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http://online.wsj.com/article/SB10001424127887323539804578265862776631652.html?mod=googlenews_wsj
EUROPE BUSINESS NEWSJanuary 26, 2013, 12:34 p.m. ET
Deutsche Telekom Eyes Stake in Wi-Fi Operator
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By STEPHAN DOERNER And ARCHIBALD PREUSCHAT
Germany's largest telecommunications company, Deutsche Telekom AG, DTE.XE +1.05% is considering a stake in Wi-Fi operator Fon to cope with exploding mobile data traffic, according to people familiar with the negotiations.
Deutsche Telekom and Fon, founded in 2006 by telecom entrepreneur Martin Varsavsky, have already signed a letter of intent, these people said. The size of the stake and its valuation remain unclear, they added.
Mobile data traffic is exploding because of the rising number of smartphones and tablet computers and increased use of cloud technology, which exchanges data with servers, also via mobile networks.
Madrid-based Fon works to supply wireless hot spots, allowing customers to access mobile Internet without making use of mobile wireless networks. Customers benefit from more bandwidth and avoid roaming charges when connecting mobile devices abroad.
Fon relies on wireless routers owned by individuals. Broadband users who are willing to share their connections can use other Fon hot spots at no extra charge. They also get an undisclosed share in revenue when non-Fon members use the broadband connection.
Fon accesses seven million wireless hot spots and claims to be the world's largest wireless network.
While its attempt to penetrate the German market in a big way failed around six years ago, it has a dense network of hot spots in Belgium and the U.K. and many participants in the Netherlands, France, Portugal and Japan.
Earlier this week, Fon entered a partnership with KPN NV KPN.AE +1.64% in the Netherlands. KPN customers will be able to share a portion of their own home bandwidth in exchange for free access to shared broadband connections of other KPN broadband customers in the Netherlands, as well as those of Fon customers in other countries. A separate wireless signal will be created for the part of the broadband connection to be shared, ensuring a secure home network for the individual KPN customer.
Using wireless local-area networks, instead of mobile networks, helps providers cope with the volume of mobile data traffic. According to estimates by Swedish network supplier Ericsson the monthly data usage of an average smartphone user will rise fourfold by 2018, to 2 gigabytes from 450 megabytes at present. Tablet users' data traffic is projected to rise to 10 gigabytes a month from the current 3 gigabytes in the next five years.
Deutsche Telekom has said investment in Germany will rise by €1 billion ($1.35 billion) to up to €4.5 billion in the years 2014 to 2016, and that heavy investment in Germany and the U.S. will result in a dividend cut. Investment will focus on higher bandwidth and faster and more efficient fourth generation mobile networks.
