Vodafone Takes Control of German Fixed-Line Network

The Arcor network, which was once earmarked for disposal by Vodafone, has developed into a core business as Germans sign up for combined high-speed Internet access and mobile-phone contracts.

Railway operator Deutsche Bahn held 18.2 percent and bank Deutsche Bank held 8.2 percent of Arcor.

The transaction, which cost 474 million euros ($735 million), bulks up Vodafone to challenge current German leader Deutsche Telekom in Europe's biggest telecommunications market.

Vodafone sought control of Arcor after realizing the marketing benefits of signing up a customer up for cell phones and high-speed Internet access with the one contract.

An operator of wireless networks around the globe, Vodafone was originally an opponent of fixed-line phone companies, encouraging customers to make all their calls mobile, and did not really want Arcor when it acquired a parcel of German phone interests in 2000.

But fixed-line systems have made a comeback in the form of digital subscriber line (DSL) systems, which offer high-speed Internet connections. On DSL, voice traffic is more or less an afterthought.

The wired Arcor network was established in the 1990s using the German railway system's own telecommunications lines as a backbone.

Vodafone chief executive Friedrich Joussen said Vodafone and Arcor were currently providing 13 percent of German DSL connections, but the joint company aimed to raise that market share to 20 percent.