Fon scores mega-deal with Deutsche Telecom

Thomas Wehmeier/Informa Telecoms and Media
05 Mar 2013

It’s certainly been a very busy start to 2013 for Fon with a first quarter that’s been characterised by impressive commercial momentum.

Today’s joint announcement with Deutsche Telekom at CeBIT follows swiftly on from a partnership agreement announcement with Dutch incumbent telco KPN in late January. Fon’s partners now make up an impressive set of leading global telcos; from flagship partner BT in the UK to Brazil’s Oi and from SFR in France to Japan’s SoftBank.

In the broader context of Fon’s development, this latest deal is significant for two main reasons:

1. Firstly, Deutsche Telekom (DT) becomes the single largest tier-one partner that Fon has signed up to date; DT’s German business unit alone generated in excess of €22 billion ($28.65 billion) in revenues in 2012.

2.Secondly, this represents Fon’s first truly multi-market deal. The pan-regional group-level agreement announcement today covers commercial launches not only Germany, but also Bulgaria, Greece, Romania, Slovakia and Hungary. There must also exist the possibility of expanding that to other markets in DT’s footprint over time

This very much looks to be the type of deal that will have others queuing to knock at Fon’s door to understand their partnership strategy and business model in more detail.

Aside from just dotting the I’s and crossing the T’s on the contract today, DT and Fon have also put a clear stake in the ground and committed to build a network of 2.5 million community-sourced hotspots by the end of 2016, equating to roughly 20% of the 12-million strong fixed broadband customer base DT enjoys in Germany today. It’s certainly an impressive-looking number on the face of it, but is actually relatively conservative considering that the partnership with BT in the UK has already yielded more than 4.5 million hotspots, equivalent to almost 70% of its retail broadband base.

I wouldn’t be surprised to see that number as much as double if Deutsche Telekom pursuesthe strategy aggressively and sees strong traction upon launch in mid-2013.

The real driver of growth for BT in the UK was the decision to make it an opt-out decision for users if they wanted to add their hotspot to the growing BT Fon hotspot community. It is unclear today if DT is able or willing to take a similar approach in Germany, but perhaps the conservative number suggests that this may not be the way the operator is planning to roll out the “WLAN to Go” service in Germany.

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