Deutsche Telekom Articulates a Global Wholesale Strategy
The telecommunications giant makes prudent moves to achieve global coverage

The question of whether a global imperative exists in wholesale businesses has been sidelined for some years. Global ambitions were curtailed when the dot bomb revealed that the rationale for building global networks from scratch, causally expressed as “build it and they will come” was deeply flawed.

Now, Deutsche Telekom is the first carrier to articulate a solution to the challenge of pursuing a global wholesale agenda. The strategy has been quietly constructed by the new head of DT’s International Carrier Sales and Solutions (DT) ision, Helmut Angst. Identifying Telecom Italia Sparkle (TIS) as the player of choice in an “operational partnership,” DT sees the opportunity to divide the geographical turf and connect their networks, but with assets remaining inside each legal entity. DT already provisions ‘virtual PoPs’ in Eastern Europe for TIS in Warsaw.

Within this structure, the companies can move forward in a global partnership, against a landscape of consolidation and declining margins.

It is only in the past year that the notion of global networks has been resurrected – in this case by VSNL International’s vaulting purchase of both Tyco Telecom and Teleglobe/ITXC. VSNL now represents a major challenger to traditional wholesale players. To sustain a defensible market positioning, players such as DT needed to make a radical move to complete its global reach.

DT and TIS will collectively provide global coverage: both have obvious strengths in Europe – DT in northern and eastern Europe, and TIS in the Mediterranean Basin. Both too are already present – albeit to a limited extent for TIS -in Asia and in North America. TIS also holds the unique advantage of a strong footprint in South America.

DT emphasise that the partnership with TIS is not exclusive and there remains the possibility of involving other vertical or horizontal partners in the future.

However, the deal is not risk free, and an element of caution is necessary. All strategic partnerships between major telecommunication carriers have been disbanded, sometimes acrimoniously. Global One, Concert, and UniSource have all vanished. It remains to be seen whether the operational relationship can overcome branding, product and billing integration issues to transform the combined business into a compelling and differentiated proposition.

DT ICSS targets only carriers, not end users in contrast to TIS, who wholesale directly to enterprises. Potential conflicts could arise internally, with DT although it equally perceives synergies particularly as its national and international wholesale businesses move closer together. Provisioning wholesale services to MVNOs by T-Mobile has yet to be resolved in the new structure. From a broader perspective, a potential conflict with the retail part of T-Com’s business could be Telecom Italia’s investment in Hansenet and the Alice / DSL product.

Other international wholesale players may now find themselves more exposed, as DT’s move neatly precludes an otherwise heavy cash outlay. Outside of partnerships, cash may yet be the only option to acquire the international assets of other carriers that may appear on the market in the next twenty-four months.

Have you also seen our other consultant comments?