Departure of 1&1 continues to slow down Telefónica Deutschland

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Telefonica Deutschland continues to suffer from the loss of major customer 1&1. In the third quarter of 2025, revenue fell by 6.6 percent compared to the same period last year, despite solid core business, as the company announced on Tuesday in Munich. Meanwhile, the Spanish parent company is forging future plans that are likely to affect the German market as well.

In addition to the revenue decline to almost two billion euros, Telefónica Deutschland also recorded a minus of 9.5 percent in adjusted operating result (Ebitda) to 628 million euros. The company refers to "temporary effects" of the "largely completed customer migration in the partner business." This refers to the approximately twelve million customers of 1&1 who have now moved to Vodafone after years in the O2 network.

Demand for smartphones is falling

Additionally, the results are burdened by persistently falling demand for new smartphones. Revenue from mobile hardware fell by 5.5 percent in the third quarter, according to the information. The background is particularly longer replacement cycles – customers are keeping their phones longer before replacing them.

In the core business of network services, Telefónica Deutschland sees itself as solidly positioned. The company reports growth of 157,000 to now 17.8 million mobile contracts. The number of mobile connections for the Internet of Things increased by 202,000. The fixed-line business developed more slowly, with a net increase of 3,000 connections.

Telefónica Deutschland contributes about one-fifth to the operating result of its Spanish parent. Its new CEO Marc Murta also had mixed figures to present on Tuesday. The group's quarterly revenue fell by 1.6 percent to almost nine billion euros, and Ebitda by 1.5 percent to just over three billion euros.

Reorientation in the parent company

Murta wants to help the group achieve more growth again and presented the key points of his "Transform & Grow" strategy on Tuesday. He is accelerating the exit from loss-making business in some Latin American countries, initiated by his predecessor José María Álvarez-Pallete. Telefónica is concentrating on its home market Spain, its subsidiaries in Germany and Brazil, and the joint venture in Great Britain.

This makes the German subsidiary currently the problem child in the group. The Spaniards surprisingly dismissed Markus Haas, the CEO of Telefónica Deutschland, at the beginning of the month. Negotiations are currently underway regarding the termination of the contract, it was said on Tuesday from Madrid. The search for a successor is also underway.

Murta expects Telefónica Deutschland to grow again from 2027 onwards. The new CEO, who was installed after the Spanish government's entry, does not rule out acquisitions for his growth strategy. The European market must continue to consolidate so that companies can manage the necessary investments, Murta said on Tuesday in Madrid.

Takeover of 1&1?

The Telefónica CEO does not comment on concrete takeover plans but wants to seize opportunities. "You can assume that we are in talks in every single market," says Murta – and halves the dividend for 2026 to 15 cents per share for investors, to retain cash reserves for a takeover.

Insiders consider Vodafone Spain and German 1&1 to be possible candidates. Murta and his COO Emilio Gayo declined to answer questions about plans for a takeover of 1&1. 1&1 also does not comment on the speculation.

Overall, investors reacted rather disappointed, with Telefónica's share price falling by around twelve percent on Tuesday. Murta's presentation of his new strategy lacked details on how he intends to achieve the targeted growth.

(vbr)