1&1 AG shares surged after it secured a deal with Vodafone Group Plc that will let the mobile provider resell 5G service in Germany. Telefonica Deutschland Holding AG, which has the current contract to provide mobile network access to 1&1, sank the most ever in Frankfurt trading.
(Bloomberg) — 1&1 AG shares surged after it secured a deal with Vodafone Group Plc that will let the mobile provider resell 5G service in Germany. Telefonica Deutschland Holding AG, which has the current contract to provide mobile network access to 1&1, sank the most ever in Frankfurt trading.
Vodafone’s German unit and 1&1 have committed to an exclusive agreement for five years beginning on Oct. 1, 2024 at the latest, the companies said in a statement on Wednesday. The deal includes options to extend for another 13 years, including a transition period. 1&1 will pay a fixed price based on the percentage of Vodafone’s network that its customers use, the companies said without disclosing any more financial details.
Read More: Telefonica Sinks as 1&1 Opts For Vodafone Network: Street Wrap
1&1 — which was launched as a “mobile virtual network operator,” reselling service from other carriers — is preparing to start selling service under its own network at the end of next month. The carrier will be able to use the agreement with Vodafone as a “significant buffer, providing access to a high-quality 5G network while any issues are addressed” with the rollout, Bloomberg Intelligence analyst Erhan Gurses said.
The news is particularly harsh for Telefonica Deutschland, which relies on its relationship with 1&1 for an estimated 40% of its free cash flow, Berenberg analyst Usman Ghazi said in an interview. Telefonica Deutschland issued a separate statement confirming its 2023 outlook and dividend commitment. The company also said that its existing contract with 1&1, to provide 4G service, goes until June 2025.
A representative for Telefonica declined to comment on Ghazi’s estimate or provide further financial details of the 1&1 relationship. Telefonica SA is the majority owner and parent company of Telefonica Deutschland.
Customers with 4G mobile tariffs will keep access to roaming from Telefonica Deutschland for now. 1&1 will provide 5G coverage under its previous MVNO model, using services from Telefonica or Vodafone in the interim.
1&1 shares surged 17% to €12 in Frankfurt trading on Wednesday, the biggest gain since 2008. Telefonica Deutschland fell 18%, the most on record. Shares of Telefonica, its parent company, dropped 7% in Madrid.
–With assistance from Agatha Cantrill.
(Updates with analyst comment in fourth paragraph.)
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