- The end of the 'privilege of secondary costs' in the TV market: Telekom closes
After the end of the "ancillary cost privilege", where tenants had to pay for their TV connection via operating costs and cable network operators like Vodafone had a significant advantage, Deutsche Telekom is gaining some momentum. After cancellations, Magenta TV added 114,000 customers in the second quarter, the company announced in Bonn. In total, there are now around 4.5 million.
Growth has accelerated, with a net increase of only 73,000 in the first quarter of the year. Telekom invested heavily in advertising for major events like the UEFA European Football Championship to boost business, which likely contributed to the increase in demand. According to CEO Tim Höttges, the Magenta TV brand received a "boost" in the last quarter.
Expensive advertising campaign pays off
In addition to TV customers tied to a connection, there are also "Over the Top" (OTT) customers who receive Magenta TV outside their internet contract and do not need a receiver. The company has sold "hundreds of thousands" of such contracts, according to CFO Christian Illek. However, some of these customers are only temporary, having signed up for Magenta TV during the UEFA Euro 2024 due to its extensive offering and then cancelling or planning to cancel their contracts.
The ancillary cost privilege is a thing of the past
Since July 1, 2024, costs for the TV signal cannot be passed on to tenants via ancillary costs. This option, which existed for decades, gave market leader Vodafone a clear competitive advantage. Vodafone's German subsidiary, a British conglomerate, had around 8.5 million customers paying for their TV connection this way, whether they wanted to or not. Landlords had concluded corresponding collective agreements.
This is no longer possible, and customers must now have their own contract with the TV provider or voluntarily participate in a new form of collective contract. Since the beginning of the year, Vodafone has lost around 1.3 million customers due to this legal change, with a significant shortfall expected in the summer quarter.
Different transmission methods
There are various ways to watch TV, including via satellite, antenna, cable, and the internet. While there are freely accessible channels on the internet, such as the ARD Mediathek, private channels are usually not free and require payment. Internet providers like Zattoo, waipu.tv, and Magenta TV offer access to these channels and are now on a growth trajectory.
Compared to Vodafone's significant losses, Telekom's gain of around 187,000 customers since the beginning of the year is limited. When asked about this, CFO Christian Illek pointed out that there are also customers who no longer want linear TV. "They've left the mandatory connection and don't want any TV connection at all." The exact number is unclear, but the company's board is "very satisfied" with the overall TV development.
Positive quarterly results
The business of the Bonn-based company with its American subsidiary T-Mobile US is running well, with unexpectedly high demand for mobile contracts in the second quarter of 2024. On a consolidated basis, the company's revenue increased by 4.3% year-on-year to €28.4 billion, exceeding analysts' expectations. Net profit was around €2.1 billion, compared to around €1.5 billion in the previous year.
Tim Höttges, the CEO of Deutsche Telekom, attributed the boost in Magenta TV customers in the last quarter to the company's advertising campaigns for major events.
Despite losing some customers due to the end of the ancillary cost privilege, Tim Höttges and the company's board expressed satisfaction with the overall TV development at Deutsche Telekom.
