Discussion Papers

Heike Belitz, Jürgen Müller, Brigitte Preißl, Wolfgang Seufert

Die Entwicklung des Marktes für Telefone in der Bundesrepublik Deutschland - Auswirkungen der Liberalisierung des Endgerätemarktes
Nr. 96 / Oktober 1992
(no longer available)

Summary

The German market for terminal equipment was liberalized on July,1st 1990. The abolition of the monopoly opened the way for the development of a market for telephones, a market with special characteristics which derive from its evolution out of a monopoly and from the dominance of a single actor, the DBP Telekom. The volume, dynamics and problems of this market were analyzed in the present study. Special attention was given to the following topics:

- market volumes and variety of supply;
- development and performance of the private sales market;
- price trends;
- market shares, strategy and behaviour of the former monopolist, the Telekom;
- situation of German telephone producers;
- market entry of foreign suppliers.

The results of the analysis can be summed up in six points:

1. Liberalization caused a considerable expansion of market volumes. Between 1990 and 1991 the number of telephones absorbed in the German market (newly leased and sold) rose from 6.45 million to 7.25 million, i.e., by 12 per cent. To some extent, this reflects modernization needs which were held back before liberalization. In the long run, further growth potentials will derive from

an increase in the number of subsets per household,
the evolution of the East German market,
shorter life cycles for telephones.

Additionally, sales will be pushed up by the installation of telephone plugs in private households which allow for an easy replacement.

2. The private sales sector (i.e., all distribution channels besides the Telekom) is growing dynamically. At the end of 1991 it held 16 percent of the market. This share will rise to 30 percent over the next years.

3. For sales to Telekom drastic falls in price have been observed for many categories of telephones. The development of prices in the private sales market is not as dramatic. Price reductions vary according to categories. Though the general price trend is downwards, on average customers are spending more on telephones, because they are tending to buy more high quality subsets (e.g. cordless phones and phones with many additional functions). Low-price import models have gained only small market shares.

4. Telekom continues to hold a dominant position. Its market share was about 83 per cent at the end of 1991 and it will not fall below 70 per cent (including leased subsets).

5. German telephone producers have to face fierce competition, especially for orders from Telekom which are essential for a satisfactory utilization of production capacities. Price reductions are only partly due to technical progress. Partly, they reflect desperate battles for survival in the market. Large firms have competitive advantages against small and middle sized firms.

Telephone production for the German market is likely to shift gradually to production sites outside the country. This results from the growing market shares of foreign suppliers, but also from takeovers of German firms by foreign companies, which concentrate telephone production for several countries in one location.

6. Foreign suppliers have gained considerable shares in the private sales market. Up to now, however, they have not sold telephones to Telekom. A large part of newly approved telephones comes from foreign companies. Thus, it is most probable that more telephones produced abroad will appear on the German market in the future.

Only German language version available.

Discussion Paper no longer available.

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