Withdrawal from UMTS auction: Swisscom and debitel intend to provide UMTS with partners
11 August 2000
debitel and Swisscom today withdrew from the auction for a UMTS licence in Germany. They now intend to substantially increase debitel"s market share by the time UMTS is launched through huge investment in customer growth in order to position debitel as an alternative and innovative provider of UMTS services together with partners whose bids were successful.
debitel and Swisscom, which participated in the auction for a UMTS licence in Germany as debitel Multimedia GmbH, have withdrawn after thorough economic consideration. "debitel bid for a UMTS licence in order to provide network access independently," explained debitel CEO Peter Wagner. "Such independence has considerable economic value. However, if the cost of obtaining a licence exceeds that value, quick market access becomes the decisive criterion because without a sufficient customer base the licence is worthless and no longer justifies such high investment. We have a broad customer base, a wide sales network and highly efficient customer care processes. We will help the licence holders to solve their customer-base problem. This strategy offers us the best chance of commercial success." Swisscom and debitel will initiate negotiations on partnerships with licence holders as soon as the auction has been completed.
debitel will extend its position as Europe´s largest, network-independent service provider. The customer base, sales network and customer care processes will be strengthened through huge investment. By the end of 2000, debitel aims to increase its customer base from its present 5 million to 6,5 million in Germany and from 6,5 million to over 8,6 million in Europe. With over 7000 sales outlets, the company already has the best access to the market.
The new UMTS services will see a clearer division of tasks in the mobile market. The first area is the construction and operation of expensive infrastructure. The second is the preparation and marketing of the new mobile services. debitel will concentrate on the latter, a new, rapidly growing area of business. The foundations are in place for the number 3 in the German mobile communications market - in which Swisscom has a 74% holding - to continue to grow, to harness value-creation potential and develop into a mobile virtual network operator (MVNO). "It´s extremely important for debitel and Swisscom to harness the future potential in Europe´s biggest growth market and to be able to offer an alternative to holding their own UMTS licence that will nevertheless ensure growth," commented Jens Alder, Swisscom CEO and chairman of debitel´s supervisory board.
Swisscom and debitel will both invest heavily in the development of UMTS infrastructure and products. Various options are available with respect to financing investment costs. These include merging and subsequently floating the mobile activities of Swisscom and debitel and the conclusion of a MVNO agreement with sufficient scope for value creation. Alternatively, the capital of Swisscom AG could be increased. A proposal will be put to the shareholders´ meeting of Swisscom AG by the Board of Directors after consultation with the principal shareholders.