Ladies and Gentlemen,

when I was seven years old, I found a book on my father's desk with the title "English in 20 minutes". After reading it, I was able to say "Good morning" and "How do you do" and "I hate Cornflakes". This was rather useless, but all my relatives came to the conclusion that I was sort of a genius.

This came into my mind when I was asked to give an overview of the German media market - in 20 minutes. As this is nearly impossible, all I can do is the same what I did when I was seven: Reduce it to the basics and try to make a good impression.

Thus I will concentrate on one question: How will the German media market develop during the next five years and where are investment opportunities?

The answers are not obvious. Germany has a very lively media landscape. It is number three worldwide in advertising spending and number four in advertising growth. It has a strong local and regional newspaper market - 300 copies per 1,000 inhabitants are sold; this is 50 % more than in the United States -, it has a large number of magazines and it has powerful players in the area of the printed press. There are a lot of radio stations, mostly highly profitable, and there is an astonishing variety of television programs, from the publicly financed general interest and cultural channels to private free- and Pay-TV-stations.

It is very difficult to enter this well organized and well protected market. You may find gaps, but when you examine them a little bit closer, you will come to a rather depressing result: The German language media market is small, there is a lot of competition, and the risk to lose money is relatively high. I saw a lot of companies trying to establish new newspapers, magazines, radio or TV stations and I saw most of them leaving this field afterwards with a lot of experience, but an empty wallet.

There are, however, new opportunities, which derive from new technologies and new economic structures. Even better: Germany needs the help of experienced worldwide and US-companies to manage the transition from analogue to digital, from broadcast to point to point, from mobile phones to mobile devices.

Some days ago you could read that Liberty Media is going to buy the remaining six cable regions from German Telekom (three already have been sold, to Callahan and Klesch). This is not really news, because a Telekom spokesman already announced this some months ago, obviously for the purpose to tell good news at a time where the papers were full of bad news about the incumbent phone and cable company. This time it is more realistic. But I think that the final word is not yet spoken. This has to do with the structure of the German cable.

Have a look on this chart:

In Germany, roundabout 22 mio. households are passed by the cable, 18 mio. are connected to it. When cabling of Germany started (in 1980) the former government decided to differentiate between cable in the households (so called "net level 4") and the overhead network ("net level 3"). The overhead cabling was mostly done by German Telecom, which was, at that time, state-owned. Net level 4 cables were installed and operated by private companies. There are still 5,000 of those companies in Germany which leads to a fragmentated if not chaotic cable system. Only 20 % of the net level 4 market is controlled by larger companies, called "Tele Columbus", "Primacom", "Bosch Telecom" and "UPC / ewt".

Thus, you do not win a lot when you buy the net level 3 networks together with Telekom's 26 % share of net level 4. You cannot, for sure, establish a new media business with only one quarter of German households. What you have to do is to come to an agreement with all net level 4 companies - or to make an attractive offer for buying them.

During last weekend rumours came up that Liberty wants to buy Tele Columbus, which is a company owned by Deutsche Bank (DB Investor).

This makes sense, first of all because Deutsche Bank, who formerly made a bid for the Telekom network, bought Tele Columbus a bit premature, in the expectation of winning the bid. I don't think that they really want to operate cable networks on a long-term-basis.

The second reason is that Liberty now wants to know if the German Bundeskartellamt, the anti-trust authority, approves owning companies of both net levels. If it does not, the value of the net level 3 networks is much lower. Thus the Bundeskartellamt will have to give an overall statement, which involves the question if a company which already has shares in TV stations, like Liberty, may own cable networks.

We will have to wait until official answers are given; only then we really can be sure that Liberty comes into the German media market.

Another announcement Liberty made was that they do not intend to push telephony services, at least not in the beginning. They told, that they were a video company and that they want to introduce new services, from digital to interactive television, as well as fast internet access.

My expectation is that in all these fields, Callahan, Klesch - already linked to Liberty - and Liberty itself will have to co-operate closely. I cannot imagine that Klesch with approximately 1,3 million homes connected, Callahan with 6,6 million and Liberty with the remaining 10 million households will try to establish these new services only for their respective regions.

What they might do, for example, is to build a common content company, which could be open for third parties, as well. The same could be true for internet access. We all know that it is not a simple task to build and establish a fast internet access company like @Home or Roadrunner. You need a lot of experience and, of course, reduce costs as internet advertising business in Germany, as well as E-commerce-business, is still suffering. And: You really have to do a lot of homework in order to satisfy customers. You certainly may not offer a service under the label "fast internet" if it is not really fast and not really reliable; price and quality competition of DSL networks will be high.

Thus, if I were an American content company I would assume that in all those fields, from internet access to digital TV to interactive TV, your contribution and even a shareholder position may be welcomed.

In any case, what is urgently needed is content. Content for free TV, pay TV and video on demand. You might think that this market is already taken by German broadcasters. No, it is not, mostly because all the rights are still owned by the production companies or the majors. Thus, German free and pay TV-companies mostly do not have the rights for additional TV programs (that's a question of sub-licensing and how many runs you bought) and especially not for on demand point-to-point transmission.

