Telefonica's German O2 Unit Launches Low-cost Mobile Operato

MADRID -(Dow Jones)- Telefonica's German O2 unit plans to launch a low-cost mobile telephone operator Monday, as 02 looks to gain a foothold in the booming German discount market.

02 said the operator will be called Fonic and is being launched with supermarket chain Lidl, where the SIM cards can be purchased.

Users will have to pay EUR9.9 for a SIM card, but won't be charged a monthly fee or have to make a minimum number of calls.

Telefonica is one of the world's largest telecommunications companies, but Fonic is its first discount market venture.

Telefonica launched Fonic due to the significance of the low-cost market in Germany and doesn't have plans to extend the model to other countries, a company spokesman said Friday.

The low-cost strategy mirrors that of rivals such as wireless operator E-Plus and Internet service provider United Internet, which have gained traction in Germany due to the success of discount brands such as Simyo and Base and 1&1 Internet. Last month, Deutsche Telekom launched its own discount cellular operator, Congstar.

Fonic said it expects the market share of the discount mobile segment in Germany to more than double by 2010 from its current level of roughly 10%.

-By Jason Sinclair, Dow Jones Newswires; 34 913958127; jason.sinclair@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 31st August 2007