Slowdown hits Germany's mobile market

Germany's 3G licenses were auctioned for $44 billion last year

By CNN's Bettina Lusher

BERLIN, Germany (CNN) -- It was a little bit like a gold rush, German-style.

Last August, telecom companies went into a bidding frenzy for German 3G licenses. When the dust settled, everyone rubbed their eyes in astonishment at the money spent: The bill for the six licenses came to $44 billion -- way more than either the government or analysts had expected.

Now Deutsche Telekom and other companies have seen their share prices tumble and debt levels increase as the cost of investing in licenses has spiraled.

"I don't think its terminal in terms of the businesses of companies like Deutsche Telekom, France Telecom, British Telecom, etc.," says Doug Wight, a telecoms analyst with Commerzbank.

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"Remember, these are huge cash-generating utility-type companies in regards to their traditional fixed businesses, so they can take on a huge amount of debt on their balance sheets."

The number of Deutsche Telekom cell phone subscribers grew from some 9 million to 19 million last year. Now the company wants to make sure it builds on that base and keeps those customers.

Lately, though, business is slowing down -- by as much as 50 percent compared to last year in some German phone stores. Not many customers are asking about 3G.

"Only business people, professionals are asking sometimes ... but it will take another two years before it comes on the market," says phone seller Birgit Weseloh. "Once it's there, I think there will be more interest. And if the price is OK, people will ask for it and buy it."

In the meantime, Deutsche Telekom is trying to pay off its debt, selling assets that are not related to its core business. It has sold off parts of its cable business for $2.6 billion. Now it plans to sell unneeded real estate along with its 10 percent stake in the U.S. phone company Sprint.

Saving some euros would come in handy; experts think it will cost up to $30 billion to build 3G networks in Germany alone.