Let me introduce this chart to you which leads us through the rest of my presentation. What I tried to do is to evaluate which services and goods are needed in Germany in the next five years in the field of electronic media. At the top of this chart I did not take cable, DSL or UMTS as categories, but the more general keywords Print, Broadcast, Point to Point and Mobile. "Broadcast" and "Point to Point" cover cable and DSL, in their respective status. As, up to now, only two percent of the cable is upgraded, it is more a broadcast opportunity, shifting more and more towards point to point. With the DSL it's exactly the other way around: it starts with point to point and may, perhaps, one day used for broadcast purposes, as well.

When I spoke about rights, then you see that I gave three plus-signs in all three categories. To repeat it: no cable or telco has any rights available. Existing broadcasters do have rights, but they are not sufficient. We just discovered one of the opportunity windows in the German media market.

To finalize the cable item, let me give you some additional information:

55 % of the German households use (with their primary TV set) cable reception, 36 % are linked to satellite dishes. Terrestrial reception is now at approximately 9 % and declining.

Up to now TV is analogue, using the PAL system ( 625 lines versus 525 for NTSC) . Digital Video Broadcasting (DVB) standards are finalized; there is also an emerging (but not yet completely fixed) standard for multimedia enhancements and applications, called "Multimedia Home Platform" (MHP), with a Java-based interface. The German government decided to stop analogue terrestrial transmission in 2010.

Of course, the market for interactive services still needs to be developed. As I already mentioned, only 2 % of the cable systems are upgraded (which means: cover the frequencies up to 862 MHz, are equipped with a return channel and have a small cluster size) and are therefore enabled for distributing more TV programs and offering internet access and video on demand.

The consequences are obvious: As Germany's cable coverage is quite ok, there is a huge opportunity for modernizing the media system step by step, from analogue to digital and from broadcast to point to point.

This is, by the way, a chance for the manufacturers of end devices. Germans need set-top-boxes, receivers for terrestrial digital TV and - of course - mobile UMTS devices.

Let's come to UMTS. Germany was one of the countries where a bidding procedure took place. That means: It became very expensive. Nearly 100 billion marks had to be paid by the six operators, which are Vodafone, T-Mobile, E-Plus, VIAG Interkom, Mobilcom and Telefonica / Sonera. The competition will be huge, especially because mobile virtual network operators like Debitel, not owning networks, but already now owning customers, will come into the market, as well.

And the market will be very difficult. 58 % of the German population own mobile phones, but how many of them will accept UMTS services? Already now, 60 to 70 % of the new customers buy prepaid cards and have a closer look on their monthly phone bill. The average revenue will decline, says KPMG, and nobody knows if new services will generate additional revenue.

What does that mean for the UMTS market? Well, all companies urgently need network equipment to be able to start on time. But they need attractive UMTS content and services as well. This is, in my opinion, the second opportunity window in the German media market, and this window is wide open.

These are the three challenges: Mobile operators must find innovative value-adding-services. They have to find a solutions for building reliable and long-term customer relations. And they have to build alliances which cover all areas of the media business. All of this is true, by the way, for cable and DSL, as well.

This leads us to the simple but nevertheless astonishing fact that the consulting business also has its opportunity windows, and possibly the biggest ones. This is true even in the print area and covers questions like expanding the newspaper and magazine and book business into electronic media and mobile business, extending customer relation, print on demand, electronic ink and e-books.

But the opportunities for consulting are really impressive in the electronic world. How should a broadcaster expand into point-to-point-business? How can he extend customer relations, how can he use additional revenue sources, how can he make a profitable line extension? How should cable and DSL companies build content packages? How to introduce services? How to do marketing, billing, pricing? Which equipment should they use, which set top boxes? Which alliances should they build, for example for internet access and telephony? And what are the business models behind all that?

Let's have a last look on the chart. I see seven fields where investments in Germany are needed and justify a closer look. I already mentioned them all: Consulting, Network equipment, end devices, rights (by the way not only for tv content, but also for games and any other multimedia offerings), utilitites and applications (think about digital rights management, micro-billing, security software, customer care systems and so on), services (for example video-on-demand-services, portals, GPS-services for mobile devices) and - finally - even day-to-day-operations, especially in the field of fast internet access and interactive TV.

If you add the plus-signs in the table, then the biggest opportunity windows are in DSL- and cable business regarding their point-to-point capabilities, and the UMTS field.

We would need an additional week, if you asked me now about the success chances of every service which I mentioned. This is up to you. All I wanted to do this morning is give you an idea where the challenges in the German media system are. My task was a little bit like that of a quizmaster giving you hints in which directions you should think. From one of my former bosses, I learned the sentence: "Don't tell me problems, give me solutions". Today, my task was not to give you solutions, but to tell you problems. Or chances and opportunities.

Thanks for listening.