Another European cell purchase
A brief note here on the announcement that Deutsche Telecom, with its T-Mobile cell phone subsidiary, has agreed to buy out Austrian cell phone company Tele.ring. For such a small country (a little more than 8 million people), Austria has had a lot of competition, with five cell phone providers. One of them already was T-Mobile, which now will have a bigger slice of the pie, by adding almost a million new subscribers and a total of 3 million. Tele,ring was owned by US phone company Alltel.
The $1.6 billion deal follows soon after France Telecom's announced purchase of Spain's Amena as well as other European cell phone deals. The race to be one of the few survivors is on.
Another motivator foe the acquisition may be that Deutsche Telekom is having problems sustaining domestic growth, according to a Wall Street Journal story (Deutsche Telekom Struggles To Maintain Growth at Home", ). First, economic stagnation in Germany isn't helping. Second, its T-Mobile subsidiary is the odd man out in the US cell phone market, as all three other cell phone firms (Cingular, Verizon, Sprint) have made major acquisitions recently. While T-Mobile is doing well, its growth is going to require a major infrastructure investment across the US.
Finally, Deutsche Telekom is getting more competition at home, both in cell and DSL services. As the WSJ article points out:
The task could become even more difficult with the emergence of Internet-based no-frills wireless operators in Germany. With flat-rate pricing and no monthly fee, the discount operators could threaten the position of established players like T-Mobile. T-Mobile responded to the new wave of competition last week with a discount offering of its own, but analysts warn it risks eroding its own business.
The company has also been forced top lower its DSL rates due to cable TV competition.
