T-Mobile Czech Republic Joins Fixed Broadband Brigade

| Jan 7, 2008 | Consumer Broadband Service - Europe | Competitive Update

| Analyst: Ben Tudor

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate

Event Summary

January 1, 2008 – T-Mobile Czech Republic is to offer 2Mbps ADSL connections to consumers for CZK 399 a month. Existing mobile subscribers will be offered discounts for signing up to two year contracts. The move is intended to improve coverage for the company’s data services, which are at present limited to ‘Internet 4G’ cards – in reality HSDPA cards providing Wi-Fi, UMTS, GPRS and EDGE coverage within Czech. At present, the company’s UMTS coverage is limited to approximately half the Czech population and DSL will be marketed to both residential and SME customers.

The move is also intended as a spoiler for an expected fourth mobile operator launch in the Republic that of MobilKom, and expected bundling competition from alternative fixed line operators Radiokommunikace and GTS Novera. Monthly FUP limits are set at 10 GB, with a premium service offering 8Mbps and 40 GB FUP. Modems and other CPE are also sold as part of the package.

Analytical Summary

• Current Perspective: Positive on T-Mobile’s offering of DSL in the Czech Republic, as it is likely to increase the company’s ability to offer reliable data connections to its users, who previously only had the option of Web ‘n Walk datacards (sold as ‘4G’ in the Czech Republic) that connected to the firm’s UMTS TDD, GPRS, EDGE and Wi-Fi networks. The move also allows T-Mobile to begin the process of bundling services already taken up in other nations in Europe, something which will help the business.

• Vendor Importance: High to T-Mobile in the Czech Republic because it positions the company well in the anticipated move towards bundled services, and potentially reaches more customers than its original plain vanilla mobile services.

• Market Impact: Moderate on the Czech mobile service provider market because T-Mobile’s broadband play has yet to hit the market, and there is, as yet, only limited competition for T-Mobile’s mobile operation, despite talks of a fourth mobile operator for the Republic.

Recommended Competitor Actions

• Alternative fixed-line operators should aim to win MVNO status as quickly as possible, even only as a spoiler for mobile operators looking to move into fixed. With only half the population covered by mobile broadband, a bundle of DSL or Cable data access with plain vanilla GSM calling could be a winner in areas where 3G coverage is poor, non-existent or too expensive for customers.

• Telefonica O2 and Vodafone should provide attractive mobile tariffs to encourage switching from T-Mobile. T-Mobile’s discount offer is a bid to lock in its mobile subscribers, showing that those same subscribers could be easily wooed away. A bundled offering of data and voice could lure them back.

• UPC should look to partner with a mobile operator – be it one of the incumbents or MobilKom – to provide a bundled offering. Brave mobile/fixed line partnerships can compete with mobile operators moving into fixed line services.

• Fixed line providers should offer unique applications or better deals than T-Mobile. IPTV is a distinct application, but one that demands high quality networks and some form of QoS. But movie rental over the Internet is not as demanding. Music rental, data backup or free software downloads of premium packages could drive stickiness.

• Alternative mobile operators should get their skates on. MVNO offerings, especially if bundled, will succeed in stealing data card subscribers from T-Mobile.

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Competitive Positives and Concerns

Recommended Vendor Actions

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