Case Studies

Mobile phone, Smartphone or iPhone - the world today would barely function any more without mobile communications. The mobile market is extremely profitable and therefore produces fierce competition. Large players such as T-Mobile, Vodafone, E-Plus etc. used to be the only alternatives, but now small operators are convincing the market with their innovative concepts without long-term commitments and complicated, often expensive tariffs.

The mobile communications discounter BLAU Mobilfunk GmbH from Hamburg was the first independent operator in Germany. The start-up was founded in summer 2005 by three young entrepreneurs with in-depth experience in the sector. Martin Ostermayer, Dirk Freise and Thorsten Rehling had successfully developed the mobile communications portal handy.de and sold it to Bertelsmann in 2001. Venture capital firm Neuhaus Partners (then “Dr. Neuhaus Techno Nord”) from Hamburg provided the start-up capital for both projects, helping the trio on its way. The trust shown by the investor and its willingness to take risks paid off. BLAU Mobilfunk made a name for itself within a short period of time and “customers were thrilled!” according to founder Martin Ostermayer.

Double the courage, half the risk: Founders were supported by Neuhaus Partners

The business model has already been used by successful discount airlines: Providing services at an extremely favourable price without extensive and expensive customer support. Neuhaus had already had experience in this field. The mail order pharmacy DocMorris successfully applied this approach in the pharmacy sector. Neuhaus Partners also provided capital for this company. But not only the investors put their money into the BLAU idea, the founders Martin Ostermayer, Dirk Freise and Thorsten Rehling did the same. “The condition was that all should carry the same risk,” explains Martin Ostermayer.

Although other providers were ready to launch “discount telecommunications” in summer 2005, BLAU was the only independent operator. All competitors were subsidiaries of established operators which acted rather slowly and did not have as much know-how about the internet as did the Blau team. But especially this knowledge was important as BLAU products were sold exclusively on the Internet at that point, the only way of achieving unbeatable prices.

BLAU developed so quickly and successfully that soon other investors became interested in the idea. At the end of 2005, the private equity investor Al-Fawares from Kuwait came on board and a short time later Heliad Equity-Partners, a private equity firm from Frankfurt. The new funds were put into other successful investments. Not long after, BLAU Mobilfunk starter packs went on sale in discount stores, petrol stations and chemists across Germany. The also company sailed into uncharted waters with its “Blauworld” tariff: the fast growing international telecommunications sector. The private equity investments also had a positive effect on the young company’s staff numbers. Within only one year, the three visionaries Martin Ostermayer, Dirk Freise and Thorsten Rehling were surrounded by a 30-strong team.

In the same league as the large operators

At the beginning of 2007, the company managed to take the next big step forward. BLAU took over debitel Light, a subsidiary of debitel AG; Stuttgart, significantly enlarging its customer base. This move improved the company’s market position and increased its profitability. In return, debitel AG was given a minority interest in BLAU Mobilfunk. After the merger of both companies, BLAU Mobilfunk became the second largest mobile communications discounter in Germany.

Even the competition was not blind to BLAU’s potential. It therefore came as no surprise when in spring 2008, E-Plus’ Dutch parent group KPN made an offer to buy the company. Both founders and investors sold their shares under the condition that everything should remain as it was. “We kept the core brands blau.de and blauworld and continued to manage BLAU and its 100 employees in the same manner and within the same organisational structure as before,” reports Martin Ostermayer. He is also optimistic about the future in view to the success of the company so far: “Together with our investors and thanks to their financial support, we created an excellent basis during the early years. Our position could have not been better at the time of sale.”