Deutsche Telekom and France Telecom Announce M2M Radio Access Networks Sharing Agreement

Deutsche Telekom and France Telecom have announced that they have formed a strategic alliance to look at sharing their radio access networks across Europe, as part of a wider co-operation agreement between the two European giants. The co-operation will initially aim to create a machine-to-machine (M2M) joint project, aimed at increasing the quality of service and standards for cross-border communications. The agreement will initially cover France, Germany, Belgium and Luxembourg, and ultimately aims to include all mobile network operators affiliated to the two groups.

In addition to network sharing, German giant Deutsche Telekom and French incumbent France Telecom are looking at creating an agreement to standardise equipment specifications, and are exploring solutions for improving roaming conditions on each other's Wi-Fi networks. In addition, the operators have identified a set of new growth business development domains, which include technical co-operation on home media servers, development of cross border e-Health services, connected cars technology and in-car infotainment services, content and technical enablers for TV and video services

Outlook and Implications

• M2M—A Network Sans Frontiéres: Deutsche Telekom and France Telecom say M2M communication is an enabling technology, that will facilitate the development of e-Energy, e-Health, and connected home and connected car services. The operators added that their co-operation agreement will be the foundation for a seamless network that can offer cross-border services anywhere in the world, and they aim to expand their networks globally through partnerships with other mobile network operators. M2M has experienced particular traction in France, where subscriptions grew by some 1 million, or 63% year-on-year, during 2010, to reach 2.6 million at the end of December (see World: 9 February 2011: M2M Growth in France and Wana's Market-Share Gains Shine in Q4 2010 Data Releases). M2M has also seen significant growth in other markets, such as Spain, where such connections grew from 1.72 million to 2.08 million between September 2009 and September 2010, while Sweden had 2 million M2M connections at the end of June 2010, up from 1.7 million in June 2009. Meanwhile, in the United States, Sprint Nextel, a major rival to Deutsche Telekom's T-Mobile USA, has said that it expects M2M-based services to have a significant impact on its revenues in two or more years' time, as it sees in-car safety devices, smart electricity meters, and healthcare monitors driving M2M revenues into billions of U.S. dollars (see United States: 17 January 2011: Sprint Sees Rise of M2M Generating Revenue in Two Years). Deutsche Telekom and France Telecom are now hoping to capitalise on their significant global coverage to reap fresh revenue streams from M2M services.

• France Telecom Targeting Business Services Growth: Executive Vice President for Strategy and Development at France Telecom Elie Girard said the collaboration will allow the two operators to address new growth opportunities, as well as operational efficiency issues in a limited and targeted set of business domains for the benefits of their respective customers. France Telecom has recently stated it is beginning to see an increase in big-business spend, after a deep slump in the sector following the global financial crisis, and many of its corporate customers seek to expand in emerging markets (see France: 8 December 2010: France Telecom Business Head Sees Positive Trends in Corporate Sector). Orange Business Services reaches 220 countries, serving big multinationals in its key home market and a further 160 countries, and is seen by France Telecom as strategically important because of its international reach, while its clients spend bigger and sign longer-term contracts. The rate of revenue decline in the operator's corporate sector slowed in 2010, dropping just 3.7% year-on-year (y/y) in the third quarter of 2010 compared with 4.9% y/y in the second quarter and 7% y/y in the first quarter, and the incumbent's business unit says it now hopes to see improved results for its strategy, involving new products and services such as M2M smart metering. Meanwhile, France Telecom has recently revealed it is planning to acquire a stake in French video-sharing website Dailymotion, as part of its new strategy to move into the area of content, to attract new clients and find alternative sources of revenue (see France: 25 January 2011: France Telecom Signals New Direction Into Content with Acquisition of Video Site Dailymotion). It is hoped such content will also drive broadband use, particularly in the mobile sector, where the French telecoms regulator recently revealed that mobile service revenues recorded 2.9% year-on-year (y/y) growth in the third quarter of 2010.

• Deal Hits Deutsche Telekom Strategic Objectives: Chief Technology and Innovation Officer for Deutsche Telekom Ed Kozel stated that operators are expected to increase quality of service and to eliminate barriers and borders when using services, adding that he is confident that the co-operation will enable both operators to bring sustained benefits to their customers. In March 2010, the German incumbent outlined a new plan for growth, one of the areas in which it intends on doubling the amount of revenue it receives by 2015 is intelligent network services, which includes M2M networking (see World—Germany: 18 March 2010: Deutsche Telekom Releases New Strategy, Seeks Growth from Data and T-Systems). In February 2010, Deutsche Telekom announced a tie-up with automotive supplier Peiker Actusic in which the two firms announced plans for jointly developing M2M products for vehicles. One of the German operator's responsibilities in the deal was to arrange roaming deals, so that services would continue to work outside of the vehicle's home country (see Germany: 8 February 2010: Deutsche Telekom Partners with Auto Supplier on M2M). M2M deals fall into Deutsche Telekom's T-Systems unit which reported 2.21 billion euro (US$2.97 billion) in revenue in the third quarter of 2010, up 3.8% year-on-year, contributing 13% to Deutsche Telekom's total revenues.