s not a new issue — and certainly one that Obermann has been talking about for years, given his previous role as head of T-Mobile. But it’s surprising how little activity has actually occurred in this area, despite falling margins for voice and the drive to build out networks for new mobile Internet services.

T-Mobile has been one of the more prominent operators attempting to practice what it preaches. The company finally got the go-ahead this week from German regulators to team up with other major mobile operators to build a new mobile TV network running on the DVB-H standard. And it is now in the process of finally buying up Orange in the Netherlands — Obermann has long said there needed to be consolidation in small markets like this, where being number-four or even a distant three just doesn’t compute.

What’s not often mentioned is what kind of an impact this kind of consolidation might have on mobile content. In the U.K., 3 — the newest of the operators with a 3G-only service — has been bandied about as a possible M&A player for having so few subscribers compared to O2, Orange, Vodafone and T-Mobile (3.9 million compared to 17.9 million for the biggest, O2). But 3 has also proven to be one of the most forward-thinking mobile operators in Europe, being the first to push ahead with flat-rate data charging. It’s also taken a lead in new services such as downloadable sports clips, ad-funded video content, and social media services. Where would consolidation leave this kind of innovation? All of these pricing plans and services are now being picked up by the other operators in the market, but it’s arguable how long we would have waited for these services if 3 wasn’t there to launch them first.

There is definitely a ripe opportunity out there in consumer mobile Internet services over the newer networks. Two reports out this week from Cisco (you can download them here and here) look at the future of Internet traffic to 2011. Within mobile data, traffic from 3.5G and WiMAX will make up over half of all mobile data traffic by 2011. Consumer internet services like video will be the overwhelming driver in IP traffic overall, making up 60 percent of the 17 exabytes of traffic per month by 2011 (currently video accounts for 20 percent of IP traffic, says Cisco).

There are currently 30 mobile network owners in Europe, with 70 networks if you count 2G, 3G and wireless broadband. As is the case in the U.S., those operators can only use their networks for specific technologies, per national regulations. Obermann, paraphrased in the Independent, said that regulators will need to relax those regulations if they want those network owners to continue to invest in new infratructure.

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