Deutsche Telekom to Work With Utilities, Rivals for German Fiber Network

Deutsche Telekom AG, Europe’s largest telecommunications operator, needs to join with rivals and energy companies so it can afford to expand fiber-optic connections to more German households.

The company also wants content deals with media companies to encourage customers to sign up for faster and more expensive Internet connections, Niek Jan van Damme, board member and head of German operations, told reporters at the CeBIT technology fair in Hanover, Germany today.

“Unless we offer new services, the willingness to pay more will be relatively low,” van Damme said. “We are talking with media companies,” he added, without giving details.

According to an investor presentation in March last year, the Bonn-based company plans to roll out fiber so it passes as many as 10 percent of households, or about 4 million, in Germany by the end of 2012. Van Damme said today that Deutsche Telekom will start building the fiber network now, and plans to reach 160,000 households in 10 German cities by the end of the year.

To reach the 4 million target, the company will need cooperation agreements with telecommunications rivals and with utility companies, which also have to lay cables to homes to build a smart energy network.

Photographer: Jochen Eckel/Bloomberg

Deutsche Telekom AG's head of German operations Niek Jan van Damme. Close

Deutsche Telekom AG's head of German operations Niek Jan van Damme.

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Photographer: Jochen Eckel/Bloomberg

Deutsche Telekom AG's head of German operations Niek Jan van Damme.

The industry will have to spend about 50 billion euros ($69 billion) if it wants to cover all of Germany with a fiber-optic network, van Damme estimated.

Web Television Demand

“By 2014, 90 percent of all data volume on the Internet will be video,” requiring faster Internet connections, van Damme said. “With the higher bandwidth we can service Internet television and that presents a growth opportunity.”

On a fiber-optic connection, it will be possible to reach Internet download speeds of up to 1 gigabit per second. That compares with the 16 megabits per second that 47 percent of German households get today, van Damme said.

Deutsche Telekom last week confirmed plans announced in May to invest about 10 billion euros from 2010 to 2012 in wireless and wireline projects. That’s part of its strategy to increase revenue from mobile Internet services to about 10 billion euros in 2015 from 4 billion euros in 2009 and to increase content and services sales over the Internet by improving access to broadband.

Deutsche Telekom’s German operations make up 38 percent of the group’s sales and 49 percent of the group’s adjusted earnings before interest, taxes, depreciation and amortization, according to annual results released Feb. 25.

Photographer: Hannelore Foerster/Bloomberg

The Deutsche Telekom AG company headquarters in Bonn. Close

The Deutsche Telekom AG company headquarters in Bonn.

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Photographer: Hannelore Foerster/Bloomberg

The Deutsche Telekom AG company headquarters in Bonn.

To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net

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