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Germany’s Sexy Telecoms

Is the sun setting on German industry’s ingenuity?

November 18, 2002

Is the sun setting on German industry's ingenuity?

American consumers were recently amused by changes taking place at VoiceStream Wireless. The company is an established U.S. mobile phone operator and a subsidiary of Deutsche Telekom. First, the company was renamed T-Mobile. Then, its long-running advertising program received a facelift.

Quite literally. Hollywood star Jamie Lee Curtis had been endorsing VoiceStream in a ubiquitous "Get More from Life" print, radio and television advertising campaign since 1998. Now, the aging star has been summarily replaced by a younger, presumably sexier spokesperson, Catherine Zeta-Jones.

Nothing wrong with that, of course. In fact, Ms. Zeta-Jones — who starred in such movies as Traffic and also happens to be the wife of Michael Douglas — is the global face of T-Mobile.

Deutsche Telekom has been re-branding its mobile phone companies around the world (such as VoiceStream in the United States) — and bringing them under the T-Mobile umbrella. In a globalized economy, it is only natural that these entities should all have the same advertising campaign.

However, the campaign is also indicative of profound changes taking place in the German engineering industry. The problem is that Deutsche Telekom simply has little to offer to its customers — aside from a sexier, younger face.

Of course, German industrial companies still maintain their technological lead in a few industries. German cars, for example, still have a top-notch reputation around the globe. Mercedes, BMW, Audi and Porsche remain status symbols for moneyed elites and politicians all over the world.

Even Volkswagen is a highly respected brand for the global middle class. True, the quality and styling of cars made in Japan and even South Korea have improved substantially in recent decades. Still, their German competitors have been able to safeguard their superior reputation.

Similarly, machinery and equipment remains a major hard currency earner for Germany, accounting for over 60% of its exports.

German companies are less willing to outsource production to cheap-labor countries in Southeast Asia and China.

And even though German industrial wages remain extremely high, the quality and reliability of German engineering allows these companies to maintain price differentials on their products.

However, German engineering has been resting on its laurels far too long. The high-tech boom of the 1990s has generally passed Germany by. The Neuer Markt, the local attempt to imitate the NASDAQ market in the United States, never really got off the ground.

Of course, the global crisis in the high-tech sector was the reason why it folded. But even in its heyday, it attracted very few entrepreneurial startups. Since there were very few companies listed and Germans have a lot of money to invest, the index initially rocketed in the late 1990s.

However, when the high-tech bubble burst, the Neuer Markt was one of its worst casualties. The index plummeted 96% between March 2000 and September 2002, when parent Deutsche Boerse finally decided to pull the plug.

Overall, during the Internet and high-tech boom of the 1990s, Germany — Europe's largest economy and the economic lynchpin of the euro-zone — was consistently overshadowed by such 'fringe' European economies as Finland, Sweden, Spain and Ireland.

But perhaps all of this is really not so surprising. The boom in mobile telephony, for example, has been led in Germany by Deutsche Telekom. It is a ponderous ex-monopolist, which retains many of the bad old habits of a state-owned enterprise.

It certainly lacks the entrepreneurial spirit, mechanically gobbling up a dozen of mobile telecom companies worldwide, ranging from the United Kingdom to Hungary and Malaysia.

Now, however, the sector suffers from overcapacity and market saturation on a global basis. And it is hemorrhaging money. Regrettably, in this environment, German engineering has very little to offer its customers — except a very basic appeal.

The new advertising campaign lets investors know just that. Unless they run out and get T-Mobile service, they'll never have a chance of getting connected to somebody as sexy as Ms. Zeta-Jones on the other end of the line.

In the end, it is an apt metaphor for German technology itself. It is like an aging Hollywood diva, who resorts to plastic surgery and expensive cosmetics to hide creeping signs of old age.