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Business

Migration widens niche mobile markets

More than a million refugees came to Germany last year, bringing with them a demand for mobile phone services - and an opportunity for service providers that make migrants their key market with so-called "ethno-rates."

"With a SIM card from Ortel Mobile, migrants can phone home simply via mobile and at attractive prices," says Ortel marketing chief Gordon Röber. "Beyond that, we offer data options for every need."

Such needs have left mobile operators such as Ortel Mobile, Lycamobile and Lebara jostling to take advantage of the large influx of migrants to Germany.

"We've observed that the service providers specifically go to migrant reception centers to try and sell mobile phone contracts," said Thomas Grund, a market analyst at the consumer protection foundation Stiftung Warentest.

But the special needs of the potential customers were seldom considered, Grund said. Together with his colleagues, he produced leaflets in German, English and Arabic informing refugees as to how to place calls home affordably.

Stuttgart Notunterkunft für Flüchtlinge

An emergency refugee shelter in the German city of Stuttgart

Advertising in native languages

The Telefonica brand Ortel came into being as the German mobile communications market was broadly saturated.

"The turn of the millennium saw mobile providers searching for new key markets," said Torsten Gerpott, professor for telecommunications science at the University of Duisburg-Essen.

Germany has more than 3 million Turkish-speaking people and more than 4 million people from the former Soviet Union. Every fifth person in Germany has migrant roots - not a small market by any measure.

Special rates catering to these consumers didn't take long to materialize: The Telefonica brand Ay Yildiz offers cheaper rates for calls to Turkey and a customer hotline in German and Turkish. Ortel Mobile's website is accessible in Russian, Italian, Romanian, Arabic and Polish.

"We've been tailoring our advertising to our target market, which includes all people in Germany with a migrant background, for 10 years now," said Röber. "We recognized earlier on that native languages are very important for this target market."

Deutschland Straßenszene türkische Frau mit Handy

One in five people living in Germany have a migrant background

The companies that offer "ethno-rates" are usually so-called virtual network operators. Ortel belongs to the Telefonica corporation and uses the E-Plus network. And the British company Lycamobile doesn't have its own network, but uses Vodafone's frequencies in Germany. Lycamobile says it has more than 14 million customers in 19 countries. The company, founded in 2006, had annual sales of 1.5 billion euros ($1.7 billion) in 2014.

Refugees as business opportunities?

The University of Duisburg-Essen's Gerpott said companies haven't really made offers tailored to refugees a priority.

"Refugees are usually only able to enter pre-paid contracts. That's not so attractive for most companies," he said. "Apart from that, it's not clear how many of the people who have come are staying long-term."

Nevertheless, the refugees have an extremely high need to be able to communicate.

"That's why they might make for higher sales than many German customers, and are therefore attractive for business," he said.

Verkauf von SIM-Karten von Lycamobile Ortel Lebara und Ay Yildiz

Sales of SIM cards from Lycamobile, Ortel, Lebara and Ay Yildiz

But it's a sensitive topic.

"If a company aggressively markets to refugees, there's the danger that it will be accused of unethically profiting from the hardships of refugees," according to Gerpott.

But charity doesn't seem to be the answer either, as German telecommunications yourfone found out in the autumn of last year. It announced cooperation with the German Red Cross and Caritas Germany, where it would donate 50,000 SIM cards worth 3.5 million euros to refugee reception centers.

"We want to participate and help in the integration of refugees", yourfone CEO Julian Valdenaire was quoted as saying on teltarif.de.

But the company found itself assailed with angry commentary on the Internet. On top of that, German customers threatened to cancel their contracts, arguing that neither they, nor poorer Germans, were receiving the service for free. Instead, they complained, foreigners were getting all the kickbacks.

Since then, yourfone has kept silent on the issue.