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Deutsche Telekom to preserve German dominance despite Vodafone-LG challenge

Deutsche Telekom AG has criticized the proposed combination of Vodafone Group PLC and Liberty Global PLC's assets in its domestic German market, branding it anticompetitive and warning of a cable monopoly. However, the telecom giant's overall home dominance is unlikely to be challenged.

Liberty Global, which is controlled by American media mogul John Malone, recently agreed to a €18.4 billion sale of its operations in Germany, Hungary, Romania and the Czech Republic to Vodafone.

The deal underpins the shift toward convergence across the global telecom industry as mobile operators race to combine fixed line, mobile, TV and broadband services.

As the details of the agreement became clear, Deutsche Telekom CEO Timotheus Höttges warned that the deal would create a monopoly player with more than 70% market share — a claim that Liberty Global denied.

That said, the cable market's declining share in Germany's TV industry and Deutsche Telekom's gains in broadband and mobile suggest the national incumbent is likely to hang onto its dominance.

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At €3.38 billion, Liberty Global and Vodafone's total combined earnings at the end of 2017 pale in comparison to the €5.68 billion reported by Deutsche Telekom for the same period.

Moreover, Deutsche Telekom has maintained its comfortable lead in total turnover for the past two years.

It had more than 43 million mobile customers as of December 2017, up 3% year over year and slighter higher than the 2% growth in European mobile customers to 52.7 million for the same period.

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Meanwhile, Vodafone, which is Germany's second-largest mobile network behind Deutsche Telekom, closed 2017 with its highest quarterly revenue in two years. Its total revenue for the three months ended December 2017 was up 2.9% year over year to €2.77 billion and up 3.3% from the prior quarter.

The mobile giant entered the fixed-line market in 2013 through its $10 billion acquisition of Vodafone Kabel Deutschland Field Services GmbH, then Germany's largest cable network.

Liberty Global has also accelerated its revenue in the German market, which is its second-largest in Europe after the U.K. and Ireland, with 12.98 million home as of December 2017. The company grew its total turnover to €606.4 million at 2017-end, up 3% year over year and 2% quarter over quarter. Its cable revenues made up the bulk of its earnings, amounting to roughly 92.7% of its total turnover, while its mobile revenue came in at a modest €14.3 million.

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