Spanish telecom giant Telefonica (TEF) is reportedly expanding the broadband offering to wholesale customers across Germany. The company’s subsidiary Telefonica O2 Germany is providing faster Internet access starting from October 2009 through the launch of SHDSL.bis standard based broadband network.    

SHDSL.bis enables higher bandwidth data transmission and will initially provide increased upload and download speeds of up to 5.7 megabit per second (Mbps). The company will further enhance throughput in 2010 to offer network speeds of up to 22.8 Mbps. This will effectively address the rapidly increasing demand for higher data transmission speeds in the wholesale broadband market.

Telefonica O2 Germany offers its fixed telephony and DSL broadband services to the end-users directly and through its wholesale partners such as United Internet, Hansenet and Freenet. Total number of unbundled broadband connections distributed by the company and its wholesale partners reached 1.5 million at the end of the most recent quarter, reflecting approximately 44% year over year growth.     
The broadband wholesale business is performing in line with expectation having achieved respectable growth in revenue and subscriber base on a consistent basis. Enhanced profitability of this business contributed to the healthy growth in operating margin of O2 Germany in the first half of 2009.
Telefonica O2 Germany plans to cover roughly 70% of the German homes with SHDSL.bis based network by the end of 2009. This aggressive deployment will effectively position the company to own the second largest broadband infrastructure in the domestic market behind Deutsche Telekom (DT).
While this healthy initiative is expected to drive growth of Telefonica’s broadband services in the business customer segment, we remain concerned about the declining wireline voice business and recent slowdown in wireless operation across the domestic and European segments due to the recession.

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