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Consumers who like their coffee rich and mobile phones cheap are getting hooked on Tchibo. Germany’s largest coffee shop chain has emerged as one of the country’s top addresses for pre-pay mobile phone services.

A household name for coffee products, Tchibo has successfully leveraged its brand name to launch a nationwide mobile virtual network operator business.

In 16 months, Tchibo mobil has attracted more than 500,000 pre-pay customers and an undisclosed number of contract customers. In spite of increasing competition, it appears to have won a loyal customer base.

Tchibo’s marketing strategy for phones is similar to the one it has for the many other consumer goods it offers beyond coffee: the products are simple, pricing is transparent and quality service is ensured through a huge network of stores, in addition to the internet.

Customers can choose one of three types of phones: a low-cost, low-tech handset, a clamshell model and another with an integrated camera.

No smart phones or other wireless devices such as BlackBerries or personal digital assistants are available. Business users and technology freaks are not in the target group.

Fees cater to children, mothers, grandparents and others seeking value for money and clarity. “We were the first service provider in Germany to offer a transparent, low, standard price,” says Tchibo board member Thomas Vollmoeller.

For pre-pay customers, the charge initially began at €0.35 a minute but has since dropped to €0.25. Contract customers, who receive a subsidised handset for as little as €1, pay a monthly subscription of €9.95 and €0.15 a call. Calls between Tchibo customers cost €0.05 a minute.

These fees were introduced at a time when mobile phone tariffs in Germany were, in many cases, nearly twice as high.

Perhaps more than anything else, Tchibo’s nationwide network of stores sets the group apart from most rivals, as it offers unparalleled marketing and sales opportunities.

Tchibo has more than 100,000 outlets. Customers can purchase phones, pre-paid cards, Sim card-only packages and contracts in the shops, in addition to receiving basic support. A hotline centre provides help with technical issues.

Network infrastructure and billing services are provided by the German subsidiary of British mobile phone operator O2 (now owned by Telefónica). The subsidiary and Tchibo are partners in the joint venture Tchibo Mobilfunk.

The smallest of Germany’s four operators, O2 joins rival e-Plus, which has also opened its network to MVNOs, in addition to launching new low-cost brands of its own.

Tchibo mobil has been off to a good start but its long term success remains to be seen. Analysts, including Bena Roberts at Current Analysis, warn that pre-pay is a low-value service generating little profit.

On top of that, competition in Germany is heating up with many big retailers entering the fray, including food discount giant Aldi, which has already become one of the country’s largest distributors of PCs.

Tchibo is not saying how profitable is its MVNO, only that that the venture has surpassed expectations and that new offerings are in the pipeline.

How about some Kuchen to go with that new phone?

Copyright The Financial Times Limited 2017. All rights reserved.
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