The mobile phone market in Germany

1. Market Quantification

1. Market size

• 65% of the German population owns a mobile phone
• Nearly one person out of ten possesses phones with WAP function
• Mobile penetration rate: 68%
• The German mobile market is 18% of the Western mobile market

1. Global evolution of the market

• Germany had the fastest growing telecom service, but its level begins to decrease
• The average market increase varies between 15% (2001) and 12% (2002) - Lower growth-rate compared to the previous years.
• Germany has developed to the largest mobile phone market in Europe just within a few years. At the end of 2000, the number of mobile connections in the mobile net exceeded those in the fixed net for the first time.
• After a rapid growth in 2000, the German mobile phone market begins to be constant and some companies even have faced with financial difficulties.
• Business is slowing down in stores: in most cases, there has been a decrease of 50% in sales.
• The number of dispatched SMS reports tripled in the year 2000.

1. Structure of the market and evolution

• Target group: each class of the population has a mobile
• 30-39 years: target group, which prefers new technological solutions the most, followed by the 20-29 and 40-49 years old.
• Class that buys the most: qualified workers
• 65 mobiles per 100 inhabitants (compared to the USA’s 48%)

2. Macroenvironment Analysis

Within the rapidly changing global world, the firm, that wants to enter a new market, must monitor six major forces: demographic, politic/legal, economic, social/cultural, technological (PEST-analysis) and natural ones. Although these different environments will be described in this part separately, their causal interactions – setting the stage for opportunities as well as threats – will be presented in the last part of the report («Recommendations for new entrants»).

2. Demographic environment

• 82 million inhabitants: great potential to exploit.
• Young population

• Growth rate of population: - 0,2%

1. Political environment

• Efforts were done to help some operators not to go bankrupt. → Help from the government: Schröder saved MobilCom with a 400 million Euro loan.

1. Economic environment

• Germany is a country which is very good at services, finance etc. (one of the leaders within the European Union)
• Rich country (GDP: 19 907Euro/inhabitant) → The majority of the target group can afford to use high-tech products
• Nevertheless, there are more and more problems with financing: growth in debt levels.

1. Socio-cultural environment

• German people like the latest innovations: they are at the leading edge of technology.

1. Technological environment

• Germany is a well performing country as far as the industry is concerned → the country is good at technological innovations
• Manufacturers attract new customers with the new standard Enhanced Messaging Service, briefly EMS (a short message with pictures, melodies and even with simple animations). The target group consists of people aged 14 -24.

1. Natural environment

• Role of the government in environmental protection
• Germany is widely known as an environmental-conscious country (selective litter collecting) → mobile users are incited to hand back old batteries of their phones

3. Microenvironment Analysis

1. Consumers

• In 2000, there were 54 million people who subscribed for a mobile phone (65% of the whole population)
• Business people or professionals often seek technology.
• More than every second “handy” owner uses SMS service (Short Messaging Service). Sending mini-texts is especially popular with the younger generation. (See «SMS-ing according to age groups» in the Annex).
• The innovative consumers, target groups for modern telecommunications, have a clear sociodemographic profile

1. Competitors

• Two giants dominate market: T-Mobile (subsidiary of Deutsche Telecom) and Vodafone. → Together, they control 80% of Europe's largest mobile market in Germany
• Each of them tries to seek for more and more revenues. → There is a kind of war between them, as they see their price tumble.
• Mergers → to reduce the costs among competitors.

1. Distributors

Distribution usually happens in two ways: international retail chains selling all the providers’ products and services, e.g. Phone House; or in own labelled shops.

4. Qualitative Aspects of the Market

In the qualitative part of the market research we map the potential target group (main characteristics, such as “consumption” habits and preferences etc.) of mobile services in Germany. (Some aspects of the qualitative market analysis were already mentioned in the quantitative part.)

As presented on the graph «Criteria to choose a mobile service provider» (See Annex) almost half of the customers (47%) choose their mobile service provider on the basis of its network coverage. Although the recommendations of relatives and friends (21%) are also important for the typical German mobile user, tariffs are much more decisive (45%) factors.

The graph «Monthly amount spent on mobile services» shows also the price-consciousness of Germans: the average mobile user is not willing to spend more than 13 Euros a month for the different mobile services (69%).

Most of the German mobile owners use their “handys” for making or receiving calls (94%). Beside the traditional function of the telephone, SMS is the second most popular way of using the device (66,7%). However, technologically it is long ago possible to read and write e-mails with mobiles (WAP function), only small niches of people make use of it (8,60%). On the graph «The art of mobile using» you will find other categories with less importance as well.

5. Recommendations for New Entrants

After making both a quantitative and qualitative analysis, now we can give our recommendations for new entrants. As for the facts and figures, presented in the previous pages, there are the following opportunities and threats of entering the mobile phone market in Germany:

Opportunities

• Germany has the fastest growing telecom service
• Increasing competitive landscape
• Area of high profits
• Area where you can develop technology and fit to consumers' needs
• Nearly all mobile manufacturers slipped into the red in the last few years, except Nokia, that still managed to remain profitable.
• According to estimations each month approximately 2 billion SMS messages are exchanged. Since (thanks to the latest innovations) SMS reports can also be sent to the fixed net telephones, the number of text exchanges via telephone will still increase in the future. → SMS becomes a mass medium

Threats

• The mobile market is saturated – sales of phones begins to decrease
• Penetration rate may be a bit too high, which means that there are fewer opportunities to enter the German market for new comers.
• The weight of competitors’ market share is really high → difficult to enter the market and find a still uncovered niche there.
• Increasingly competitive landscape
• Area of high profits, but just in the long run – first it requires high investments
• There are many global players with a sound financial background present on the market

To summarize our findings, it is not really wise for new comers to enter the German mobile phone market. There is already a fierce competition between the four providers, meaning that it is not worth to enter the market. It would take too long time to have the initial investment back, which is huge in case of mobile communication.

There is a new trend on the market that could be beneficial for mobile phone producers, who also have a hard time nowadays on the market. Providers started to develop phones alongside with the producers (e.g. Vodafone Live! Sharp phone). The fact that providers and manufacturers work together means that they are more able to have a better view what the consumer want; they are also more likely to come out with products that fit the demands, and are successful as well.

There are many possibilities for the present providers in Germany to enhance their services and thus make more profit, but we find it virtually impossible for a new entrant to make it on the German market. Some of these could be:

• The above mentioned cooperation with device producers
• Cooperation with the media (e.g. making SMS quizzes related to TV shows etc.)
• Joint services with institutions (e.g. mobile banking, buying cinema tickets with the mobile)

Sources

Book

E-materials

Annex