Deutsche Telekom to expand mobile phone business

The T-Mobile brand could soon be coming to a market near you. As part of a strategy to revive profits, Deutsche Telekom intends to expand its T-Mobile cellular business in markets in which the German telecommunications group is already offering fixed-line services and possibly in entirely new markets, the company said Thursday.

T-Mobile is already one of the largest mobile phone operators in western Europe and the U.S. Its T-Mobile USA subsidiary has emerged as the group’s main growth engine.

Deutsche Telekom “does not rule out acquisitions” as part of its expansion strategy, it said.

Acquiring the Dutch mobile phone subsidiary of France’s Orange could be part of that strategy. The company is rumored to be among the bidders for the Dutch company, the smallest of four operators in the Netherlands.

The new strategy carries the signature of René Obermann, newly appointed CEO of Deutsche Telekom and the former head of the group’s mobile phone business.

Obermann is under pressure to tap new areas of growth to offset falling prices for mobile phone calls in mature markets such as Germany and the U.S. and to counter stiff competition from providers of fixed-line telephone services, particularly new VOIP (voice over Internet Protocol) service providers. More than 2.3 fixed-line customers defected to rivals last year.

Obermann’s new strategy also includes selling several business units, including the French and Spanish ISPs (Internet service providers) Club Internet and Ya.com and the T-Systems Media & Broadcast unit.

In addition, the CEO hopes to find an international “strategic partner” for its T-Systems subsidiary.

T-Systems provides IT services to about 60 multinationals and 160,000 smaller companies. The Frankfurt-based unit, which also operates and maintains Deutsche Telekom’s global telecommunications network, was established a few years ago following the merger of DaimlerChrysler’s IT outsourcing unit, Debis Systemhaus, and the systems integration activities of the German network operator.

Last year, T-Systems acquired Gedas, the former computer services subsidiary of German car maker Volkswagen. Gedas has 12 subsidiaries around the world, including Brazil, China, Japan, and the U.S. Most of these are located in automobile manufacturing centers.

By the end of 2010, Deutsche Telekom hopes to have 1.5 million customers for its new IPTV (Internet Protocol television) service. The operator intends to have 50 cities connected to its new VDSL (Very high bit-rate Digital Subscriber Line) network next year, with an additional 750 towns to linked via ADSL2+ (Asymmetric DSL) technology.

Deutsche Telekom’s VDSL network has been a contentious issue with regulators in Brussels.

On Monday, the European Commission threatened the German government with legal action unless it scraps a new law that protects Deutsche Telekom from competition in the broadband Internet access market. The Commission’s action focuses on specific amendments in the German law that effectively exempt the German operator VDSL network from competition. The amendment was requested by the company, which is still partly owned by the German state.