The agreement is a huge knock for Telefonica Deutschland, which generates 40% of its free cash flow from its relationship with 1&1, according to analysts
This week, Germany’s newest mobile operator 1&1 has signed an exclusive deal with Vodafone Germany, allowing it to provide 5G services to its customers using Vodafone’s network.
The operator currently has a similar long-term deal with Telefonica Deutschland to provide 4G services, which will last until June 2025.
1&1 was originally a mobile virtual network operator (MVNO) using Telefónica Deutschland’s network to deliver services. In 2019, however, 1&1 purchased €1.07 billion-worth of spectrum at auction, aiming to build its own 5G network.
Whilst its own network is being built, 1&1 will need to provide services via other operators. It will be able to use Vodafone’s mobile networks wherever it does not yet operate its own sites (starting from 1st October 2024). The agreement is long term, up to 18 years, and will also provide coverage to areas not covered by 1&1’s new network.
Since the news, Telefonica Deutschland’s share prices have dropped by 16%, the most on record. Shares of parent company Telefónica also fell by 7%. On the contrary, shares in 1&1 rose by 15%, the biggest one-day gain since 2008.
There have not been any disclosed financial details, although 1&1 will pay a set price based on the percentage of Vodafone’s network used by its customers.
“Both sides will benefit from this mobile communications partnership in the long term. 1&1 also gets access to 5G. And the attractive conditions of this partnership help us as Vodafone to make even better use of our networks and to further improve them for our customers,” said Phillip Rogge, Vodafone Germany CEO.
The deal marks a change in the tone of the relationship between the two firms. In February 2021, 1&1 filed a complaint to the German Federal Cartel Office, noting that it was facing ‘ongoing obstacles to the rollout of its 5G network resulting from actions by Vodafone’. 1&1 alleged that Vodafone’s tower unit, Vantage Towers, failed to provide access to its sites as per their contractual agreement.
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