The prices in the supermarket are rising, but you can rely on the mobile phone contract – at least that’s what Telefónica boss Markus Haas says. In an interview with CHIP, he explains why mobile communications are inflation-braking. He also sheds light on why it is so difficult to provide some regions with fast internet.
CHIP: Mr. Haas, last year you promised my colleague that by 2024 there would be fast internet throughout Germany. What’s the status there?
Markus Haas: We are well on the way to achieving our goal and are already providing 99 percent of the population and 98 percent of the area with high-speed Internet via mobile communications. The last percentage points are structurally and therefore financially the most difficult. Where there is currently no coverage at all – so-called white spots – or where only one provider provides mobile broadband – so-called gray spots – we as an industry are working together to find quick remedies.
You talk about white and gray patches, “quick fixes” and structurally difficult percentage points – is comprehensive Internet, ie 100 percent coverage, even possible?
Hass: Our goal must be almost complete area coverage. What counts for me is the feedback from our customers about our network. And that’s as good as ever. We have made great progress here – but of course the work on the network never ends. Every year we bring several thousand additional locations online.
Comprehensive Internet: “Narrow valleys, mountains, dense forests are a challenge”
According to Stiftung Warentest, there have been major improvements in terms of data speed and network expansion since 2017. Nevertheless, in some places you have to walk up and down the garden to send an SMS. Why is it such a big challenge to develop certain regions?
Hass: I agree with you: In an everyday living and working environment, mobile communications must work without restrictions. You should always have reception with our O network in your home AND of course also in your own garden. That is our claim. In the shadow of buildings made of reinforced concrete or in deep basements, the signal will naturally no longer arrive at some point. Narrow valleys, mountains, dense forests are also a challenge.
If it’s so difficult to ensure flawless mobile communications there, could Tesla’s Starlink satellites be a solution?
Hass: It’s not a matter of either/or. What is important is the optimum solution for the customer. A mobile network like that of O2 is clearly superior in terms of transmission speeds, response times and the price.
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O2 boss says: “Mobile communications is inflation-braking”
In an international comparison, our mobile phone tariffs are expensive. Studies have shown that users in France and Poland have long been able to surf the web or make calls on their mobile for significantly less money. Why do Germans have to spend so much money on mobile communications?
Hass: I have to disagree. Mobile communications are affordable for everyone in this country, and the monthly costs are among the lowest in Europe. Tariffs with ample data volume cost less than 1 euro per day. The basket of goods from the Federal Statistical Office shows that mobile communications are becoming cheaper for consumers year after year – while almost everything around us is becoming significantly more expensive.
Mobile telephony is therefore inflation-braking. And the international comparisons seem popular but give a distorted picture. They do not take sufficient account of the differences in purchasing power, the included services and much more. In hardly any other country in Europe do customers effectively spend so little money on mobile communications as in Germany.
There is also a curiosity about which the “Spiegel” recently reported. Contracts with Vodafone, Telekom, but also O2 are often more expensive than with smaller competitors who use the networks of the big operators. Can you explain why that is? From the customer’s point of view, it would actually be smarter to conclude a contract with the discounter instead of with O2.
Hass: Here, too, people like to compare apples with oranges. The major differences in the market offerings can be seen in the respective 4G or 5G technology, the service package, the speed, the included data volume in Germany and abroad, the payment method, but also whether customers buy a high-quality end device at attractive conditions would like.
Competent advice in the shop is also more important than ever for customers. The satisfaction and loyalty values for our core brand O2 have reached absolute highs in the past few quarters.
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You say most users are very happy with O2. How do you then explain the negative reviews on individual consumer portals?
Hass: For me, the best benchmark is customer behavior. For a long time we have seen by far the largest growth in contract connections in the market. In 2021 alone, we were able to win 1.5 million additional contract customers.
Another topic: The German Internet provider 1&1 is currently working on setting up a fourth cell phone network, which is scheduled to go live in summer 2023. It is considered certain that 1&1 will offer tariffs that are below the level of Telekom, Vodafone and O2. How are you reacting to this initiative at Telefónica? Will it affect your pricing structures?
Hass: We are excellently positioned with our brands and price structures. No provider is currently growing as dynamically as we are. 1&1 is not a classic newcomer, but has been active for many years. The company itself recently stated that one should not expect a price war. With over 25 years of experience on the market, we know what mobile communications must cost so that it ultimately pays off.
End of 2022: 5G for 50 percent of households
Telefónica was able to increase its revenue in the first quarter of 2022 and, bottom line, even made a double-digit million profit. Despite this, you had to accept a loss of customers in the prepaid segment for the fourth time in a row, and sales also fell in the fixed network business. Do you see a trend towards postpaid and mobile?
Hass: Prepaid continues to be very popular with certain demographics and revenue per user is increasing. The annual packages in this segment are also very popular. Regarding the second part of your question: We continue to grow in sales of fiber optic, VDSL and cable broadband. The line-based interconnection charges between the networks are independent of this. These continue to fall, leading to a slight drop in sales in this area.
Finally, on the mobile communications of the future: Although O2 is pushing ahead with the 5G expansion with great strides, only a few areas have so far benefited from the new technology. Why is that and how do you intend to change that?
Hass: We are rolling out 5G faster than any network technology before. Just five years after the start, we want to supply the entire federal territory. We are currently reaching 40 percent of households, and by the end of the year it will be 50 percent. We invested more in 2021 than ever before – and in 2022 we will again be investing over a billion euros in the network, IT and service.
This text first appeared on FOCUS Online: The fourth mobile network is to start in Germany – is it becoming more expensive for O2 customers now?