Pricing at Deutsche Telekom - Essay Example

Pricing at Deutsche Telekom Deutsche Telekom is a German telecommunications company with its headquarters in Bonn, North Rhine-Westphalia, and Germany. In Europe, this is the largest telecommunications company, and it was formed in 1996 in the privatization of the former state-owned monopoly Deutsche Bundespost. However as of the year 2008 the governmental state of Germany still owned fare share of the company; this is 17% through the government bank and 15% through direct company stock (Waesche 162). The remaining percentage is what is owned by the private investors. The company owns various subsidiary companies of which all of them have names starting with the letter T such as the T-Home; a Legacy Telephone, Broadband and IPTV Service Provider, the T-Online; an Internet Service Provider, the T-Mobile; A Mobile Network Operator, and the T-Systems; A business division, focused on providing services to public and business sector customers. Recently the company has unveiled a new structural group through the merging of the two organizational units T-Com and T-Online into the Broadband/Fixed Network (BBFN) strategic business area. This Broadband/Fixed Network business area is one of the largest providers in Europe with approximately over 9 million broadband lines, 40 million narrowband lines and 14 million registered Internet customers. The company also holds substantial shares in other telecom companies especially within the region including Central European subsidiaries such as Magyar Telekom in Hungary, T-Hrvatski Telekom in Croatia, and Slovak Telekom in Slovakia. Again these subsidiary companies some also hold shares in subsidiary companies such as maygar Telkom holds various shares in T-Crnogorski Telekom in Montenegro, and Makedonski Telekom in Macedonia; all of which have also been rebranded and included under the T-Com/T-Home umbrella. In the year 2009, the orange Telekom Company and the T-Mobile parent Deutsche Telekom announced of their involvement in advance negotiations to merge their UK operations to develop the largest mobile network in Britain that is now known as everything everywhere (EE) (Benoit 2012). The occurrence of such merging of large companies is a step by the companies to better secure the market such that they be having a better hand due to operating in large economies of scale. Deutsche Telekom has an exceptionally large and broad market share in the world. It is positioned in over 50 countries in Africa, Asia, Europe and America with the heaviest investment being in the United States and throughout Europe. It has a share market of approximately with almost ten million subscribers in Europe and a total of 50 million customers in Europe, Asia, and the United States. Having started in Germany as public owned the company became privatized in 1996 and has extended operations to a global level. Now the largest telecommunication company in the EU it is finding it difficult to expand its regional operations due to increased competition as a result of moving from regional to global markets and pricing pressures originating from increasingly restrictive EU sector specific legislation. The company generated a net income of €80 million on revenues of €64.6 billion in the year 2009. In relation to the previous year, 2008, this is a representation of a 76.5% drop in net income and a 4.8% increase in revenues when the company earned €340 million on €61.7 billion in revenue (Benoit 2012). The company is experiencing particularly high market penetration rates in Western Europe and the United States. The company is also serving market penetration of various emerging markets in countries such as such as Brazil, India, China, South Africa and Argentina in Africa, Asia and South America. Such markets are now just opening up and adopting such technologies thus providing good avenues to sink investments first for companies to have a greater chance at dominating the consumer markets. The company faces stiff competition from some of the various capital established telecommunication companies in the world. These are inclusive of BT Group plc, Vodafone Group Plc, and Versatel AG. These companies also offer more similar consumer services as the Deutsche Telekom Company which makes them able to offer competition especially in the penetration of new markets although the Deutsche Telekom Company still remains to be the leading consumer share holder in the world among them. Due to this the competitors also enjoy an advantage in that they are given access to Deutsche Telekom Company networks for a price set by the regulatory authority. This means that sector specific regulation has a direct significant influence on both the price structuring and product portfolio at Deutsche Telekom as well as on the Group's options in terms of making investments in new and sheer cost-intensive mobile and fixed-line broadband networks investments that need to be justified regulatory authorities and the telecommunications companies, therefore, need to engage in lively discussion and dialog. Deutsche Telekom Company being a globally active company with a strong presence in various countries it serves the purpose of being a discussion partner for governments, parliaments, authorities and NGOs on all issues related to ICT and innovation. It also does so for some domestic institutions as well as other associations and organizations. The German Telecommunications act was revised thus resulting to the engagement of, active constant, dialog with interested stakeholders from politics and the general public. The company’s partners from parliaments, governments and other organizations need to uphold their independence and integrity as stipulated and codified in Telekom's employee guidelines. Through having registered in the public lobbyist register in Brussels with all the required information Deutsche Telekom also ensures transparency. Despite this, the company is still subject to statutory cross-industry obligations such as general laws on competition, social law, labor laws and consumer protection. It also adheres to the telecommunications sector for operating and providing telecommunications networks and services. The telecommunications act of 1996 is an act that was established with the main objective of allowing anyone to explore any communications business. This would as such allow for any communications company to compete freely in any markets with other similar service providers (Paglin 25). Deutsche Telekom Company Is the owner and operator of the Germany fixed telephone network services. Before the enactment of the 1996 telecommunications act, the state owned the company and as such offered for resources for main investments in the company such as in telephone lines and network. It was a legal monopoly and the sole provider of tele-communication services to the consumer market. Due to its large and wide national wide coverage, the company was as such least likely to face competition. Any competitors that could come up had to overcome Deutsche Telekom in economies of scale, as well as large investment in the establishment of the infrastructure required of offer of such tele communications services. As a result of such factors, Deutsche Telekom was unlikely to face any competition in this sector. As a result, the market acted as a monopolized market. Work cited Benoit, D. Deutsche Telekom Waited Two Days After AT&T-T-Mobile Died to Court MetroPCS, The Wall Street Journal 2012. Web. Paglin, D. A Legislative History of the Communications Act of 1996, New York: Oxford University Press 2009. 2: 25-26. Print. Waesche, M. Internet Entrepreneurship in Europe: Venture Failure and the Timing of Telecommunications Reforms. New York: Edward Elgar Publishing 2003. 1: 162–164. Print. Read More