Telefónica considers reviving relations with 1&1

Following the premature dismissal of CEO Markus Haas from Telefónica Deutschland, the Spanish parent company is considering reviving relations with 1&1. In the rebuilding of relations between the companies, both closer cooperation and, in the long term, even an acquisition are conceivable, as Handelsblatt has learned from three people familiar with the matter. Talks between the two groups are still in an early stage, and failure is not ruled out.

1&1 and Telefónica with problems

According to the report by Handelsblatt, both 1&1 and Telefónica have problems: 1&1 is having trouble building its own 5G mobile network, while Telefónica is complaining about low network utilization, and growth prospects are considered low given the limited possibilities of its brand, O2.

According to the insider report, Telefónica believes that it makes little sense to compete against the two major competitors in the German mobile network, Vodafone and Deutsche Telekom, without 1&1. 1&1 CEO Ralph Dommermuth terminated a long-standing network partnership with Telefónica in 2023 and replaced it with a new agreement with Vodafone in August 2024. Through this, around 12 million mobile customers will switch to Vodafone's network by the end of this year. The loss of the major customer 1&1 to competitor Vodafone is specifically attributed to Haas. So far, Telefónica Deutschland has not been able to compensate despite new partnerships, such as with Freenet.

With the replacement of Haas by a new CEO for Telefónica-Deutschland, an agreement with 1&1 could proceed more easily, as the relationship with United Internet founder Dommermuth is considered strained. Robert Grindle of Deutsche Bank writes in an analysis that the upcoming management change “indicates that an agreement with 1&1 will be easier to achieve.”

For analyst James Ratzer of New Street Research, it is clear that there is hardly any better capital investment for Telefónica than buying 1&1. “But the crucial question is whether Dommermuth is willing to make a deal,” Ratzer said. The founder of United Internet is concerned about his legacy.

According to calculations by Ratzer and his colleague Ben Rickett, building a full-fledged mobile network for 1&1 makes no economic sense. In June 2025, 1&1's own mobile network had 1200 antenna sites; analysts estimate that the group could operate up to 12,500 sites in Germany by 2031. However, these would only be enough to save about half of the data transfer. For comparison, Telefónica has 28,000 sites in Germany.

No comment

Other analysts consider an acquisition of 1&1 by Telefónica “realistic or sensible.” For example, Ottavio Adorisio of investment bank Bernstein warns “that 1&1 is already highly valued on the stock market, with an enterprise value of around ten times the operating profit (Ebitda: Earnings Before Interest, Taxes, and Amortization) and about 22 times the operating free cash flow for 2026.” To make an attractive offer to 1&1 shareholders, Telefónica would have to “pay a significant premium– and would thus lose a large part of the possible synergies,” according to Handelsblatt.

According to Handelsblatt, a spokesperson for United Internet declined to comment on the insider report but said that network construction is progressing. Telefónica and the German subsidiary also declined to comment.

Therefore, apart from speculation, there is no official news from the two network operators yet. An acquisition by Telefónica would also raise antitrust issues as it would again result in only three network operators in Germany. 1&1 is unlikely to be in a hurry with possible negotiations, as the network operator is initially solidly positioned with the roaming deal with Vodafone.

On the other hand, the mood between United Internet and Vodafone is likely to be clouded: the German Federal Cartel Office accuses Vodafone of illegally hindering 1&1's network construction. This could explain why 1&1 might be open to alternatives despite the ongoing Vodafone partnership.

(afl)